Sitting of 22 June 1984

Preamble
The House met at half-past Nine o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS

  MEMBERS' MOTOR MILEAGE ALLOWANCE
  Return ordered,
  of the Report to the Leader of the House of Commons of the independent inquiry into motor mileage allowance for Members of Parliament.—[Mr. Douglas Hogg.]

  Civil Aviation
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Douglas Hogg.]
  9.35 am
  The Secretary of State for Transport (Mr. Nicholas Ridley): This is an opportune time to hear the views of hon. Members on aviation policy. I hope the House will understand if I am a little reticent. The debate comes at a time when the Civil Aviation Authority has not completed its review of civil aviation policy, crucial decisions on London airports have not been made, I am about to consult on the air travel limit and there is a review under way of Scottish airport policy. For those reasons, I can say very little on those subjects now. There are also inquiries and reviews in which I am quasi-judicial, or have an appellate role, or where statute places responsibility primarily on the CAA, and on which I can therefore say nothing. Finally, the debate also comes at a time when the Select Committee which is examining airports is conducting its researches in the United States.
  However, it will be an interesting exercise to listen to the hon. Member for Kingston upon Hull, East (Mr. Prescott) and the massed cohorts of Labour Members behind him and hear how the Labour party's policies on civil aviation are shaping up. It was not even mentioned as a subject in its election manifesto. It will be more interesting to listen to the views of my hon. Friends on this issue and that, partly through force of circumstance, is what I want to do. It is important to hear what hon. Members think of these important and historical issues, because we are on the verge of a new era in civil aviation.
  It might help hon. Members if I set out the broad principles that we are applying to civil aviation policy and the problems that we face in ensuring its successful development. It will provide a background to the debate and raise questions to which the hon. Member for Kingston upon Hull, East will no doubt wish to provide his answers. My hon. Friend the Parliamentary Under-Secretary of State will be happy to answer any questions and deal with any points outstanding at the end of the debate, if he is fortunate enough to catch your eye, Mr. Deputy Speaker.
  The central question which I ask the hon. Member for Kingston upon Hull, East is whether he believes in the benefits of competition between airlines. Or does it fall into that category of competition which Socialists describe
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  as wasteful? We start with the reality of a vastly expanding market for air transport. Since 1962, excluding the Soviet Union, the number of passengers travelling by air has grown more than fivefold worldwide. In Britain in 1965–66, the seven airports now owned by the British Airports Authority handled 14·5 million passengers. In 1983–84 they handled 45·9 million passengers. Air transport has brought foreign travel within the reach of a vast number of people. It is used increasingly as a mode of domestic travel, particularly by business travellers, and it has immeasurably added to the quality and convenience of life. I see no signs that demand will slacken. As the world emerges from recession, and as standards of living improve, I have no doubt that demand and the desire to travel will increase. We estimate that by the year 2000 100 million passengers or more will use Britain's airports. To me, that is the central fact.
  Our policies—I hope the hon. Member for Kingston upon Hull, East shares this view — must be directed towards satisfying that demand and giving the traveller what he or she wants. Air travel is no longer the prerogative of the better off; it has become a form of mass public transport.
  When one considers closely the civil aviation scene, what comes across most clearly is the phenomenal growth in the liberalised and competitive sectors. For many years charter travel has been regulated liberally, and the number of chartered services at United Kingdom airports more than doubled between 1972 and 1982. As for scheduled services, since we introduced a more liberal regime in the Civil Aviation Act 1980 and encouraged additional scheduled services from London to Scotland and to Hong Kong, traffic on those routes has grown by 10 per cent. or more.
  The United States has completely deregulated its internal air services, with the result that fares are generally lower, the variety of services is enormous, ranging from no-frills, cheap fare services to high quality, high-cost services. There have been extraordinary improvements in airline productivity and the restructuring of air networks more closely to reflect what passengers want. At the same time, safety has not been compromised and there has been no wide-scale abandonment of air services to small communities. I accept that some services have succeeded and some have failed. Some carriers have failed, but others have grown in their place. In all cases, success or failure has been decided by the users of the service, not by bureaucratic diktat.
  The evidence of the benefits of competition is overwhelming. Therefore, our first priority is to extend the scope of competition wherever we have the opportunity to do so. Europe is the obvious candidate. It is called the Common Market. We want a common market in European aviation, and the lessons, although not necessarily the detail, of the American experience could be applied fruitfully to Europe. We must live with the reality that some of our partners are reluctant to move quickly in this direction, but the defences are beginning to fall. The Commission's second memorandum on aviation offers a modest way forward, and a high-level working group has been set up to get some real progress on this and to report by the end of the year.
  However, I want to move faster. In May I demonstrated the Government's resolve by removing the requirement on United Kingdom airlines to consult other EC airlines on any route before setting fare levels. I am trying to negotiate

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  more liberal bilateral deals. We have succeeded in the first instance. The hon. Member for Kingston upon Hull, East taunted me at Question Time the other day by saying that the cheap fares to Amsterdam were a gimmick for the European elections. I must disappoint him about that, and he will have to remove any reference to it from his speech.
  On Wednesday I met the Dutch Minister of Transport, and we concluded a bilateral deal which allows country-of-origin pricing between the United Kingdom and Holland. Any airline designated by either Government will be allowed to fly on any route between Britain and the Netherlands and to decide for itself the frequency and capacity of its services. That means that the cheap £49 return fare between London and Amsterdam, proposed by British Caledonian, British Airways, Air UK and KLM, can go ahead as planned. Subject to CAA approval, Virgin Atlantic should be able to offer a £20 single fare from London to Maastricht. That is a real achievement — in my opinion, a breakthrough.
  That will be the thin edge of the wedge for lower air fares in Europe, and British airlines are following our lead by fighting for lower fares to European destinations. On Monday, British Caledonian announced plans for one-way fares ranging from £35 to Paris, £40 to Frankfurt and £40 to Geneva. Those proposals are subject to the other Governments agreeing, which they may very well not, but they would cut European air fares on average by about half, compared with business class tariffs. Progress towards greater competition in Europe is inevitable under the pressure of consumer frustration and the interests of the airlines.
  The Government stand firmly as the champion of the consumer. We are the flag carriers for lower air fares. I have received many letters from consumer organisations and others who support our initiatives. I hope that the hon. Member for Kingston upon Hull, East will add his voice, although not, as is his wont, from a sedentary position.
  Mr. John Prescott: Clearly I was wrong on Monday, because the initiative did not run into the ground. Can the Secretary of State say whether information about the sixth freedom services and the conditions of the agreement are available, or will be available, to hon. Members?
  Mr. Ridley: I shall write to the hon. Gentleman with the full text of the agreement, which is rather complex and perhaps not ideal for debate. I am grateful to him for his remarks, and I am sure that he will join me in hoping that we can widen this initiative to the entire European Community.
  Competition comes first in the Government's policies, but it must be fair competition, and the European Community must do its duty and act against state subsidies to airlines. Competition must be fair in other ways, which is why I asked the CAA to conduct a review of civil aviation policy and the structure of the British aviation industry, to explore all possibilities for increasing competition and fairness. The issues are so important to the development of competition and a successful British civil aviation industry that we need the professionals to give us their best assessment. The CAA has published a preliminary assessment. It is now consulting the airlines and we hope to have its final report soon. I shall not
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  prejudge the review by offering views of my own. I realise the great interest in the CAA review, and I look forward to hearing the views of my hon. Friends this morning.
  To realise the full potential for market responsiveness and innovation, it is essential to transfer British Airways into the private sector. But the question of the balance in the industry is a separate issue from the privatisation of British Airways. If there is a danger inherent in the market strength of BA, it would apply even more strongly with the airline in the public sector than if it were in the private sector. Our plans for privatising BA are progressing extremely well.
  I pay tribute to the hard work of Lord King and his staff in turning the company round so spectacularly. BA's latest report shows an operating surplus of £268 million in the last financial year. The deficit on reserves has been reduced from £401 million in March 1983 to £54 million in March 1984. A year ago it reported that its liabilities exceeded its assets by £221 million. Now it has reversed that position and has a net worth of £126 million. We look forward to seeing BA in the private sector next year.
  As the House knows, the Select Committee on Transport is studying the future of airports. I set out the Government's position last month in the evidence that I gave to the Committee. Let me first deal with the three London airports. We have an expanding and increasingly liberal and competitive market in aviation, but it depends for its existence on a finite resource—London airport space. Where airport resources are in short supply, how do we develop our airports policy to cater for demand and to preserve and extend airline competition?
  As a result of examining the problem, I have concluded that the British Airport Authority's London airports cannot be treated in isolation from one another. They are all part of one system, so we have decided against privatising them separately. We will be looking at all the other options for privatising them together or introducing private capital into their operations.
  Meanwhile, two issues connected with London's airports still have to be resolved. The first is Stansted. This, as the House knows, is the subject of a public inquiry. The inspector has not yet submitted his report, and it would be wrong for me to comment on the subject in any way.
  The second issue is the implementation of the 275,000 air transport movement limit at Heathrow, which we are committed to introducing for environmental reasons. I do not wish to comment on that now, as I shall shortly issue a consultation paper setting out the options for containing demand within that limit.
  Mr. John Wilkinson (Ruislip-Northwood): Can my right hon. Friend nevertheless assure the House that there will be no question—as has been suggested in the press —of a surcharge on landing fees or some restriction of an artificial kind upon the mainly independent scheduled carriers which operate domestic feeder services into Heathrow? Those carriers would be drastically affected were the 275,000 limit to be imposed when terminal 4 comes into operation.
  Mr. Ridley: My hon. Friend will no doubt wish to comment on the consultation paper when he has had a chance to read it—which will be very soon. When a commodity is in short supply and demand exceeds supply,

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  one can deal with that situation by means either of the pricing mechanism or of the ration book. My party has usually felt more inclined to use the pricing mechanism.
  Mr. Tony Favell: Is my right hon. Friend aware that there is a great deal of concern in the north-west about the future of Ringway airport, following the proposed abolition of the greater Manchester council? There is anxiety about Ringway's ability to compete with the three London airports, as it will have to do. Will my right hon. Friend look into the matter?
  Mr. Ridley: Not only am I looking into the matter, but I shall say something about it at the end of my speech.
  Mr. Anthony Steen: Is my right hon. Friend aware that the 275,000 movements limit at Heathrow is already on the verge of being breached? Is he further aware that one of the reasons for that is that the British Airports Authority has given permission to British Airways to provide a back-up service for its shuttle services, and that it has also allowed British Airways to increase the number of flights on the shuttle services to Edinburgh, Glasgow and Belfast, so that more and more British Airways aircraft are landing and taking off at Heathrow? There are also executive aircraft—two, three and four-seaters — landing there. How does my right hon. Friend square that situation with the point that the private domestic independent airline should not be squeezed out because the big national carrier is given preferential treatment?
  Mr. Ridley: There are 275,000 reasons why the limit is under pressure, and each one of them can be something that one is in favour of, or opposed to, as a concept. There are helicopters, too. The very light aircraft do not count towards the limit, but there are domestic flights, British flights, foreign flights and flights of all sorts. The problem is very difficult. I hope that the issues are fairly set out in the paper. I am sure that my hon. Friend will wish to read it. I am sorry that it is not available now, but the date was not chosen by me. I look forward to hearing the views of the House on the paper when it is published.
  The House will know that, in consultation with my right hon. Friend the Secretary of State for Scotland, I have initiated a review of the British Airport Authority's Scottish airports policy, which will examine the case for change. We expect the review to be completed by the autumn. Meanwhile, we are preparing the disposal of the Civil Aviation Authority's interest in several small Scottish airports to local authorities or private buyers.
  In my evidence to the Select Committee I made it clear that I was considering new arrangements for local authority airports. It is Government policy, inherited from the previous Administration, that airports should not in general be subsidised. They should be operated on a fully commercial basis. Some of the local authority airports take a commercial approach, but more could be done.
  Our present thinking is that we might legislate to require the larger airports to become public limited companies. A practical first step would be for local authorities to convert their airports into company form. That would bring a number of advantages—a formal management framework, Companies Act accounts, transparency of subsidies and a framework which would facilitate the introduction of private capital and allow some flexibility of ownership.
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  We believe that the introduction of private capital would result in sharper management of local authority airports. We are not, however, proposing to require its introduction, but hope that local authorities will come to recognise the advantages and will introduce schemes for involving private capital voluntarily.
  Mention of ownership brings me to those airports which are currently owned by metropolitan county councils or in which those councils have an interest. The White Paper "Streamlining the Cities" suggested that MCC interests should be transferred to the new joint boards acting as the passenger transport authorities. Following consultation, however, I now propose to invite the district councils concerned to reach agreement on detailed arrangements for the transfer of MCC interests direct to them, and for the continued running of the airports.
  I hope that they will see the advantage of establishing an airport company at this stage. The airport interests could then be transferred to the districts by order. Only if they cannot agree by a certain date would the MCC interests be transferred by order to the PTA. I hope that the districts will be able to reach agreement between themselves on how the MCC interests in airports should be transferred.
  Mr. Prescott: I have listened with care to the interesting statement just made by the Secretary of State. Has this policy been adopted because those airports cannot be sold to the private sector, or because the Secretary of State recognises that public money will have to be used to maintain loss-making airports in metropolitan areas?
  Mr. Ridley: Not all the airports make a loss. Some of them are very profitable, although some are the reverse. It is right that local authorities should be able to subsidise the loss-makers if they wish to keep them on, and to profit from the profitable airports which they have created. There is nothing in what I have said which directs local authorities to do anything, unless we legislate to cause them to make public limited companies. I am interested in transparency of subsidy, separation of politics from management, and proper accounting, so that we shall have all the pre-conditions for good management.
  That is as far as the Government should go. It would be helpful if the district councils could own their share in metropolitan airports as at present constituted, so that they would have a direct interest in them, perhaps by holding shares. They would then be able to influence the conduct of the airports.
  Finally, I should like to say a few words about the environmental impact of aviation. Air travel has brought inestimable benefits, but there have been costs to the environment from increased aircraft noise. As part of our concern for the environment, the Government are determined to bring relief to those affected by aircraft noise. We have maintained the ban on the use by British operators after January 1986 of jet aircraft which do not meet internationally agreed noise standards.
  Some airlines have urged us to postpone that date, but we have refused. An EEC directive will extend the prohibition to other member states' aircraft from 1987 and to all aircraft using the Community's airports from 1989 at the latest. As a result, the number of people affected by aircraft noise at Heathrow, for example, could be reduced from more than 1 million now to fewer than 300,000 by 1990.
  Mr. Michael Colvin: As a result of that, could my right hon. Friend be persuaded to re-examine the number of permitted movements at Heathrow?
  Mr. Ridley: I must be honest with the House. My predecessors gave the figure of 275,000 and I should not like to suggest that we are trying to get out of that just because it appears inconvenient now that we come to the time. It is right that these issues should be debated widely. That is why we are publishing the consultation paper. There are two sides to the argument and it is right that the paper should be properly aired, because the last way in which the problem should be solved is by simply refusing to deliver an obligation which Governments have undertaken.
  Mr. Toby Jessel: My right hon. Friend implied that only 300,000 people would be affected by aircraft noise after 1990. Does he agree that the figures that he gave are based on the so-called noise and number index, a formula which attaches more weight to the average peak loudness of each flight than to the number of flights? Does he agree also that the method could be out of date, as it was produced many years ago when there were far fewer flights? Does he further agree that it is the sheer frequency of flights that is annoying to people who live under the flight path? The index needs to be revised, and not too much reliance should be put on the calculation of 300,000 people.
  Mr. Ridley: It is difficult to know what is the right measure of noise at an airport. It is also unfair simply to measure the number of aircraft movements, as some aircraft are infinitely quieter than others. We do not have an entirely objective and impartial measurement of noise. A mixture of factors must be taken into account and I hope that right hon. and hon. Members will address themselves to this important point when the consultation paper is published.
  We have been the first to extend the noise certification requirements to microlight aircraft, which are a potent source of irritation in some parts of the country. Our Civil Aviation Act 1980 gave the CAA a statutory duty to take environmental factors into account when considering whether to grant air transport licences. I said at the beginning that there was nothing about aviation in the Labour party's election manifesto. There was nothing about it in its latest European election manifesto either, despite the fact that our policy here is producing real benefits for travellers. The Labour party's view of Europe extends only as far as the "parish pump", but there was something about aviation in "Labour's Programme 1982" which read — [Interruption.] I am about to read Labour's programme.
  "Labour is certainly not opposed to low air fares"—
  I am glad to hear that, despite the double negative.
  "But
  and this is a substantial but—
  "fares policies must be consistent with a licensing system".
  [Interruption.] — I have never known an Opposition spokesman who was so eager to barrack when quotations from his party's documents were being read.
  Mr. Cranley Onslow: As it is crystal clear that we shall not have the advantage of hearing from a spokesman for the so-called alliance, can my right hon. Friend tell us about its aviation policy—if it has any?
  Mr. Ridley: As usual, my hon. Friend has bowled me out middle stump. I apologise profusely for not being able to give an answer, but perhaps the right hon. Member for Western Isles (Mr. Stewart) will be able to help us.
  The lukewarm and qualified support for cheap fares which is implied in the quotation which I read sits a little uneasily with all the rhetoric that we have heard from the Greater London council and its amanuensis on the Opposition Front Bench about public transport fares. It just underlines the point that when the Labour party talks about low fares it means fares buttressed by crippling subsidies, burdened by regulation and institutionalised inefficiency. Competition is the way to provide "fares fair" fares. Bleeding the taxpayer dry is not, so may I just ask the hon. Gentleman to clarify exactly what sort of licensing system he would impose on air travel? Would it allow competition, especially on air fares? Would it allow consumer choice? Or would he relegate the traveller to the whim of the over-cartelised, over-subsidised and overregulated world which, thank heavens, is now slowly crumbling away in civil aviation, though it continues to reign supreme in the mind of the Labour party?
  10.5 am
  Mr. John Prescott: I shall answer some of the pertinent questions asked by the Secretary of State but I hope that the House will allow me to arrive at them when I had planned to do so. I do not intend to duck them.
  I am as surprised as the Secretary of State at how this debate came about. I did not want a debate on civil aviation as so many reviews are taking place. I also do not want to damage the possibility of the House debating the conclusions of those reviews. Government business managers tend to tell us that, because we had a debate on a given subject fairly recently, it will be difficult to find further time to debate the reports. Several aviation people have asked me whether I called for this debate and I want to put it on the record that I did not.
  Government policy is motivated by the privatisation of British Airways and the liberalisation of routes and fares. The Secretary of State showed that competition is almost an end in itself for the Government—it is not a case of judging what is best for British aviation. As the right hon. Gentleman has set so many reviews in hand, it seems clear that he has decided that competition, as he has expressed it, is by far the best way in which to achieve the best interests of civil aviation. The Opposition have considerable doubts about that ideological posture.
  As the Secretary of State said, there is no doubt that aviation is at a crossroads. We face important changes, which civil aviation must take into account. However, I am sure that we all agree that British civil aviation has been a most successful transport industry. The fact that the Secretary of State envisages 100 million people going through our airports by the end of the century reflects the fact that they are already used by 65 million people. It is generally recognised that Heathrow is the crossroads for the international air network. That is strongly to the advantage of British civil aviation.
  British Airways is our largest international carrier and we have a successful charter and innovating industry. We should recognise that. Civil aviation is a major employer, a huge earner of foreign currency and makes a substantial contribution to the balance of payments. Although there is room for improvement — the Secretary of State

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  mentioned some areas — the story of British civil aviation is successful. Much of it can be attributed to historical reasons, as is the case with shipping, with which I am much more conversant. However, shipping and civil aviation have some common characteristics. They are both international industries, but something that has happened to shipping could happen to British aviation.
  Civil aviation has a form of regulated competition. Even the Secretary of State does not talk simply of competition — he talks of "fair competition". That is a value judgment. In shipping, it is felt that Russian shipping is not fair but that other forms are. The matter is not left to the market mechanism; even the Secretary of State admits that. As his trip to Amsterdam shows, Governments must agree to the regulations involved to achieve a lower fare structure. Historic conditions in transport have given us supremacy in shipping and in aviation.
  Network systems and regular services are maintained by international agreement and a certain amount of price fixing is a predominant feature. Shipping has now largely moved away from conference systems to open competition and our position in the world fleet ownership league has dropped from first or second to eighth or ninth. When the Government came to office we had 1,200 ships. We now have only 600. The people who have benefited from British investment and development in that international industry have been those who emphasised the need for competition — mainly the Russians and the flags of convenience fleets—and who have broken the regulatory controls in that industry to Britain's great disadvantage. It is thus vital to consider the benefits and advantages of general agreements of one kind or another in international competition.
  Mr. Colvin: As the hon. Gentleman will know, a large amount of the cargo that used to be carried by ship is now more profitably carried by air. Does he agree that that makes it equally vital to consider the needs of air cargo in aviation policy?
  Mr. Prescott: The most recent figures from British Airways show the success of air cargo. My point was that those who argue against international regulations and controls tend to be those who do not have much of the market and wish to achieve a larger share, which inevitably tends to be to the disadvantage of those who dominate the various sectors. The national interest is thus a major factor in this context.
  The rules required for international competition may thus be quite different from those needed in the domestic sector. Indeed, the EEC document on aviation argues not for the deregulation or reduction of fares internationally, which the EEC regards as extremely difficult to achieve, but for movement towards fare reductions for intra-European traffic, a matter to which the Secretary of State has been addressing himself this week. We must bear that in mind in formulating our domestic air policy.
  It is clear that world aviation is not run on the basis of laissez-faire competition. As the Secretary of State has said, it is often controlled by Governments and maintained by subsidies because of the requirement to maintain national airlines. This is one of the main differences between the deregulation that has taken place in the American market and that which may be proposed in Europe because the position of federal states is quite
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  different from that of national states. National states will wish to maintain their own airlines, probably at great cost, as has been the case in the past few years, and in their national policies they will judge questions of fare reduction and competition against that background.
  The subsidies put into the national airlines take account of the recent depression in the industry. IATA states that in 1979 the airlines made a collective loss of £4·5 billion but finds evidence now of a move towards small profits on a revenue of about £50 billion. That gives some idea of the scale of the industry and its international and domestic implications.
  In my view, therefore, the EEC was right to make a distinction between the European Community and the international sector in terms of competition. As the report shows, the problems of moving towards some form of deregulation or fare reduction are considerable. I do not necessarily accept all the EEC conclusions, but it is clear that the concept of competition must be considered on a different basis domestically and internationally.
  The CAA interim report shows that we cannot wipe the slate clean but must start from the existing interlocking airline systems, the dominance of certain carriers and the objectives that we seek to achieve in our aviation policy, taking into account the bilateral negotiations with other countries in which Governments are inevitably involved.
  As the Secretary of State stressed, the criteria and the questions set out in the CAA review reflect the Government's desire to pursue a policy of competition and to change the CAA criteria for considering the granting and renewal of licences to recognise that user interest should be on a par with the balance of operators, contributions to the balance of payments and all the other matters emphasised in the interim review. The review shows that the CAA is well aware of the Government's desire for solutions favourable to its thinking in terms of route substitution and removal, liberalisation, fare reductions and so on and has asked for further observations from all involved. Unfortunately, we cannot contribute to that thinking through today's debate as I gather that the closing date for evidence was 15 May. Today's debate will thus not be taken into account in the report expected in mid-July.
  Mr. Onslow: The hon. Gentleman must have known that the CAA was anxious to obtain evidence from any qualified source. Can he say whether the Labour party submitted any evidence and, if so, what that evidence was?
  Mr. Prescott: We met the CAA through our various committees. I intend to conclude my remarks by dealing with Labour party aviation policy, as the Secretary of State asked about it. Nevertheless, even if it is not spelt out in our manifesto, it is made perfectly clear in our transport policy document, which the Secretary of State went on to quote after complaining that we had no aviation policy.
  The Government seem to be ideologically obsessed with competition as the main way to safeguard British aviation interests internationally. They should bear in mind the important analogy with the shipping industry in this respect. It is clear from the interim report that the CAA is well aware of the Government's intention to privatise and possibly to reduce the size of British Airways. I hope that any such reduction is still an open question for the CAA, as one gets the impression that it has reached a

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  conclusion more in line with the Government's ideas about competition and privatisation than with the future good of British aviation, although I reserve my judgment on that until the final report is published.
  In considering these matters, we must fully assess the experience of deregulation in the United States. I doubt whether the time allowed for the review has been sufficient for the CAA to do that. That experiment has been described as a considerable success, but recent assessments show that even developments such as People Express are never easy. Such airlines start off with an awful lot of razzamatazz about better services and lower fares, but in aviation it is the long-run costs that count, as Laker and other people found out.
  I do not know whether Virgin Atlantic will take off today. I thought that the Secretary of State might tell us about that. I read articles about it in the weekend newspapers, as many other hon. Members may have done. It seemed that on Tuesday the airline would get its certification, on Wednesday the plane would be painted and on Friday it hoped to take off. In the meantime, there is already a legal suit between the owners of the corporation about the legal and financial validity of the airline's background. I only quote what was in the weekend papers for all to see. That is all happening at the start of the exercise, before the service has even got under way.
  I was able to travel to the United States with my family merely because Laker forced down the fares of British Airways. Many ordinary people, not wealthy people, could travel to the United States. The present management of BA is making its own innovations. Lord King is an impressive and powerful man, but there is no doubt that the fare cuts, which are of considerable benefit to travellers, would not have been made without the intervention of Laker.
  The long-run consequences of the Laker operation were considerable. They raise the question of how we get a fair approach to fares policy that encourages people to travel on airlines. The aviation industry is a massive growth industry, with great potential. At least the Labour party believes in the sense of a reduced fares structure in public transport that leads to many people using transport more often. However, unfortunately, the Secretary of State has constantly brought forward legislation, and will do so again on Monday, with the express purpose of increasing fares and chasing people from the public low transport system.
  There is a relationship between the fare charged and the use of the transport facilities provided. That principle is as applicable to buses and trains as it is to planes. It is one of the important points to bear in mind when considering the economics of public transport, but unfortunately it tends to be blurred in the rhetoric of exchanges in the Chamber. There is an ideological difference of opinion in the House about the proper way to finance public transport to maintain maximum utilisation. That is not evident in the rest of Europe, with its successful transport.
  The experiments with Virgin Atlantic and People Express show that there is a demand. The big question is what size the airline should be, what markets it should aim at and how many seats it should make available. The Secretary of State's view is that one should leave it to price and competition. He referred to the domestic services that
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  he introduced by overruling the CAA—for example, the British Midland flights to Scotland. It has been said in the debate that there is excess capacity. That is one of the other aspects of competition. Changes in Heathrow flight movements come up against the ceiling of 275,000 flight movements, for environmental reasons. In the aviation industry, one cannot move far in one direction without creating consequences for something else. One cannot simply leave it to price and competition. That is not the best way of determining the best use of limited public resources, and we cannot accept it.
  The Government appear to believe that the privatisation of British Airways is essential. British Airways stated in evidence to the CAA:
  "Privatisation of British Airways is irrelevant to the issues of competition or the sound development of the aviation industry in the UK."
  Therefore, the judgment about whether one should privatise is political. Privatisation is not an essential condition for maintaining competition or achieving the competitiveness that the Government wish.
  Mr. Ridley: In case the hon. Gentleman was trying to pray me in aid for that conclusion, I should like to state the Government's position. I said that, whether or not British Airways is privatised, the issues that the CAA was considering would have to be decided. It had nothing to do with privatisation. When there is a competitive environment in this country and Europe, it would not be fair competition if British Airways were not in the private sector. Otherwise, the long, deep public purse is available to subsidise those who lose competition, and that is not fair to those who do not have access to it.
  Mr. Prescott: That is a reasonable point, but I should have been more convinced if the Government had applied the same argument to the private Rolls-Royce when they said that one could not allow that industry to collapse and the taxpayer to finance the company. In the case of a major airline carrier or airport, the Government cannot stand aside and say that the market will prevail. There was the same argument about the port of Liverpool, when the Government said that it would collapse, and had to bring forward legislation for its financial operation. That is the thinking of the Selsdon men who seem to be coming back to the Tory Government. Such an understanding of transport might be fatal for the industry that the Secretary of State is in charge of.
  Therefore, the case for British Airways being privatised has not been established, although the Secretary of State tried to do so. A former Secretary of State for Transport, Sir John Nott, introduced the Civil Aviation Bill in 1979, which contained the powers to privatise British Airways, but the case has yet to be made.
  There has been considerable talk about the inefficiency of British Airways, but I do not hear anyone making that case now. The Secretary of State referred to the remarkable turnround in British aviation due to the people in the industry, including Lord King. The right hon. Gentleman readily credited all those involved in that turnround, which can be measured in the profits, assets and reserves. BA's annual report refers to progress in the past 10 years. There have been impressive gains and developments. The real problem arose in 1981, when there were considerable financial difficulties. However, we have to bear it in mind that much of the turnabout was due

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  to 20,000 people being made redundant. The Government have picked up the cost of unemployment involved. I congratulate those involved in the financial turnround.
  There have been criticisms about the rigid fares structure, but BA has announced that it is attempting to negotiate reductions in fares in several areas. It was actively involved in negotiations on the Amsterdam route, but the Secretary of State had to intervene to break the logjam. Therefore, in fare structure changes, the corporation is not necessarily the master in its own house.
  The quality of service varies. I know that one can now get breakfast on the shuttle to Scotland. The fare structure is settled, and competition will now be on menus and services, with problems of excess capacity and the limited space available at Heathrow. There are more domestic flights, leaving less space for international flights, which threatens the development of Heathrow, in its contribution to the international airline hub network.
  Civil aviation policy, certainly up to 1979, was largely agreed between Labour and Tory Administrations. That policy was designed to support the major character of British Airways and the role of the private sector within those operations, and to use the CAA as the regulatory body for guidance on the objectives that were to be achieved.
  That changed on the introduction of the Civil Aviation Act 1979, when the then Secretary of State made it clear that he wished to privatise BA and make the CAA less involved in the regulatory process from the operators' point of view and to be more concerned with the user. Less priority was given to decisions concerning network, cross-subsidisation, the balance of payments contribution and airport policy, and that has been reflected in a number of decisions made since then—for example, the desire of Government to get out of being involved in negotiations, said by the former Secretary of State to involve 110 bilateral negotiations.
  The result was that the Government soon had to overrule the CAA. In its decision on Cathay Pacific, the Government just could not stay out of the matter. On domestic services at Heathrow, the present Secretary of State overruled the CAA on the competition aspect. When it came to the possibility of British Midland Airways flying out of Glasgow to America, the Secretary of State, in the name of competition, overruled the CAA because that would have undermined the interchange network of the gateway facility at Prestwick. The right hon. Gentleman was up against the problem of airport policy in relation to route policy. All of these matters are interconnected and the reality is that the Government cannot rely on the market price mechanism to decide such major matters of policy.
  Mr. Steen: Taking that point a stage further, is it not a fact that British Airways can cross-subsidise its domestic routes from its international routes, whereas British Midland Airways, by being refused that licence to fly from Glasgow to New York, does not get the international traffic from which to cross-subsidise its domestic flights?
  Mr. Prescott: The hon. Gentleman raises an important point, with which I intended to deal. The argument we hear about breaking up BA's routes is that somehow they will go to BCal. But what about the other seven private operators? Will they not say, "If there is to be a share-out of routes, why should it be a duopoly instead of a
  608
  monopoly?" That is the reality of the situation and, when it is considered in those terms, one begins to see how we could undermine the dominant role that British Aviation has been able to retain, for the reasons which I gave earlier. They are the major problems that flow from the ideas of privatisation and competition that motivate the Secretary of State's thinking in this matter.
  I notice a distinct difference between what the then Secretary of State, when launching the 1979 Act, said about privatising British Airways and the apparent views of the present Secretary of State. For example. the then Secretary of State said on Second Reading of the Civil Aviation Act 1979:
  "I do not propose that any part of British Airways should be broken up or sold off."
  He said:
  "British Airways are not a monopoly. They have to operate commercially in an increasingly competitive market."
  He went on to make it clear that, in his view, only a minority of the shares would be sold, and added that the real desire to get at BA was nothing to do with civil aviation policy. He said:
  "The Treasury will relinquish control of the airline's finances. The commercial borrowings of the airline will fall outside the Government's accounts." — [Official Report, 19 November 1979; Vol. 974, c. 39, 40, 47.]
  It is monetarism, the Government's economic policy, that motivates them to remove the £2 billion that was seen as necessary for the reinvestment programme in British aviation, money that simply becomes part of the public sector borrowing requirement. In that sense, therefore, the Government are motivated not by a civilian aviation requirement but by their pursuit of monetarism. In that sense there is a coincidence between the ideological and monetarist, or competition, policy which the Government are pursuing and the disastrous effects of that policy on the nation's industrial development.
  The sale of BA constitutes a major threat to British civil aviation. It even represents a threat to the interests of the taxpayer. We note that BA is being packaged for sale. We also note that the results last week were announced in a way designed to attract the attention of the City so as to get the best possible price, which must be the aim of the Secretary of State, although his track record in the disposal of public assets is, so far, absolutely lousy.
  We must not forget that the turnround which has resulted in BA becoming efficient was achieved at a cost of 20,000 people going on the dole. I am not an account ant so I cannot make an expert judgment of the accounts of the company, but I can pray in aid what I suspect and fear, and I can perhaps best express that fear by quoting from an editorial in Accountancy Age, to which I referred at Question Time on Monday. It said, having considered the accounts:
  "Everything from aircraft to the flagging value of sterling is coming to the aid of the flotation party, with the net result that BA's year-on-year improvement looks significantly more dramatic that it actually is … The airline is looking towards privatisation in the near future and is indulging in an undignified scramble to make its results look as good as possible—not to the taxpayer but to a small group of government officials and stockbrokers."
  That was a serious charge, and I trust that the Secretary of State will give it serious attention. That statement may not carry great weight, but it is a question of experts making an assessment of the accounts of a corporation which is at present owned by the state.
  Mr. Nicholas Baker: If privatisation is successfully carried through and thereby further investment in BA ends, with no further taxpayers' money being diverted to BA — money which might otherwise go into the social services or to other perfectly good ends —there would be a benefit to the taxpayer, would there not?
  Mr. Prescott: That is the type of balanced judgment that each of us must make when we see the package that is produced by the Secretary of State. When considering the taxpayers' interest, we must remember that we have written off some of this company's capital. Admittedly, that included £160 million in respect of Concorde, which I well understood. Various sums have been given since 1972, but if the company is becoming profitable, it could be expected to pay a return on those sums.
  We must also consider the payment by the Treasury of the sterling guaranteed exchanges, which are estimated at £200 million, for the purchase of aircraft and borrowing abroad. Nor must we overlook the public dividend of £180 million. When all those figures are added up, we are in the region of £800 million, and that, according to my reading of the press, is the kind of money that the Government can expect to raise from the sale of BA; I understand that between £800 million and £900 million is in view.
  If the Government were to receive that money to offset the debts in which they are involved, it is clear that the debt equity relationship would be disastrous. In other words, the Government will be forced either to write off further debts or to come to an agreement that a percentage of the money that they receive shall remain with the company so as to secure the sale. The timing of the sale is crucial in that.
  These matters are of great concern because the rip-off of the taxpayer has been evident, as the Public Accounts Committee has readily shown, in relation to the selling of British ports, of hotels, in regard to the proposition affecting Sealink, and now aviation. There is every reason to believe that the desire to rush the sale of BA could be to the disadvantage of the taxpayer.
  If BA has been returned to a profitable state, the British taxpayer, who has carried BA through its period of difficulty, should begin to benefit. Now that BA is a more efficient organisation, as everybody agrees, the British taxpayer, rather than those who buy into it, should benefit.
  The challenge that is now placed before us by Sir Adam Thomson in his "blue book" in relation to the routes that he seeks to purchase at a charge of £200 million raises an important political question. It also raises important issues about the size of BA and whether other private operators are likely to demand their share of what is going. He poses another difficult problem — his solution to the BCal Gatwick versus BA Heathrow argument. The unions have estimated that perhaps 8,000 jobs could be affected, and that is causing great concern. It also reduces Heathrow's ability to compete with other international airports, and that fact cannot be ignored. There is a distinct possibility that we will direct the movement of British airlines to other airports. We must remember that when BA moved from Heathrow to Gatwick it was to the advantage only of the Spanish operator; it did not help BA or British civil aviation. We must not ignore the consequences of such moves.
  We must be concerned about airport policy, especially its effect on regional airport development. A powerful case
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  has been put forward by the Campaign for the North. It clearly questioned the criteria for airport development, which must take into account the North-South disparities, regional development, jobs and the deprivation in certain areas. Those factors cannot and should not be ignored.
  The problem will be made worse by selling the British Airports Authority and other municipal authority airports, where the profit motive will predominate rather than the maintenance of the infrastructure of the airport system, especially in Scotland. The Heathrow limit of 275,000 movements and the Minister's commitment to reduce them if they go above that figure begs the question. What criteria will be used to reduce either domestic flights, helicopters or international trading flights? That is a crucial question.
  The decisions of the CAA are relevant to the Government's decisions on infrastructure problems, airports and all the interconnected problems. All that can be seen in the Amsterdam deal. I do not want to be churlish towards the Secretary of State. I said during Question Time on Monday that the deal was running into the ground. I expressed an opinion, but I was wrong. The Secretary of State intervened with the Dutch Minister to break the logjam, and cheaper fares can now apply. However they are measured, fares in Europe are too high. It is not acceptable to argue that they are at the right level. I welcome the fact that BA, together with British Caledonian, is to the fore in attempting to reduce fare levels, but the reality is that we need the agreement of the other countries involved. I await details of this agreement before making a final judgment.
  But if we have given KLM the right to land anywhere, it is possible that it will be in direct competition with BA and other British carrier routes, as the Dutch Minister claims. Of course, KLM is not on the same scale as BA, but I remind the House that in the north we can see the adverts saying, "It's better to use Schiphol than Heathrow". Under the new agreement, it will be possible for KLM to develop the hub concept for the development of Manchester and the northern airports to the distinct disadvantage of development of British aviation policy. I reserve judgment on that matter, other than to say that the pursuit of competition for competition's sake will produce major disadvantages for both the airline operators and airport development.
  The serious doubts about the international carriers' role and the share of routes for a privatised BA must be challenged. The reduction of the fare structure may have considerable consequences in aviation policy generally. The Labour party does not believe that simple reliance on competition and market forces will achieve a sensible solution for air transport services. The Government's policies have led to wasteful duplication of some services and the neglect of others. Increased capacities and the possibility of fare wars could undermine the financial viability of airlines.
  The Labour party is certainly not opposed to lower fares, as we made clear in our transport policy document, but they must be consistent with a licensing system that ensures the sensible utilisation of capacity, the maintenance of a necessary network of service, the highest possible safety standards, the development of employment on the basis of satisfactory terms and conditions and adequate investment for future development in British civil aviation based upon a major public section carrier. The Labour party's policy is now on the record.

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  The Government must think long and hard before damaging the prospects of the industry, possibly for the remainder of the century. We await the civil aviation review with some anxiety and trust that this House will be given an opportunity to debate its conclusions before the Government act.
  10.45 am
  Mr. Cranley Onslow: I shall try to be brief as many hon. Members wish to speak, and a great deal of time has been taken up by Front Bench speeches.
  As this is a debate about civil aviation policy, I hope that my right hon. Friend the Secretary of State will not mind my saying that I am sorry that he did not say anything about safety, which should always take priority in our considerations, and especially about the recent CAA report on helicopter airworthiness. Perhaps my hon. Friend the Under-Secretary of State will find time to mention that important document when he replies to the debate.
  Reading between the lines of the press release, the House may share some of my anxieties. It states:
  "The greater part of the report is concerned with the long-term improvement of existing airworthiness standards which will affect the next generation of helicopters."
  Surely that is saying that the present generation is not as safe as it should be. My right hon. Friend knows that that view is held by the operators, among others. I do not speak on behalf of any particular operator, although the House knows of my interest in this section of the industry. It is important that action is taken because some things are seriously wrong in helicopter safety. It is the Government's responsibility to ensure that appropriate action is taken. I hope that my hon. Friend the Under-Secretary will endorse that.
  The hon. Member for Kingston upon Hull, East (Mr. Prescott) raised the question of competition. Telescoping my argument considerably, I can assert, with a fair degree of accuracy, that the only people who make money out of transport are the travel agents. In due course, everyone else will lose part or all of their shirts—perhaps because of the way in which innovation comes in and the way in which the market changes, but principally because in the travel business the consumer always wants it cheaper. As consumers have more votes than the providers of transport, in the end Governments try to gratify the consumers. That is a good thing, but it can be carried to excess.
  We must constantly bear in mind that the Government have a duty to ensure not only that where services are provided they are safe services, but that there is not unfair or cut-throat competition. That is recognised in the legislation on monopolies and mergers and in other legislation to protect the consumer against his natural desire to get something for less.
  It is against that background that I want to say a few words about the policy that I hope the Government are beginning to formulate. I am not here to make a particular point on behalf of British Caledonian. Other hon. Members may do so, and I look forward to listening to them. It will be in nobody's interest if, at the end of the day, we have a British aviation industry in which BA and British Caledonian have giant status and use it to lean on the small man. Our objective must be to ensure that fairness prevails.
  I admire the job being done by Lord King. I only wish that he had been available in 1970 when it would have
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  been possible to make an impact. The lost years in between are a matter of great regret to anyone who has studied the British aviation industry. I hope that the new commercial drive in BA will not be allowed to go too far. I am not confident — and I am not sure how many of my hon. Friends are confident — that BA can be relied upon always, and without supervision, to compete with total fairness.
  The chief executive of British Airways recently 'wrote a letter to the Daily Telegraph. Hon. Members have received an enormous amount of mail on the subject and I garnered the following grain from the chaff. The letter, published on 1 June, said:
  "Any suggestion that British Airways could use its resources to undercut competition by cross-subsidy ignores the vital fact that to do so would be costly and extremely damaging to group results, hardly the conduct to be expected of a privatised concern exposed to the pressures of the market place."
  The letter concludes:
  "How interesting it is that now that our airline is strong and profitable and dedicated to serving the consumer and the national interest the complaint should be that British Airways is too competitive."
  The complaint is not that British Airways is too competitive, but that it is competing unfairly. We want a guarantee that, when it is privatised, it will not be able to do that. I should like it to stop now, because the evidence is profoundly disturbing.
  Yesterday I met the managing director of one of the successful independent airlines. He said that when gathering quotations for charters for the 1985 season he discovered that British Airways was undercutting the average of the market by at least £1 a seat. He said that that was explicable on one of two grounds—either that BA knows nothing about the market, or that it is going in for predatory financing.
  I give British Airways the benefit of the doubt. I am sure that it knows what it is doing, and therefore predatory financing must be involved.
  Mr. Prescott: Has the hon. Gentleman asked British Airways?
  Mr. Onslow: I do not need to.
  The British Airways report and accounts, which discusses British Airways Helicopters Ltd., states:
  "The outcome for the financial year was a drop in revenue and the loss of some long-held contracts to fierce competition."
  The report then relates the attempt that the company has made to expand markets overseas. It says that the Boeing Vertol fleet represents
  "the largest single commitment for the Engineering Department".
  The report continues:
  "While continuing to look for overseas opportunities that will lead to profitable growth, the company recognises the importance of the North sea".
  I do not criticise British Airways on behalf of any of its competitors, but the House is entitled to the facts. I hope that hon. Members will accept that I am in a good position to give the House those facts.
  Most people who watch the market agree that British Airways Helicopters Ltd. has not made a proper profit since 1981. Its operations may have shown a profit above the line, but not on the bottom line, and the report admits that revenue is dropping. Competition for overseas work is intense and prospectively very unprofitable, yet British Airways Helicopters is looking in that direction.
  Those who observed President Reagan's tour of Northern Ireland will have noted that British Airways

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  Helicopters used Chinooks to carry the President's retinue. Of its six Chinooks, two are employed on contract, three are surplus to requirement and one is being repaired, probably after having been ditched. We should ask whether a sensible business man would continue that operation, or run it down and dispose of it.
  If the company intends to continue to try to compete and win business by predatory methods, we are entitled to question that policy. There is no doubt that in many important respects, British Airways Helicopters, just as British Airways Air Tours, enjoys a signficant set of advantages in insurance rates in the way that it can spread overheads and in the financial write-offs that it can make.
  It is not surprising that, when the independent airlines approach us about the formulation of civil aviation policy, they draw upon such evidence. Mr. Michael Bishop, Mr. Fred Newman and Sir Adam Thomson, who are intelligent and competent business men, have reason to ask how they can trust British Airways to be the arbiters of what is fair and what is unfair competition.
  I hope that my right hon. Friend will bear in mind that it would be bad for the air transport industry as a whole and for the consumer if it were possible for one major company, or perhaps two, so to dominate the market that, by unfair competitive methods, they drive out companies which are entitled to a chance to operate under the rules of fair competition.
  10.55 am
  Mr. Donald Stewart: I agree with the last point made by the hon. Member for Woking (Mr. Onslow). I intend to make a brief speech, because of the number of hon. Members who wish to take part in the debate. It is odd that we are having the debate today, in view of the reviews and the work of the Select Committee in the pipeline, but it may be useful for certain markers to be put down.
  The Secretary of State said that the Select Committee was examining the major airports, but that the smaller airports, particularly in Scotland, were being reviewed by the Civil Aviation Authority. He said that sales to local authorities or private buyers were being considered. There is no possibility of the Western Isles island council obtaining the finances necessary, because of Government cuts. The council is having difficulty financing social services and education. There is not the slightest possibility that it would even consider purchasing an airport at which only four scheduled departures and arrivals take place each day. A number of charter flights use the airport, but not regularly. It is ludicrous to suggest that it might consider purchasing the airport. Private buyers are equally unlikely to be interested, because there would be nothing in it for them.
  I welcome the return to profitability of British Airways highlands division. Complaints have been made over the years about the level of fares. For instance, I objected over a long period to the fares on the Viscount. On the flight from London to Inverness the traveller paid 8p per mile. When the identical machine was flown from Inverness to Stornoway, the cost to the traveller went up to 16p per mile — exactly double. That is unacceptable within a nationalised service.
  I have no strong view about the Government's decision to sell British Airways. That is Government policy and I
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  am not opposed to privatisation in principle. Competition has already improved British Airways' services within the United Kingdom. However, the airline should not be sold in a manner that turns a public monopoly into a private monopoly.
  The Secretary of State referred to the danger in the market strength of British Airways. As it has 80 per cent. of the market, I can see the point of that. The hon. Member for Woking referred to two airlines, but the main danger lies with British Airways, with its lion's share of the market. Route licences, for example, are public resources. They are not tied for all time to the potential purchasers of shares in the new privatised British Airways. The opportunities in the new situation must not be confined to those who may buy shares. Nothing will accrue to the public interest by a new British Airways with private capital on its present scale.
  The Secretary of State referred to increased competition and fairness. That is the hub of the matter, otherwise the operation will achieve no advance for the public interest and for the air traveller.
  10.59 am
  Mr. Michael Colvin: Along with the Civil Aviation Authority document "Consultation on airline competition policy", there came a letter which said that the authority
  "may decide to revise some of the policies set out in its 1981 Statement — in particular those on competition and substitution."
  The arbitrary substitution of one route for another, or rather the dogmatic carve-up of British Airways route structure to try to encourage greater competition, is probably the most controversial subject that will exercise our minds in the debate, and I wish to concentrate my remarks on that key question.
  The debate outside the House, which has been extremely active, has been led by British Caledonian, but it is fair to say that it has been well supported by a number of other private operators, and, rightly, free enterprise companies see this as a golden opportunity to have a go at British Airways. They will never get another chance like it. One can hardly blame them—they have a duty to their shareholders and bankers to try for a better slice of the business.
  I agree with my right hon. Friend that a climate must be created in which British Airways can become more efficient in order to improve its international competitiveness. It has another prior objective, which is the privatisation—I should say denationalisation, because I think that privatisation is a dreadful word—of British Airways. The trouble is that having two targets leads to difficulties. If one tries to hit both at the same time, one probably finishes up by missing both.
  I am sure my right hon. Friend will agree that, when he comes to consider civil aviation competition policy, if he puts the interests of the passengers first, the decisions which are made are also most likely to be in the best interests of everyone else concerned in civil aviation, and that includes the shareholders in the companies, because civil aviation is, above all, a service industry. As we have seen with British Airways, a little bit more of the fresh air of competition blowing through the market has led to a marked effect on the service that it has given to passengers.

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  A catalyst has been the objective of denationalisation, and the improvement in British Airways services has been brought about partly by the determined and aggressive leadership of Lord King, to which reference has already been made by hon. Members, and partly by the realistic way in which British Airways staff at all levels have joined in tackling its appalling overmanning problems. I agree that that has been done at a price to the taxpayer. Nevertheless, it has been achieved without any industrial unrest, and it is incumbent on us to congratulate the staff on the co-operative way in which they have led the drive for higher productivity and competitiveness. That is really the key—competition—as hon. Members have said.
  I should like to give an example of the way in which the proposal to denationalise has persuaded British Airways to pull up its socks. The introduction of a competitor on British Airways shuttle routes to Edinburgh and Glasgow, brought about after an initial loss of custom, led to an end of the old minimal standards. Today, one has British Airways super shuttle services with breakfast, hot drinks and a free bar. It is significant that the total number of people flying between London and Edinburgh and London and Glasgow on the competing companies routes is growing more rapidly than at any other time. This is the effect of competition — mutual encouragement to improve.
  What makes no sense to me is the proposal that a slice of British Airways routes should be compulsorily sold off to other airlines. That to me would be a Socialist sort of intervention which would emasculate an earning potential of a very clear success—precisely the sort of thing that the hon. Member for Kingston upon Hull, East (Mr. Prescott) would do if he were in power.
  I should like to quote from what The Sunday Telegraph had to say about this on 10 June when Ian Watson, the city editor, wrote:
  "The remaining threat to a successful privatisation early next year of British Airways is if the Government is swayed by British Caledonian's offer to snatch 20 per cent. of BA routes."
  He continued:
  "The questions that the Government needs to consider are these: Is there any point in just handing routes over to another airline? How does that improve competition?"
  I do not think that we have yet been told the answer to that question.
  Mr. Steen: What about the loss-making routes? Should they not be got rid of?
  Mr. Colvin: There are plenty of other companies where part of the business makes a loss and other parts make a profit. I suppose that the retail trade, with the practice of loss leading in a supermarket, is as good an example as any. That to my mind is good marketing. No airline route will always be profitable. There are ups and downs. In any business — and civil aviation is no exception — often the successful routes have to carry those that are not so successful.
  Mr. Robert McCrindle: In the light of my hon. Friend's reluctance to agree to transferring routes, as British Caledonian has suggested, may we have his view on the point made by our hon. Friend the Member for Woking (Mr. Onslow) on the freedom which that situation would give to British Airways, if it chose to do so, to encourage predatory pricing, to the disadvantage of the independent carriers?
  Mr. Colvin: I think that predatory pricing is something that already happens in many businesses. It is part and parcel of the business, and there is no reason why a successful business should not undertake an aggressive pricing policy. When British Airways is in private hands it will no longer be a state monopoly, and, in any case, simply by moving British Airways and substituting another private company will not solve the monopoly problem.
  Mr. Favell: My hon. Friend mentioned the good work of the employees of British Airways in recent years. Does he agree that it would be a poor reward for those employees if routes were hived off, particularly from provincial airports such as Manchester, where 1,000 employees of British Airways are concerned about their future?
  Mr. Colvin: I agree absolutely with my hon. Friend, and I am glad that I have a few more allies on the Conservative Benches.
  Handing over an air route to a different operator gives no extra choice to the customer. Swapping one airline for another adds nothing to consumer choice. What may well be needed is more competition between airlines, and that means more than one British airline operating on certain routes, bringing the passengers the benefits of true competition through real choice.
  I wish to quote from British Airways annual report and tell the House precisely what the chairman, Lord King, has to say about this:
  "If other British airlines wish to step up their existing competition with us on more routes they are, and always have been, free to seek licences to fly with us to destinations of their choice. We are willing to compete on all of our routes."
  In fact, British Airways already competes with more than 200 companies internationally.
  Mr. McCrindle: Will my hon. Friend tell the House it is possible for a second British airline to enter into competition with British Airways on a foreign route when there is a pooling agreement between the foreign airline and British Airways which effectively renders further competition from a British airline impossible?
  Mr. Colvin: It is not impossible, with respect to my hon. Friend. It is difficult, but it is certainly not impossible. Pooling is one difficulty, and the bilateral agreements with foreign countries is a problem, but it can be done. Within the European Community, for a start, there is tremendous scope for discussions with other partners and airlines in Europe as part of the drive for lower fares to carry out just such negotiations and to reach agreement so that there can be more airlines competing on the same routes. After all, in Europe one of the main difficulties is that, even if we privatise British Airways, we are still competing with nationalised airlines on many of the European routes.
  In tampering with the route structure, British Airways could put privatisation out of the question for a number of years. The investors would want to see how the new organisation — for that is what it would be — would prosper over the next two or three years. They would not be really interested in investing, because they would suspect that what the Government could arbitrarily do once —to interfere with the company's assets—they could do again, and the potential investors would be absolutely right.

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  On 17 June an article in the business column of The Observer said that my right hon. Friend the Secretary of State
  "can hardly hand out BA's route network (its effective growth factor) with one hand and expect shares offered to the public with the other to attract a stampede."
  The Daily Express said:
  "Plans to privatise British Airways could be grounded even before they hit the runway if the Government takes away some of the airline's profitable routes."
  The Daily Express is absolutely right. Conservative Members want to see British Airways set free, able to conduct its affairs without the stifling hand of bureaucracy. The reasons are clear. First, the customer will benefit from further improvements in services. Secondly, the nation will gain as British Airways' considerable overseas earnings—more than £500 million a year net gain to invisible earnings—increase as the airline grows. Thirdly, there will be the benefit of the example to the nation of the great turnround achieved under the new management that my right hon. Friend the Prime Minister has put in.
  All that is part of the new sense of realism that prevails in so much of British industry since the Conservative party took power in 1979. As recently as 1981, not only were the financial results of British Airways poor, but the standard of its services and the attitude of some of the staff were no cause for pride. Now, under lively leadership, the standard of service has risen, productivity was up by 9 per cent. last year, there was an operating surplus of £268 million, and £106 million of interest was paid on the airline's borrowings. That is not bad.
  There is no doubt that the reduction of staff from 58,000 to about 38,000, the elimination of wasteful ways and the reduction in the aircraft fleet from some 250 aircraft to only 150 have all contributed to the notable success of British Airways. How foolish it would be to turn off such a success story just when Lord King and his dedicated team have demonstrated that they can bring home the bacon in successful competition with well over 200 airlines round the world.
  When British Airways is privatised, as, I believe, is proposed, the Government will gain by being relieved of the responsibility of guaranteeing the airline's commercial debts. The point made by the hon. Member for Kingston upon Hull, East about the public sector borrowing requirement is valid. We know that the interest and due payments have all been made in full by British Airways.
  Mr. David Ashby: Does my hon. Friend agree that British Airways is starting off with the great advantage of so much of its capital debt being written off already? It has an advantage over the private airlines, and it is public money that is being written off.
  Mr. Colvin: I agree that BA is starting with a great advantage. As the Irishman said when asked the way to Dublin, "If I were you, I wouldn't start from here." It is a fact of life that BA has had an enormous slice written off, but we do not want to have to write off any more, and that is why it is being privatised.
  After privatisation, BA will be free to make its own way, guided by professional, commercial and proven leaders, as has indeed been the case under this Administration. Surely nothing is less suited to the grey
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  hand of the civil servant than an airline. In making his final decision, I think that my right hon. Friend the Secretary of State will accept that BA, by its own efforts, has changed itself from a lame duck into a golden eagle. Now is not the time to clip its wings.
  11.13 am
  Mr. Sydney Bidwell: I welcome much of what the hon. Member for Romsey and Waterside (Mr. Colvin) said when he expressed caution about the possibility of breaking up British Airways. My prime concern today is to put to the House what I understand to be the collective view of workers in the aviation industry.
  However, I should like first to remind the House that I have certain credentials for speaking in the debate. I am sorry that the other members of the Select Committee, which is currently studying the financing and management of the British Airports Authority, are not here. I believe that they are in the United States, although I am not sure whether they have got there yet. They want to see whether any lessons can be learned from the American experience. Last week, they were in Japan. However, I was not there, because the powers that be in the House said that they were not prepared to finance all the members of the Select Committee in carrying out an agreed programme involving a visit to Japan first and then the United States. I had a particular interest in wanting to witness the Japanese experience, but instead hon. Members now have the good fortune of hearing my voice here today.
  I am, of course, disappointed that more of my hon. Friends are not here, but there are many reasons for their absence. Many of them have homes and constituencies in the north and have to travel enormous distances. They earmark Fridays for activities that they cannot take part in from Monday to Thursday. Indeed, from Monday to Thursday they are the most avid of attenders. At present, I seem to be the sole Back Bencher here, if one overlooks the presence of the hon. Member for Stockton, South (Mr. Wrigglesworth).
  I should declare another interest, which is that I am sponsored by the Transport and General Workers Union. I served on the Transport Committee throughout the last Parliament and during the first year of this Parliament. I also worked for the Great Western rail company—which dates me a bit—and then for the nationalised railway industry. I often hear Tories talking about those days, but they are a bit naive about them. They claim that there was competition among the various railway companies, but before nationalisation that was far from being so because they carved out agreements with one another.
  It seems that airline companies are bound to act in a similar way to those rail companies. Apart from the elements of competition that exist, they have interests in common. Those involved meet, and may even play golf together. In some instances, they may share the same freemasons lodge. Inevitably, they will swap notes and come to certain mutual arrangements that do not damage them. That is true whether we are talking about state arrangements with a little bit of side competition, or a gigantic and privileged company such as BA. That is inevitable, particularly when it comes to route competition. That is why the Civil Aviation Authority's activities have been indispensable.
  The development of British Airways is not the object of the Select Committee's current inquiry. I hope that the outcome of its inquiry into airports will eventually lead to

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  some word of caution over what the Secretary of State apparently wants to do. I also hope that common sense will prevail. Indeed, so far it has. The work of the last Parliament overlapped, to some extent, with the work of this Parliament. As a result of the election, there are new members on the Select Committee, but there are still quite a few who served on it during the last Parliament. The Committee managed to kill the privatisation of heavy goods vehicle testing, although it had two Secretaries of State for Transport to contend with. The proposed privatisation was investigated following the proposals of a Conservative member of the Committee. He was alarmed that Tory Right-wing doctrine was overtaking common sense but, of course, he never expressed his feelings in that way.
  The Committee decided to search out the truth. It went in search of people's feelings and it could not find anyone — it approached small operators and employees in virtually all sectors of the haulage industry—who was in favour of the proposed privatisation. I do not think that many could be found who would express themselves in favour of the privatisation of British Airways or the onward march of privatisation generally, which has failed dismally in so many instances, especially in the local authority sector. We are all aware of the sloganising against direct labour forces and Health Service laundry services, for example. The privatisation of these services has led to disaster and sub-standard performance. It is noteworthy that the Conservative-controlled authority of Barnet, in which the Prime Minister's constituency falls, has been reluctant to privatise its services in the helter-skelter approach that is urged by Right-wing members of the Tory party.
  Mr. James Couchman: Will the hon. Gentleman give the House some examples of areas in which the privatisation of Health Service laundry services has failed?
  Mr. Bidwell: I am not prepared to be sidetracked. I can pass on to the hon. Gentleman the details that have been collected by the trade union movement, especially by the Trades Union Congress. I advise the hon. Gentleman to speak to Health Service workers. He should ask them what they feel about privatisation.
  My principal task is to convey to the House the feelings of workers in the civil aviation industry. I agree with everything that was said by my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott). He might be aware that there was a shop stewards' meeting at one of the hotels near Heathrow airport last Monday. I attended the meeting with the national aviation officer of the Transport and General Workers Union, Mr. Martin. The meeting produced the following motion:
  "This meeting of British Airways/British Airports Authority Shop Stewards totally opposes the Government's short-sighted and doctrinaire policy of privatisation, especially its proposed sale of B.A. and B.A.A.
  To prepare the ground for privatisation British Airways has cut routes, sold off valuable assets and profitable subsidiary operations, and destroyed thousands of jobs. It has done so not to improve the level of service to passengers but to make the company an attractive proposition to speculators.
  B.A./B.A.A. Shop Stewards deplore this treatment of the nation's flag carrier."
  Stickers that express opposition to the proposed privatisation are appearing in cars and are becoming more numerous as time passes. If the Under-Secretary of State
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  would like to have one, I shall be quite willing to pass one to him. One sticker states "Don't sell the world's favourite airline". When the public realise what the Government are up to, I believe that they will take the same view as the shop stewards in the civil aviation industry.
  The motion continues:
  "We believe that the British taxpayer, who has invested heavily in B.A. and the B.A.A., is being short-changed by a Government for the sake of political dogma. And we believe that workers in the industry, who have given years of loyal service, are being seen as no more than expendable figures on a balance sheet.
  We therefore resolve to launch a campaign of action against the privatisation of B.A./B.A.A. The objective will be to keep B.A./B.A.A. as publicly owned and publicly accountable bodies.
  The campaign will begin immediately with a series of shopfloor meetings. All B.A./B.A.A. workers will be asked to write to the Secretary of State for Transport and lobby their M.P.s. There will be lobbies, meetings and demonstrations.
  Our message to the Government and to Management is clear. We will do all that we can to stop the sell-off. British Airways and the British Airports Authority will not be privatised."
  That is a straightforward declaration. I shall be pleased to listen to any Conservative Members who represent constituencies near airports if they can claim that their constituents are greeting the proposed changes with glee or enthusiasm. We were somewhat encouraged by the opinions expressed on the Floor of the House by wet Tories when we discussed the Government's proposals for the GLC. I do not know whether other Tories can be described as "dry". I like the term used by The Guardian, which is "and". I believe that the Secretary of State for Transport falls into that category. He expressed his views on privatisation long before he had the good fortune to be selected by the Prime Minister to become the Secretary of State. He is clearly an and Tory and a member of an ever-expanding circle within the Cabinet.
  There are some more rational elements in the wings of the Tory party; I doubt whether the right hon. Member for Old Bexley and Sidcup (Mr. Heath) would see eye to eye with the Secretary of State. When the right lion. Gentleman was Prime Minister he sacked the present Secretary of State, who was then a junior Minister.
  Mr. Ridley: I apologise to the hon. Gentleman for having only recently re-entered the Chamber. However, I wish to make it clear that I refused the position which was offered to me by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). It was the other way round from what the hon. Gentleman suggested.
  Mr. Bidwell: We shall have to refer to the history books. The right hon. Gentleman must agree that in the upper Clyde there were some extremely unkind thoughts about him when he was a Minister in the Heath Administration.
  The right hon. Gentleman should appreciate that historically British Airways has occupied a dominant position in the market, internally and externally. That was the result of the way in which it was formulated and expanded. But the workers are fearful of what lies ahead. The employees of the British Airports Authority and British Airways are equally fearful. I represent a constituency close to Heathrow airport, and many of my constituents are employed at the airport. My well-known constituency embraces Southall, which is my birthplace. Many Asians work in the airport and with British Airways

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  in many capacities, some of them doing very menial work, as one will observe if one flies from Heathrow. Therefore, the airport is a major employer.
  Mr. Patrick Ground rose——
  Mr. Bidwell: I shall give way to the hon. Gentleman, because I regard him as one of the more rational Tories and because he has a constituency close to the airport and therefore will no doubt be making vigorous representations on behalf of the workers.
  Mr. Ground: I am obliged to the hon. Gentleman. As he said, we have neighbouring constituencies. Have his constituents who work for British Airways welcomed the profit-sharing arrangements that they have begun to enjoy just this month? Does he welcome this aspect of the change?
  Mr. Bidwell: I do not mind profits being shared among the workers if that is meaningful, powerful and extensive enough. Workers will not refuse such arrangements, as they are not in a position to do so. However, as Socialists, we want to see massive worker participation so that they have a hand in the distribution of the profits and a place in policy making and planning. We have gone some way towards that in British Airways, but there is much further to go. As Socialists, we are not opposed to a continued increase in worker participation in the management until both sides work equally together.
  The fear for the future is felt not just by the lower-paid workers but by those on higher salary rates. Naturally, they will do their level best to make a success of a privatised British Airways. The workers fear for their conditions of service if more routes are hived off to other operators. They wish for a continuation of their conditions of service, holidays and pensions. When privatisation has taken place in other sectors of the economy and of British Airways' fringe activities that have been hived off, there has been no guarantee—in fact, there is evidence to the contrary—that their wages will be maintained and they will have what they consider to be a fair deal. That is dependent on the strength of the worker organisation.
  In that regard, I shall allude to the offer for getting out of the present British Airways pension scheme, a scheme that has been worked out jointly over the years. The generous pension scheme has always been linked to the retail price index. The new scheme, of a lump sum payment according to length of service, will cheapen the scheme for British Airways because it will not be linked to the retail price index, regardless of where it goes. History shows that inflation will not always be held below 5 per cent. The unions have advised their members not to have anything to do with the new scheme — although some have—because it takes away rights from workers in different ways, according to whether they are young or old.
  Any young person working for British Airways would be thoughtless if he went into the new scheme, because it cuts the level of his ultimate benefits. Constituents of mine came to me for advice long before I read what the TGWU thought about the new scheme. I have frequently given them advice to stay where they are in the old scheme. However, that is not the prime matter. Some could argue that the new scheme would be of benefit, especially if they
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  do not expect to live long after 65. If they have that feeling, they could take the cash, which would be exciting for them, as it always has been in redundancies, and schemes where jobs are carved up.
  Why — this is a question for the House and the country — when we are thinking ahead about the practicalities of hiving off, privatising or denationalising British Airways, has the management been part of this? It is because it does not wish to frighten off investors. The pension scheme affects the value of British Airways and how much investment capital there is likely to be in a privatised set-up.
  Recently I have been sent many documents, by small aircraft companies and big, and particularly by British Caledonian. The British Caledonian document has a cool logic that is far greater than that shown in the British Airways documents. Why should not British Caledonian, a major competitor of British Airways, whether nationalised or denationalised, advance its considerable fear that if this enormous change is made it will be shoved out in the cold by what is a movement from a state monopoly to a private monopoly? British Airways will have to retain its position to compete in international markets, as my hon. Friend the Member for Kingston upon Hull, East pointed out in his comprehensive speech.
  There is a contradiction in any idea of privatising British Airways and sustaining it in anything like the shape or form in which it exists now. The British Caledonian document does not have this contradiction. In the past, the CAA, no doubt through a series of Transport Ministers, has decided what routes should be shared by British Airways. Naturally, when an enterprise is nationalised, that will continue to be the case.
  I shall finish, because I know that many hon. Members are anxious to take part and I am anxious to hear from them, particularly when they show the divisions in the Tory party that may lie ahead. The watchword is absolute caution in what the Secretary of State is tying up. He is a Tory intellectual, although there is not a great galaxy of intellectuals in the Tory party. Unfortunately, he suffers from the deficiency of being doctrinaire as well. We are fellow artists and have collaborated in the annual exhibition of Member of Parliaments' art. The right hon. Gentleman is a brilliant water colour artist, and perhaps he would get better results if he stuck to that. I commend his artistic ability but it is one-track, while mine is warmhearted and widely spread, as he knows. I perceive a little chink of light in his intellectual armour. Since he has had the responsibility of this job, particularly when he and his hon. Friend the Under-Secretary of State for Transport gave evidence to the Select Committee on the future of the airports, he has shown that he has become a little more mellow with the advancing years.
  I ask the Secretary of State to look at and read carefully a book which I commend to him. It is written by Dr. Peter Richards and is called, "Engineering a Merger". It goes over the history of worker-management collaboration. The Minister should understand that, because of that history of which workers in all sections of the aviation industry are proud, a powerful voice of concern and caution is being sounded. The Secretary of State should take note of that factor because we do not want anything like the stopping of Heathrow by the workers, which would not be in the British interest.

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  If the Secretary of State works himself into such a position, he will prove to be a rotten Secretary of State for Transport and he will last no longer in the job than did his predecessors.
  11.40 am
  Mr. Robert McCrindle: I declare an interest as a consultant to British Caledonian, but I follow that with the declaration that I am a long-time admirer of British Airways and have watched its recent progress with great satisfaction, remembering the years when that was not so. Nothing that I shall say from now on should be interpreted as an attack on British Airways. On the contrary, I wish it nothing but well in its privatised future.
  I remind the House that I served on the Standing Committee that considered the Civil Aviation Bill which, in 1980, paved the way for the privatisation of British Airways. On that occasion I expressed what could be called minority views in the Conservative party, because I believed, and still do, that the double aim of the Bill was almost impossible to achieve. We sought to privatise British Airways and, naturally, to provide every possible way of maximising its earnings and profitability; but we also paid lip-service to the idea of competition encouraging the private sector and the independent airlines. I said then, and I repeat now, that those two aims are incompatible. It is because some chickens are coming home to roost that the Government have been forced during the past few months to turn their attention to the problem of how—not if and when—we should privatise British Airways. That is why we are having this debate this morning.
  The question at the heart of the matter is whether a state monopoly will become a private monopoly when BA is privatised. Monopoly breeds inefficiency, and with the dominance of BA as it is constituted predatory pricing, leading to the elimination of independent airlines, is all too possible. I realise that British Airways will say, "But we have built a route structure and made ourselves efficient. Why should this be our reward? Why should this be the Government's approach now?" That is a justifiable argument up to a point, but we must remember that the priceless asset of the route structure enjoyed by BA was given to it and its predecessors by successive Governments. British Airways may have developed those routes, but the structure was given to it. Therefore, it is right for us to question whether, as it moves to privatisation, the route structure is inviolable. I suggest that it is not.
  As to efficiency, if 37,000 people can now do the jobs which 59,000 people were believed to be necessary to perform, we are entitled to ask whether it is such a big deal, or whether there should have been movement in that direction long before the advent of Lord King and his efficient team.
  The question is not whether we privatise BA or whether we want more competition. The queston is how can we use this golden opportunity, which is unlikely to recur perhaps for another generation, to achieve both objectives? How do we restructure the industry to ensure a successful British Airways and prosperous independent airlines? How can we ensure that a powerful state of competitive tension is created—what Sir Adam Thomson has called "the needle factor"?
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  Clearly there must be change if an environment is to be created in which the airlines prosper and the consumers benefit. Privatisation is not an end in itself. If I have one objection to the recent utterances of BA, it is to the suggestion that preserving the status quo is one option when the company is privatised. That is not so. Whatever happens, there must be change in the structure of civil aviation.
  What should be done? First, we must remove the barriers to competition among British airlines. I heartily disagree with what my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) said about the freedom of airlines to come in, as though we had been standing back and doing nothing to advance our competitive interests. Secondly, we must end the bogus competition between British Airways and its foreign airline opposite numbers in the shape of pooling agreements. Thirdly, we must consider whether route transfers can be justified. We must also review the policy on Heathrow and Gatwick by taking action to equalise the opportunities for Gatwick airport to grow. That is not a revolutionary suggestion. It is still official Government policy, and one could be forgiven for wondering when initiatives will be taken in that direction.
  I appreciate that, in the light of those suggestions as to what should be done, people will ask, "What barriers to competition or bogus competition from foreign carriers?" British Caledonian and other airlines cannot just step in and compete with British Airways, even if licences to do so are granted by the Civil Aviation Authority. The market is not open to new entrants, because British Airways and foreign carriers, often with the help of foreign Governments, will do their best to frustrate any move in that direction.
  There are pooling agreements between British Airways and foreign carriers under which capacity on routes and revenue are shared. No doubt those arrangements are cosy and serve British Airways and its foreign competitors well. They may even be in the interests of Governments, for all I know, but they cannot be described as the best competitive background against which to view the future of British civil aviation. They are anti-competitive, and neither British Airways nor the foreign carriers are anxious to break them.
  During the past few days, in the capable hands of my right hon. Friend the Secretary of State, there has been a massive change in routes between Britain and the Netherlands. The original idea, which was supported by KLM, the Dutch airline, and British Airways, was a restricted area of reduced fares which could be agreed between them; but now, after pressure from Air UK and British Caledonian, and—to his eternal credit—with the firm backing of my right hon. Friend, much more competition will be available on that route. The cheaper seats will be much more widely available without so much reference to a standby basis. That is competition in practice, and to spread it abroad must be good for the passengers.
  Mr. Bidwell: The hon. Gentleman used the term "predatory pricing". That must apply to competition in all aspects of life, from flogging an apple on the barrow boy's stall to giant supermarkets. They will always branch off into such activities in order to bring greater custom. I

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  understand British Caledonian's logic, but I do not understand why the hon. Gentleman believes that serious competition means a carve-up.
  Mr. McCrindle: Predatory pricing will be possible if a privatised British Airways with its present route structure takes advantage of the considerable opportunities which it will have simply to reduce its prices—even at the risk of losing for a considerable period—so as eventually to force its competitors out of a certain route. It may not necessarily do so, but, if privatised on its present basis with 83 per cent. of scheduled routes under its control, it could do so. That might lead to the elimination of the independent carrier.
  Mr. Wilkinson: Why do my hon. Friend and other hon. Members who have spoken—although certainly not my hon. Friend the Member for Romsey and Waterside (Mr. Colvin)—believe that a privatised BA will be more prone to predatory competition in the market place than a nationalised BA which is not subject to the same disciplines in the form of responsibilities to its shareholders? Why is my hon. Friend not complaining as much about the status quo as about what might happen when the Government's policies are carried through and BA is privatised?
  Mr. McCrindle: With a nationalised industry, checks and balances are imposed by Government. Those checks and balances will not exist when the Government have privatised BA. We cannot have it both ways. If my hon. Friend and I are united in our desire to see a free enterprise civil aviation industry in this country, with all the competitive opportunities which will flow from that situation and all the possible benefits to the consumer, we cannot bemoan the fact that checks and balances will no longer be laid down by the Department of Transport or the Civil Aviation Authority.
  One might ask why routes should be transferred from BA. Why should one not simply set up competitive services from London Gatwick? I concede that there are one or two routes where that could be justified, but for the most part we are heavily circumscribed by bilateral agreements. The aim of route transfers is to try to achieve a balance. Even the most optimistic suggestions that have been made about route transfers would leave more than 60 per cent. of scheduled services of this country in the hands of BA. To privatise BA while calmly accepting the existence of that inbuilt advantage would be to lose a magnificent opportunity to put civil aviation on a much better basis.
  I should like to quote from an editorial in the Financial Times of 20 June on the question of route transfers. The writer said:
  "The second option—route transfer—is more attractive. Why should the Government regard potential investors in a privatised BA as the only possible recipients of BA's existing assets? The transfer of state assets should surely be an occasion on which all interested private-sector parties (including BCal and other smaller independent airlines) have a chance to tender for some of BA's assets."
  That, in essence, is my case — the case that I am making for a more balanced future for aviation. The case for competition is overwhelming. The case for ending sharing agreements is irrefutable. The case for transferring routes is very compelling.
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  I am not greatly concerned about whether BA should be privatised early or late in 1985. The market may well welcome a later date, as it will also have to cope with the privatisation of British Telecom, among other things. What is crucial is that the flotation, whenever it takes place, should be successful.
  British Airways should not be barred from engaging in charter flights. Competition must be fair for BA as well as for other operators. There may well be an argument for some circumscription of BA's freedom to engage in that market, but it should not be barred from it altogether.
  I want to see policies and competition that will make civil aviation in this country hum. With privatisation, change will be inevitable. We must use it. BA cannot expect privatisation with no accompanying changes. I have the greatest respect and admiration for Lord King, but it is not enough to say that everyone is out of step except our John.
  11.57 am
  Mr. John Wilkinson (Ruislip-Northwood): I shall speak briefly and simply and, I hope, bluntly and clearly. We are privileged in that my right hon. Friend the Secretary of State has come to the House with an open mind and is prepared to listen to the views of right hon. and hon. Members before he makes up his mind on important areas of policy. The decisions that he must make can be reached only at Cabinet level, and he is wise to take the professional advice of the Civil Aviation Authority before reaching those decisions.
  My right hon. Friend stressed that the enhancement of competition was at the heart of Government policy. That is entirely right. Enhancing competition should improve the quality of service to the travelling public, and that should be the primary aim of British civil aviation policy. A secondary aim should be to ensure a good return to the shareholders of the air transport company, and a third should be to ensure secure and prosperous employment for all engaged in civil aviation.
  In looking at civil air transport and reviewing Government policy, it is important not to forget the influence that airport policy will have upon civil aviation policy as a whole, and the crucial impact of airport policy upon the privatisation of BA. From the decisions made about airports, especially in the London area, important investment decisions will flow, and the quality of the prospectus for BA will be affected.
  It is a strange anomaly that, although additional passenger handling capacity will be provided when terminal 4 comes into service at Heathrow, the number of passengers which may be handled will be reduced to the arbitrary figure of 275,000. Furthermore, that will happen when the new noise regulations come into force, diminishing the adverse environmental impact of air transport movement upon the surrounding community.
  Mr. Jessel: Will my hon. Friend give way?
  Mr. Wilkinson: I am afraid that I cannot give way. I have promised to be brief.
  I hope that my right hon. Friend will not feel hidebound by decisions taken in different circumstances. I hope that he will reconsider the position.
  Secondly, we wish to place BA on the market at the most advantageous terms, securing the best returns for the Government. It would be extremely damaging and unwise

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  if we hobbled the privatised BA with an airports policy that was prejudicial to its commercial interests. BA has correctly advised everybody concerned that, if terminal 5 is not developed and BA is forced by Government diktat quite arbitrarily to divert some of its services to Stansted, that will have a damaging effect on its cash flow and result in additional costs of about £160 million a year, which will be taken out of its potential operating surplus.
  There is another argument, which I am sure appeals to my right hon. Friend. I am speaking purely in aviation terms and am not prejudging the planning considerations before the inquiry that are being deliberated by the inspector. Development at Stansted, involving the transfer of personnel and the growth of the new town, will be much more costly to the Exchequer than extension to terminal 5 of the tube and the rail link from Feltham and construction of the motorway spur from the M25, which are preconditions for terminal 5.
  Heathrow is a unique national asset of incomparable worth. It is the hub of air traffic in global terms, so we should maximise it. We can readily do that cost-effectively by developing the fifth terminal.
  The timing of the privatisation of BA is a matter for the experts. The merchant bankers will do that and advise on the best methods of flotation. I recognise that the market is regulated, but it is the best arbiter of competition and the best mechanism for guaranteeing fairness. I do not think that we should have another Edwards exercise. At the beginning of the 1970s, Ronald Edwards advocated a second force in British aviation and, as a result, major routes were transferred from BA to British Caledonian, as a result of which British Caledonian became the most important independent sector schedule carrier in the United Kingdom. We should not have another such arbitrary exercise.
  The result of the Edwards recommendations was British Caledonian being given a preferential position. If we now did what it suggests and allowed a Dutch auction for BA routes, the independence of the route licensing system would be negated. The transfer and allocation of routes would then tend to favour the financially strongest carriers, which could presumably make the highest bid. That would not be satisfactory for the smaller independents. If we are to have a civil aviation authority that does its job as a regulatory body fairly, the British Caledonian motion is not a sound one. It would be sound to float BA at an appropriate price in the market place, so the management of BA, trying to do their duty by their shareholders, would, if they thought it commercially fit and appropriate, give up some routes and perhaps sell assets on the market place in the perfectly normal way. If they thought it appropriate, they might even sell British Airtours Ltd., British Airways Helicopters Ltd. or any other operation which the independents would then buy. That would be the normal, right, rational and equitable way in which to proceed.
  Many thousands of people have made a considerable sacrifice to get BA on its feet and to make it a sound international operation which is in the premier league of international carriers. The results are there for all to see. They have been achieved with minimal industrial aggravation, willingly and with impressive wholeheartedness. In that process, 20,000 jobs have gone—and BA is probably the biggest employer in my constituency. It would be decidedly odd if so many people who have worked so hard for so long to put BA on a sound
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  footing saw their efforts rewarded by their section of the operation being lopped off and arbitrarily transferred by the Government to some other carrier. It would also be unjust.
  Having said that, I think that the Government are broadly on the right lines. I am grateful to my right hon. Friend for being so open-minded and for coming to listen to our views. I especially applaud his decision to put competition first and the steps that he has taken on, for example, the Amsterdam route, which shows how much can be done and how much we have to look forward to.
  12.5 pm
  Mr. Patrick Ground: I greatly welcome my right hon. Friend the Secretary of State's statement. I especially welcome four aspects of it. The first is that he faces up squarely to the need to plan for the growth that will occur until the year 2000 and beyond. Secondly, he recognises that liberalisation is likely to lead to greater growth. Thirdly, I like the firmness of his commitment to the proposed 275,000 annual air transport movement limit at Heathrow. Fourthly, I appreciate his commitment to competition and his firm recognition that it is necessary to go to considerable pains to ensure that competition is fair.
  The hon. Member for Ealing, Southall (Mr. Bidwell) mentioned public reaction to the present plans for BA. He accepted that the profit sharing scheme has been welcomed by employees. The offer of shares in BA will also be welcomed and appreciated by many BA employees and employees of the British Airports Authority will show a good deal of interest in the prospect of buying shares in that authority, just as interest has been shown in the purchase of council houses. The change in BA constitutes a substantial alteration in the atmosphere in the hon. Gentleman's part of west London. BA has become a much more robust and cost-conscious company.
  My right hon. Friend the Secretary of State and others asked what difference there will be in competition and predatory pricing if BA is denationalised. The true distinction is not that which my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) outlined. BA is now much more cost-conscious and competitive and that will have a great effect on the varied activities of BA in many sectors of the aviation market.
  I urge my right hon. Friend to pay careful attention to the fears expressed by small independent carriers in relation to particular sectors of the market or separate markets within the general aviation market. As my hon. Friend the Member for Woking (Mr. Onslow) has said, there is great concern about some of the practices of British Airways. I cannot accept the comments of my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) about competition. The Conservatives passed the Competition Act 1980 which defined uncompetitive practices. If the Government are to pursue a policy of competition, it is equally important to pursue the discipline of identifying uncompetitive practices and so far as possible eliminating them.
  The objectionable feature of some of the practices of British Airways is that they are an exercise not of competition but of market power arising from the disproportionate size of the nationalised concern compared with others. That aspect must be considered in a thoroughly disciplined way, despite the Government's clear wish to proceed with denationalisation of British

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  Airways. It would be ironic indeed if in denationalising British Airways the Government caused fatal damage to independent carriers which had the courage and persistence to survive the recent very difficult period for the aviation industry only to face death by unfair competition at the hands of a dominant carrier.
  My right hon. Friend the Secretary of State mentioned the decision not to split up the London airports, which is greatly to be welcomed. I believe that I am the first Conservative Member expressly to welcome it, but I am sure that many others share my view that that is the correct judgment both for London and for the industry.
  I also welcome the positive attitude of the British Airports Authority to denationalisation. It is pleasing that such an attitude has been achieved without any change of management, as in some organisations in this sphere.
  Like my right hon. Friend the Secretary of State, I am inhibited from commenting on Stansted, but for a different reason. I was professionally involved for six months in the terminal 5 inquiry and for seveal months beforehand reading the 175 days of transcript. I represented the views of a body—the GLC—which on that occasion supported Government policy. I shall say no more about that, save to make it clear that I do not accept the comments of my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) in this respect. All the matters that he suggested were outwith the scope of the inquiry were gone into at inordinate if not excruciating length, as my right hon. Friend the Secretary of State will discover when he studies the material.
  I wish to refer to two matters regarding the effect of the aviation industry on the environment in west London generally. With regard to the helicopter link, studies have recognised that the effect of helicopter noise on areas such as Lower Feltham is especially irritating. The populations living under the Gatwick-Heathrow airlink were looking forward to the completion of the M25 because, according to the plans, it would mean the end of the airlink. It is thus a considerable disappointment to learn that, despite the imminent completion of the M25, the airlink may continue. Reference has also been made to the problem of air transport movements at Heathrow. The definition of air transport movements as it is intended to apply when terminal 4 is completed includes the airlink, so if it is stopped the same number of additional movements can be taken up. I hope that we shall have a statement on that today.
  Another subject of increasing concern is the hazard of aircraft parts and blocks of ice falling from aircraft. At present, there is no assurance that residents can obtain compensation for damage or injury caused in this way. To recover damages, the individual who suffers must identify the aircraft from which the object fell and claim against the airline's insurance policy. Clearly considerable problems may arise. The owners and operators of aircraft may have an interest in knowing why a part fell off and sometimes even in recovering it, so in those circumstances tracing the aircraft is rather easier; much has been done by the Department and the CAA in this respect. The interest in blocks of ice, however, is naturally less, although blocks of ice weighing up to 50 lbs. —suitcase size—can cause a great deal of damage. I hope that the Department is carrying out detailed work on this problem.
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  Some people argue that the cost of insuring against such risks should be met by the Government, but I dissociate myself from that argument, because I believe that any such insurance should be paid for by the aviation industry, not by people on the ground. I reject the argument that is sometimes advanced, that it is satisfactory for the cost to be borne by individuals on their own insurance policies.
  Therefore, I look to the Department for evidence of the work that is going on in this sphere. Similar problems have arisen in the past, for example with vortex damage, and solutions have been found to cover the individuals who suffer, at the cost of the aviation industry. I very much hope that we can move towards a solution on those lines in the case of falling aircraft parts and blocks of ice.
  12.20 pm
  Mr. Ian Wrigglesworth: We should acknowledge the importance of the industry that we are debating, not only to those who work in it, the shareholders and the customers, but to the whole country. The civil aviation industry makes an enormous contribtuion to other industries as a service industry. It also makes a considerable contribution to our economy. I think that the House would want to recognise that. We should also acknowledge that, on the world stage, aviation is one of the industries of which we can be justifiably proud. It has been a success. We in the House will want to see that success continue and should do everything that we can to enhance it.
  I regret that I missed the Secretary of State's speech, for which I apologise. I had long-standing engagements in my constituency last night and travelled back this morning to be here for the debate, but unfortunately could not make it in time to hear the right hon. Gentleman. However, my journey on the train from the north provided me with the opportunity to read the morning papers. The needle factor is apparent in the full-page advertisements of British Caledonian and British Airways. Both claim a great victory in the new charges for fares between this country and Amsterdam. That made me realise how important it is that the progress that is being made is continued.
  The alliance wholeheartedly supports the movement towards greater competition in the civil aviation industry and, even more important, any movement towards greater deregulation. To a great extent, the present position is a hangover from the past. It comes from a time when the industry was a new-fangled thing. Many restrictions that are still held by Governments around the world are based on outdated fears that existed when the industry began and on outdated notions of national pride that are no longer relevant. We shall strongly support the Minister in the action that he is taking in Europe and elsewhere to increase competition and remove regulation from the industry.
  I very much support the views expressed by the hon. Member for Brentwood and Ongar (Mr. McCrindle). I believe that the House has not fully recognised that there is a great difference between denationalisation and competition. One can have competition without denationalisation. One has, and has had, great competition between public and private sector bodies. One does not have to have privatisation to increase competition. The great fear is that there will be less competition if the privatisation proposal goes ahead.
  Mr. McCrindle indicated assent.
  Mr. Wrigglesworth: I see that the hon. Gentleman is agreeing with me.
  The same applies to the Government's proposals to denationalise British Telecom. It has a greater monopoly of the market than British Airways. Therefore, far from being an instrument to increase competition, privatisation might be the opposite — it might be the enemy of increased competition. I am pleased that some Conservative Back Benchers see that. I hope that Ministers see it as well and will take it into account in considering their policy when the civil aviation review is complete.
  There is a powerful case for increasing competition in this market, but one has to pay regard to the fact that strict regulations and bilateral agreements exist. Therefore, one must proceed with caution in order not to destroy our successful industry. I am not suggesting that we should throw off the traces, take a unilateral stand and embark upon deregulation and free competition ourselves if other Governments are not prepared to do the same. That would considerably damage our industry.
  That brings me to the argument about the handing over of some of the licences from British Airways to British Caledonian, and other private operators. I hope that other private operators, not just British Caledonian, will be considered, although the latter has made the running on the issue, for which I admire it.
  There is a powerful case for removing some of the routes from British Airways. It has too dominant a position in the market, which will not be easy to restrain once it is out of the public sector and into the private sector. It is fatuous to suggest that with the pooling and bilateral arrangements that exist one can have free competition on individual routes. Changes should be made to get a better balance in the market and so that the dominant position of British Airways is not retained.
  I have studied the matter, and I believe that that should not undermine the position of British Airways in the way that has been suggested by some spokesmen. It is possible for British Airways and other operators in this country to sustain the success of our aviation industry. It does not require 82 per cent. domination of scheduled air services for us still to have a successful civil aviation industry. Therefore, I support the case on the ground of removing that dominant position of British Airways from the market. Whether it should go to British Caledonian or other airlines is a matter for consideration, but it is wrong and will not encourage increased competition if British Airways remains in that dominant position.
  One cannot consider the airlines without considering the airports. The Secretary of State is probably right in his decision to retain control of the London airports in the way that he announced. However, I hope that he will not fully close his mind to the suggestion — I do not make a commitment on either my behalf or that of my colleagues — of either franchising or leasing one or more of the terminals at some of the airports to other airlines. I am not firmly committed to that, because I have not been able to go into all the ramifications of it.
  Having said that we on this Bench are in favour of competition, there is something worrying about the fact that we shall have this monopoly control of the airports in the capital. We might introduce an element of competition and get greater equality between airlines by franchising or leasing terminals at airports. That is why I hope that the Secretary of State will not close his mind to the idea.
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  I am surprised that Opposition Members representing northern constituencies are not taking part in the debate. Half of Teesside airport is in my constituency — the boundary runs through the main runway—and therefore I have an interest in regional airport policy. My conclusion is not that, by Government or CAA decision, business should be pushed into the regional airports. My view is that if we can get the sort of deregulation and increased competition which we hope will result from the agreement between the British and Dutch Governments—if we can get cheaper fares in Europe and a freeing of air transport and travel in Europe on scheduled services — we will achieve increased business at the regional airports and a growth in that sector. We see in other parts of the world how domestic air services expand enormously when fares are reduced.
  It is ludicrous that the air fare from Heathrow to my constituency in Teesside is more than £100, whereas under the new arrangement with the Dutch Government I shall be able to fly from Heathrow to Amsterdam for £49. If people from Teesside, Newcastle, Manchester and the other regional airports could fly to the capitals of Europe for fares of about that amount, there would be increased traffic, which would lead to the expansion of those airports. It would help the finances of Teesside airport enormously if the Home Office would allow us to have there the duty-free facility which we have been seeking from the Government for a long time.
  Mr. Jessel: Is the hon. Gentleman being realistic? The cost of transporting passengers depends enormously on the size of the aircraft and the number of passengers it can carry. Obviously an aircraft which can transport 300 or 400 passengers will do so at much less cost per passenger than a smaller aircraft. That explains the different fares for the journeys which the hon. Gentleman described.
  Mr. Wrigglesworth: We can take large aircraft in the airports in my region, but I am looking ahead. I am not suggesting that what I propose would solve all the problems in the next year or two. I am talking about a freeing of the whole market in Europe over perhaps a decade. One hopes that we will eventually be able to go to the airport and walk on to an aeroplane without all the frippery and flummery that has been built up around air travel over the years. Let us gradually get rid of the restrictions and difficulties.
  We on this Bench strongly support the Government's movement towards deregulation and increased corn-petition. It is remarkable that the CAA still retains such enormous powers. If Conservative Members want to carry out witch hunts against quangos, I direct their attention to, above all the others, the CAA and the powers that it has in this market, some of which are almost unbelievable. Licences to operate are handed out almost like lollipops by the CAA and the Government, in an unsatisfactory and uncommercial way. It is really inaccurate to describe it as a market.
  I want to see those restrictions removed, as is happening in the United States and elsewhere, so that we can achieve greater competition and lower air fares. That would benefit the consumer and many sections of industry', because there would be cheaper and better services, so enabling those industries to be successful, as I hope the British civil aviation industry will be successful.
  12.35 pm
  Mr. Anthony Steen: I am glad to follow the hon. Member for Stockton, South (Mr. Wrigglesworth), because what he said made a great deal of sense—as it often does on these matters. The House, with him, will wish to congratulate my right hon. Friend the Secretary of State on achieving agreement with the Dutch authorities on air fares. I am sorry that my right hon. Friend is not here to hear the congratulations. Not, of course that the airlines have been responsible for high tariffs; but the Common Market Governments have been involved in refusing to relax the cartel. The timely intervention of my right hon. Friend, doing a deal with the Dutch, is a great step forward in the liberalisation of the skies and allowing free market forces to operate.
  Some see the aviation industry solely in terms of aeroplanes and airline seats. It is far more than that—it is a complex, inter-related industry, and the airline is only the tip of the iceberg. Beneath that, there is the airport, air traffic control, airworthiness, regulatory authorities, fare structures, ramp handling and so on. All that adds up to a vastly increased cost in the running of airlines. I understand that airport charges alone account for 30 per cent. of the cost of domestic flights, and 6 per cent. of the cost of long hauls.
  During the recession, a number of airlines went to hell and back to survive. There were no cheap tickets for that journey. Those who returned emerged slimmer, more competitive and with reformed working practices. Yet the infrastructure has remained antiquated and unchanged, with restrictive practices, positive discrimination and overmanning. Why has it not been subject to the same disciplines and changes as those in the airlines? Why are there still excessive landing fees at London airports? Why have not security charges been cut? Perhaps the Minister will answer those points when he replies to the debate. Will my right hon. Friend fix his gaze on those issues rather than only on fares?
  If the submerged overheads continue to rise, that will spell disaster for many of the small airlines, with airports throughout the country hosting grounded aircraft with no one able to fly them, simply because they cannot afford to do so. The effect is solely that of public sector monopolies. Already, the threat to its existence has sharpened the BAA's approach. Some of us have been fortunate to have the benefit of its hospitality and to have enjoyed the facilities which it made available to hon. Members. But why did its chairman, when he opened the £5 million departure lounge at Heathrow last July, say that the new facility would be available to all airlines? He must have known then that it was to be available only to airlines with 757 aircraft—and the only airline with that aircraft is, of course, BA. Since then, BA has virtually had exclusive use of that lounge, despite my asking my right hon. Friend week after week, month after month, to explain why. It was four months before I was told that the lounge was occasionally used by Brymon Airways — and, of course, BA handles Brymon traffic.
  Why did the chairman make that misleading statement when he opened the lounge? How sound is the BAA's judgment that development should go ahead from Heathrow to Gatwick when the single runway will soon be saturated — well before Heathrow fills all its slots? Instead of finding a way to create additional capacity, the BAA has applied its own working practices to the
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  problem, without taking account of the new working efficiency within the airlines. The fact that British Midland Airways and Brymon have shown that aircraft can be turned around at Heathrow in 25 minutes, rather than the 50 minutes that the BAA has recommended, illustrates that point well. The stands can be used only once an hour on a 50-minute turnround, whereas they can be used twice an hour on a 25-minute turnround.
  Improved working practices have emerged because the airlines have been forced to improve them under the pressure of competition. That has not seeped into the British Airports Authority, which is more impervious to the speed of change than most quangos.
  "Security" is the new password to justify any expense. It used to be fire regulations, but now it is security. The Minister will be appalled, as I was, to hear that 47 per cent. of British Airports Authority staff at Heathrow are involved in the security business. Nearly half BAA staff are engaged in security because the issue is sensitive and because the BAA has agreed to working practices which militate against the consumer.
  The Secretary of State talked about the Dutch deal, but he should look at what happens at home on his doorstep at Heathrow. Is the Minister aware that operating an X-ray machine for screening baggage can be done by three people, but working practice calls for a six-man crew? Such overmanning and restrictive practices are repeated throughout the airport empire. The problem creeps into all monopolies. I term it the "monopoly management mentality."
  If separate managements operated at the different airports, different philosophies would develop. Managements would be competitive and they would try to make their jobs more competitive and to provide better value for money. I hope that the Under-Secretary will be especially cautious when listening to the views of the authority about the way in which airports should be run. In view of the authority's restrictive practices, it is important to be cautious when taking its advice. If it has something to learn about running better airports, its recommendations should be considered carefully.
  Let us consider, for example, the 275,000 movements at Heathrow. Whether to breach that is a major policy decision, but it need not be breached for a while. Special preference has been given to British Airways in its domestic services. The BA shuttle operates a great number of back-up planes. It has been able to increase its services to Edinburgh and Glasgow. That is acceptable, but the BAA has said that the limit of movements is being reached. British Airways is allowed to increase the number of its domestic flights, but other airlines have to fight tooth and nail for a slot in the terminal which they want to use.
  That highlights the inconsistency of BAA policy and its discrimination in favour of British Airways. When it turns away international traffic, it loses substantial landing fees. Why does it allow the shuttle ever-increasing numbers of movements and back-up services? If the BAA was acting in the best interests of customers, it would be innovatory and be determined to use Heathrow to its maximum advantage. It does not do that.
  The BAA is profitable. Certainly at Heathrow it makes a few bob, but how much more could it make if it did not suffer from restrictive practices. It would be more profitable if it came under separate private management. I want to make it plain that I have the highest regard for

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  the individual managers in the British Airports Authority. It is not their fault that they are part of this unmoveable and unwieldy quango with an unglamorous track record.
  Let us examine the way that the British Airports Authority deals with British Midland Airways. Perhaps I should declare an interest as an adviser to British Midland Airways. The British Airports Authority did not take kindly to the Government's decision to uphold British Midland Airways' appeal to compete with a national carrier to Glasgow and Edinburgh. It did not oppose it, but it made it as difficult as it could for British Midland to operate. For example, it started by saying that there was not sufficient airport capacity for British Midlands Airways to operate and compete with the national carriers. It said that there were not enough slots. While saying that, it was giving more slots to British Airways to increase its shuttle services. It has been proved untrue. British Midland Airways has slotted into Heathrow and there has been plenty of space. The British Airports Authority had to give way because the Government overruled the Civil Aviation Authority.
  Mr. Terry Dicks: Is not the problem that my hon. Friend raises not about slots, but about the availability of slots on a particular day? I understood my hon. Friend to have said not that the slots were not available during the day, but that they were not available when British Midland wanted them to be on that day. That was the problem that faced the British Airports Authority at the time.
  Mr. Steen: My hon. Friend makes a fair point. My point was that preferential treatment seems to be meted out to BA because it can put on its back-up shuttle when its main aircraft is full. If British Midland wanted to fill the slot used by that back-up shuttle, it was not allowed to do that initially. It is a discriminatory practice that has long existed in the British Airports Authority by which preferential treatment is given to the state carrier. It has been the traditional picture. If British Airways is to be privatised, we must end that preferential treatment by the British Airports Authority of what was the state carrier, but which will be another private airline.
  Mr. Bill Walker: I am a little confused by my hon. Friend's comments on back-up facility, and I speak as someone who makes regular use of the services to Glasgow, Edinburgh and London. The back-up facility has always been available. There was a guarantee that, if one arrived 10 minutes before the aircraft took off, one was assured of a seat. I have never failed to get a seat in these conditions.
  Mr. Steen: I may not have made myself clear to the House. The British Airports Authority, instead of welcoming the competition of British Midlands on the routes, has been as obstructive as possible about the existence of that carrier. It did not find a way of providing slots and giving preference to the shuttle back-up and all the other little planes that come in. It did not direct its mind to providing equal opportunties to the private airline.
  To take that a stage further, when the chairman of the British Airports Authority opened the departure lounge at Heathrow last summer, he said that that facility would be available to everybody. It was not available to British Midlands Airways, and has not been available to anyone else, other than the odd Brymon plane which cannot fit in
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  anywhere else. British Midland had an enormouse battle to get the British Airports Authority to provide a lounge for its departures. It is only fair to inform the House that British Midland Airways is the second largest carrier into Heathrow, yet the British Airports Authority was not prepared to provide a lounge for it until it was taken virtually to the door of the court. It provided a £200,000 lounge to offset the £5 million lounge that it offered to BA.
  The management of the British Airports Authority has been involved in a preferential relationship with the national carrier. If the same business managers are to run the same outfit under the private enterpise flag, the present restrictive practices will continue. It is easy for the Government to make statements about their philosophy of and support for private enterprise, but unless the tools of the job are provided such statements are empty and meaningless. Competition means having equal opportunities, and the provision of equal facilities and equal status. It is not just about permission to run competing flights.
  In Glasgow and Edinburgh, new facilities are still not available to British Midland, yet it contributes £2 million to the coffers of the British Airports Authority in flying into Scotland. Why does BA receive preferential treatment in Glasgow and Edinburgh when it comes to gates and departure lounges, when the private operator is now putting £2 million into the BAA's coffers? Unlike the Dutch and American authorities, and despite increased revenue, the BAA's approach to competition is, to put it mildly, disappointing.
  It might be useful for the House to learn something of the problems of ramp handling at Heathrow. The BAA has a monopoly on handling at Glasgow and Edinburgh, and does all the ramp handling. However, at Heathrow there are two handlers at terminal 1 —British Airways and Aer Lingus. The BAA has refused to allow British Midland even to tender for its own baggage handling. It has to have either British Airways or Aer Lingus. It cannot use British Airways, because it is in direct competition with British Midland on those routes, so it is forced, in a closed shop, to use Aer Lingus. It is, however allowed to look at other terminals. In terminal 2 there are three ramp handlers, and in terminal 3 there are eight. However, out of all the ramp handlers at Heathrow, only one is British —BA. All the other concessions are to foreign airlines.
  There is a special reason why BMA wants to handle its own baggage. It cannot let BA do it because of the competitive factor and there has now been criticism from people in Belfast of the fact that it is using the Eire state carrier to do its baggage handling. The BAA has been intransigent and has refused to let that private carrier do its own baggage handling, even though it would save it about £500,000, which would be passed on to the consumer. Those are important points, and I hope that my hon. Friend the Under-Secretary of State will bear them in mind when considering what should happen about the BAA.
  It is encouraging to see the great Lord King looking down at us from a great height in the Peers Gallery, listening to what we have to say. The House must admire his remarkable performance in turning BA from a floundering nationalised industry into a profitable business. That has happened during the past two years. Yet for the past 20 years private sector airlines have been operating under the shadow of BA, which has had greatly preferred status both internationally and on domestic

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  routes, and has enjoyed the protection of Government in putting up finance to buy aircraft and in providing financial cover for losses. The airline has operated m a very preferential and preferred position.
  We all acknowledge the efforts that Lord King has made, but it is fair to say that he has made no greater efforts than all the private sector airlines have been making over the past 10 years to stay and survive. So, good though it may be, it should not be thought of by the Government as a miracle that BA has at last caught up with the private operators and is running an effective business.
  Lord King has turned something slothful into something that private operators have been doing all along. Perhaps the Minister will give an undertaking that, while the civil aviation policy review is under way, BA's board will not be allowed to make definitive purchases of new aircraft for routes that are clearly subject to review. Will he explain, for example, the circumstances that gave rise to his approving the purchase of £9 million-worth of new aircraft for the Highlands and Islands routes, when they have already been defined as highly marginal? The Government made that decision, and the House demands an explanation.
  More important is the commitment of British Airways to buy 14 Boeing 737s at a cost of £179 million, with an option on 17 more. I understand that the contract has been changed and that British Airways has entered into a commitment to buy 16—two extra aircraft— with an option on 15. The importance of the 15 options is that they all cover routes that are now operated by fully depreciated aircraft which have been written off. These are considered to be marginal routes for profitability. The 15 options should not be converted into firm orders until the civil aviation review has been submitted and British Airways has been privatised.
  Seemingly the chairman of BA is making decisions to pre-empt the effectiveness of the review. Before it is privatised, British Airways is trying to put itself into a preferred position and other private operators' efforts will be thwarted.
  British Airways is said to be moving into a £2 million advertising campaign. The hon. Member for Ealing, Southall (Mr. Bidwell) has demonstrated that that has already started. I wonder whether the Government want that sort of use to be made of public money.
  Private operators such as British Midland Airways cannot cross-subsidise their domestic routes from profitable international routes, whereas British Airways can use its international profits by channelling them into its domestic routes. Airlines such as British Midland Airways have been prevented from flying on international routes by the appeal of the British Airports Authority to the Government. British Midland Airways requested that it should be allowed to fly from Glasgow to New York. The Government have stopped private enterprise operating in a competitive market.
  The prospects for private airline companies are uncertain. There is more traffic than ever before and the uncertainty arises because the Government are opening the doors in favour of the state carrier and the state airport owner and not because competition is too fierce. To this extent, the Government are responsible for what happens.
  12.58 pm
  Mr. Nicholas Baker: My prejudice towards travel is very much like the prejudice of my hon. Friend the Member for Aldershot (Mr. Critchley) towards oratory, in that I think that there is too much of it. I shall bear in mind the comparative lateness of the hour and make a few brief remarks. I have noticed that the longer contributions to the debate have tended to include the fewest points for my right hon. Friend the Secretary of State to consider.
  I welcome the debate and I do not complain that the Government have not made up their mind. This is our opportunity to say how the civil aviation industry should be restructured and how British Airways should be put in a position for privatisation.
  My right hon. Friend the Secretary of State will have to face some grave problems and I shall refer to four which I think he will have to tackle. First, he will have to decide whether to allow smaller airlines to develop. He will have to decide whether to release them from the check that is imposed upon them, thanks very much to the efficiency of BA. That is especially so in the charter sector. The small airlines feel that BA is dumping charter capacity on to the market.
  The second problem to be faced is the bilateral system of agreement on routes and fares and the effect that it has on the market generally. It is possible to move to a multilateral system, but that will take a good deal of time. I welcome the deal that my right hon. Friend has done with the Dutch, but I am told that this may result in British airlines losing a considerable amount of business to them, BA being one. However, that is competition, and that is why I welcome it. I warn my right hon. Friend that the Civil Aviation Authority will claim that British airlines will lose business. That will be the nature of the report from the airlines.
  The third problem is that of airports policy, and there have been a number of contributions about that. I shall put in a word for the environment. It is very easy for us in this debate to talk entirely about profitability and the development of industries, but the environment is increasingly a factor in airport policy, and rightly so, as is the effect on a region of the placing of airports and the development of business at airports. I welcome the point made by the hon. Member for Stockton, South (Mr. Wrigglesworth) about the need to help greater development of regional airports, which I hope my right hon. Friend will want to do. On environmental grounds, in the argument between a fifth terminal at Heathrow, if that is how it turns out, and Stansted, I would be against the development of Stansted.
  My hon. Friend's fourth problem is simply that the customer is not getting the best possible deal as things are. I agree with my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) that the present position is not desirable in the long term. The present European fares are an example of how the customer is not getting the best possible deal.
  There are various ways to introduce and develop competition that have not been discussed, and that is a pity, because there are many circumstances in which direct competition cannot be achieved. There is route competition between different routes which could be, and should be, developed, and there is also the indirect competition that customers enjoy when comparing the

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  services provided by one airline with those of another, even though they may be at different airports in different countries. Competition has to be fair, and I agree with a number of comments that have been made about the lack of fair competition.
  I add my congratulations to British Airways on the great achievement of profitability that it has produced. In the days when I did a lot of international flying, I always flew that flag. I only wish that it would put the capital "A" back into its title. I have never been able to accommodate that change.
  My right hon. Friend the Secretary of State has privatisation plans before him. He will find great difficulties in the time table that he wants to achieve. I hope that he will try to be objective when considering privatisation and agreeing the structure of the routes when he receives the recommendations from the CAA. I hope, too, that he will disassociate himself from his position as a shareholder in British Airways. It is right that some changes should take place in the structure of routes, and my right hon. Friend should consider this as early as possible this year. It is for him to do that, as no one else can. The pressures that have been put on the CAA to make the decision are unrealistic and are asking that body to do what it was not set up to do. I wish to see British Airways remaining the principal national carrier, despite the changes.
  I shall conclude on what I think those changes should be and how my right hon. Friend should bring them about. There is a case for some reallocation of routes, and it is better that that should be done now. I disagree strongly with those who argue against this being done now rather than after privatisation. To leave it until after privatisation would be a serious fraud of those who take the shares, and it would be unfair on the management of British Airways. Some of British Airways routes are unprofitable, although it is impossible to tell from its accounts which those are. It is commonly believed that the Highlands and Islands services are unprofitable, as are some international routes from Birmingham and Manchester airports.
  Mr. Colvin: The Highlands and Islands services are now some of the most efficient in the British Airways system. They have had dramatic staff reductions, their productivity is greater and they are well into profit.
  Mr. Baker: I am aware of the improvements in efficiency, but many airlines believe that those routes are not profitable. British Airways should be prepared to make clear in the CAA review which of its lines are profitable and which are not.
  My right hon. Friend must make some changes. He will have to get the parties together to agree some rescheduling, and they will have to decide, with the aid of his colleagues in the Treasury, how much revenue income the Government are prepared to lose as a result of BA being privatised in a slightly different form. British Airways, slightly changed and privatised, will be in a better position to serve the public than it is even now.
  1.6 pm
  Mr. Bill Walker: I welcome the opportunity to speak in the debate because the present changes and possible changes in civil aviation will have a substantial impact north of the border. My hon. Friend the Member for Dorset, North (Mr. Baker) mentioned the
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  Scottish services, and as one who uses those services more frequently than most, I can speak from first-hand experience. My hon. Friend may be prepared to listen to what I say.
  There is no doubt that the intervention of British Midland Airways on the routes from Edinburgh and Glasgow to London has improved services tremendously. It is also encouraging that the number of customers has increased. That is a splendid example of competition inspiring more people to use the facilities available. The super-shuttle service is just what it says, and I now have a splendid choice of departure times with British Midland and super-shuttle flights. That is especially important today because I, no doubt with many other hon. Members, must get home quickly to attend constituency engagements. It is important to me that the additional facilities are available, and all the Scottish Opposition Members appear to have used them already.
  There is merit in setting up one holding company for the privatised British Airports Authority and in having separate public limited companies for the south-eastern airports and the four Scottish airports. That arrangement would provide cost and profit centres for the two separate areas of airport operations while retaining the strength and expertise of the existing BAA. I, too, complained about the facilities at Heathrow and elsewhere, and I am pleased that they have improved substantially during the past 12 months.
  If we had Scottish control over Scottish airports, the people of Scotland could then make decisions about their airports, which is important with the continuing and ever-increasing demand for more Scottish devolution. I shall not go down that road today—I have never been happy with the idea—but we must recognise that the feeling exists.
  It is time for a complete reassessment of the Scottish air transport system. Prestwick, for example, is under review. Prestwick has remained Scotland's international airport not because that is what somebody wants but because the terminal facilities there are far superior to those at Glasgow. There is no duty-free facility of any consequence at Glasgow, but there is a substantial one at Prestwick. Those who travel internally may not consider that to be important, but charter operators who operate from Prestwick have told me that they do not wish to move to Glasgow under present circumstances. They would require substantial improvements in the facilities available at Glasgow. A massive investment would be required to provide those facilities, and that may well mean that Prestwick will remain the principal Scottish international airport.
  I am interested in services to the Highlands and Islands. I suggest that the new generation of twin-engined long-range vertical-take-off helicopters would provide a form of transport better suited to the Highlands and Islands than fixed-wing aircraft. Instead of providing massive subsidies — the Scottish Office is also providing subsidies for expensive airfields—it might be more cost-effective and more operationally effective to subsidise helicopter passengers for a short period until the traffic built up. The experience of the Scilly Isles is worth considering. Stornoway is a NATO base and will therefore continue to have an airfield, but on other islands we could scrap the airports and make use of the piers, which have facilities for customer handling, as heliports. On the mainland, we could make use of facilities at existing airports or, indeed,

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  bus terminals. Those are not frivolous comments. We in the Highlands and Islands recognise that the public purse has subsidised our transport for a long time. Subsidy will continue to be needed, but we want to find the most cost-effective answer for the nation. I believe that helicopters are the answer.
  There is clearly a demand for Scottish airline operators to provide services into London Heathrow, but the operators are facing problems. The present number of movements allowed into Heathrow, coupled with the planning problems of taxi-ing at terminal 4, mean that there is little scope for improvement in services from Scotland to Heathrow, yet that is what is required. I believe that, as a matter of urgency, the permitted number of aircraft movements can and must be increased at Heathrow, as it has been elsewhere in the world.
  The noise problem has been substantially reduced now that quieter modern aircraft are coming into service, and the number of movements permitted could reflect that substantial change. I also believe that — whatever happens about Stansted — an increased number of aircraft movements, together with the fact that aircraft will be carrying more people, will make terminal 5 necessary. If Gatwick is to be a hub operation centre, it requires a runway which will take commuter aircraft.
  My hon. Friend the Member for Romsey and Waterside (Mr. Colvin) spoke eloquently about hiving off some of BA's routes. I agree with much of what he said, but before entering that argument I must put on record my admiration for the remarkable job that Lord King and his team have done. It was wrong of some right hon. and hon. Members not to acknowledge the massive scale of the problem that they have tackled and largely resolved. It is no mean achievement to turn round such a massive organisation. Perhaps I might observe, for the benefit of my hon. Friend the Member for Dorset, North (Mr. Baker), that Scotland's Highlands and Islands division is one of the best examples of all. The massive reduction in staff and the turnround is an example to everyone.
  What were the terms of reference given to Lord King when he was asked to carry out this Herculean task? Do the Government have any residual responsibility to Lord King and his team? Were they made aware, when they were asked to tackle the job, that the slimmed down profitable airline, when privatised, might be required to give up some of its routes? The answer must have a bearing on the views of the Government and their supporters.
  I welcome the introduction of genuine competition. Experience of Scottish routes shows how effective it is. However, we are still a long way from that in the long-haul international routes and in Europe. No one should pretend that pooling arrangements and bilateral agreements are competitive. I have no wish to see fine independent British airlines being submerged by any monopoly, whether British or any other. We must understand what monopoly is. I am worried about the problems that might be created by some of the ideas that I have heard floated. We want a healthy airline capacity, operators being able to function to the best of their ability and the pressures of the market place being taken into account when the privatisation package is enacted. Lord King and his team should be
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  given a fair package to operate, which reflects the challenge that they have accepted. Moreover, other airlines should not be put unnecessarily at risk.
  My right hon. Friend will not be surprised that I wish to draw attention to the problems created by the introduction of the airway between Edinburgh, Glasgow and Aberdeen. The review that was promised some time ago —I shall not embarrass my right hon. Friend by saying how long ago — is taking a long time to complete. Meanwhile, the Scottish Gliding Union has suffered substantial damage. I must declare an interest as the parliamentary spokesman on behalf of British gliding. It is an unpaid job, just like all of my other jobs in this place. The visitors who bring their high-performance sail planes to use the unique site at Portmoak have almost completely vanished. The airway has become the deterrent that I and others involved in gliding feared. The wave has been operating because nature provides it regularly, but the airway has prevented access to the wave conditions. I do not believe that the airway is as busy where the wave operates as was at first expected, and at weekends the frequency of flights does not justify an airway.
  Much of the aircraft movement that is claimed for the airway does not reflect the number of aircraft that leave the airway or join it just south of Aberdeen. Figures for civil aircraft movement in the RAF Leuchars military aerodrome traffic zone show that many commuter and charter aircraft fly directly from Aberdeen down the east coast, as I have previously suggested. It is clear from a written answer given by the Ministry of Defence yesterday that aircraft movement in the area has increased substantially since the introduction of the airway. In 1981, Leuchars logged 980 movements; in 1982, it logged 2,468 and in 1983 it logged 3,099. Anyone who believes that the commuter airlines are using the airway will believe anything. They use it for a short distance and then leave it to take the most direct and comfortable route. Only a fool flies over mountains at under 12,000 ft when it is bumpy.
  The only party to suffer as a result of the airway has been the Scottish Gliding Union. The delay by National Air Traffic Services in producing the review report shows that there is a desperate need for an independent appeals procedure against its decisions. It is nonsense to claim that only NATS is professionally qualified to deal with air space matters. Indeed, I believe that an eminent professor who is qualified and acknowledged as an airspace expert is producing a paper showing the fallacy of that claim.
  Ministers must acknowledge that the British Gliding Association has behaved responsibly and constructively throughout. Both it and I have been extremely patient, but my patience is now wearing thin and I may be forced, as once before, to call for the assistance and support of the more than 150 right hon. and hon. Members who take an interest in the well-being of gliding in this country to put pressure on the Government to ensure that democratic and fair access to decisions is available to bodies such as the British Gliding Association, because within our parliamentary system there is clearly a need for a review to deal with a quango that is exercising dictatorial powers.
  1.21 pm
  Mr. James Coachman: I rise somewhat diffidently to contribute briefly to the debate. I am not an enthusiastic flier, and the RAF found itself able to dispense with my services as a pilot within a very few hours of

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  flying. For me, the greatest joy of flying is the reassuring moment when the undercarriage makes firm and continued re-contact with terra firma. In the past few months, however, I have become increasingly interested in two contentious matters affecting the British Airports Authority —the long-running saga of a possible third London airport and the question of privatisation. In the few minutes available to me today I shall confine myself to the first issue.
  Unlike my right hon. Friend the Secretary of State, I do not feel constrained not to comment on Stansted. I believe that the decision is long overdue and that as soon as the public inquiry is determined, if the answer is favourable, urgent action to alleviate the perceived shortfall in capacity in the 1990s should be taken.
  I have no doubt at all about the validity of the case for Stansted. I believe that the Government's airports policy in 1979 was absolutely right. The invitation to the BAA in 1979 to consider the development of Stansted followed nearly 20 years of dithering. The Roskill and Maplin concepts had been and gone and plans for a massive new four-runway airport handling about 100 million passengers per year had been abandoned.
  In 1979, the Government reaffirmed the policy to provide a fourth but not a fifth terminal at Heathrow and to provide a second terminal but not a second runway at Gatwick. That additional capacity, with Stansted in its present state and also Luton, will bring the London and south-east capacity to about 68·5 million passengers per year. That should suffice until the early 1990s, but there is broad agreement that demand will grow to about 84 million passengers per year between 1995 and 2000—that is, 15 million per year above the maximum planned capacity for Healthrow, Gatwick and Stansted in its current state.
  The are no serious green field contenders, and Stansted with its two-mile runway and other facilities and with excellent road access via the M25 and M11 cries out for development into London's third airport.
  Mr. Bidwell rose——
  Mr. Couchman: I am sorry. I shall not give way as I have only five minutes in which to make my speech.
  Further intensification of the use of Heathrow and Gatwick would be unacceptable. The Government have placed a limit of 275,000 aircraft movements per year on Heathrow, and that limit is likely to be exceeded this year. Even if the limit, which includes helicopter movements, were relaxed a little, there would still be a need to constrain the 15 per cent. of aircraft movements made up by small turbo propeller aircraft on domestic services.
  If the 38 million passengers per year capacity of a four-terminal Heathrow were to be fully used, with the limit imposed on movements, there would need to be a concentration on movements of large aircraft on international flights. There is not likely to be another quantum leap in passenger load capacities in this century.
  Gatwick is not similarly limited by a ceiling imposed on air traffic movements, but its single runway means that a total capacity of around 160,000 movements per year is about all that can be contemplated. The 40-year covenant by the British Airports Authority not to develop a second runway at Gatwick more or less guarantees that Gatwick's capacity for annual air traffic movements is constrained to roughly the present level. There may be a significant
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  change in the balance of large and small aircraft movements and of scheduled as opposed to chartered flights. No doubt Gatwick's management will seek a greater share of the profitable interlining traffic.
  For all those valid reasons, I believe that the development of Stansted, with the provision of a 15 million passengers per year terminal, is now urgent. It will be a significantly preferable development, in environmental terms, to further intensification of the use of Heathrow and Gatwick. In terms of enhancing employment opportunities for north-east London, Essex and even Kent, Stansted will offer a substantial benefit. That enhancement in employment opportunities would be considerably greater than any enhancement that ensued from further development of Heathrow and Gatwick.
  The overriding points in favour of Stansted are the existence of an excellent runway, the motorway pattern and the feasibility of developing terminal facilities by the time a third major London airport is essential, if London's competitive edge is not to be lost to the continent.
  It is interesting that 20 years ago some people considered that Gatwick would be a white elephant. Today, some people think that Stansted will be a white elephant. I am sure that the doubters would give way, in view of the success of Gatwick.
  1.27 pm
  Mr. Nicholas Soames: My constituency interests in this matter are extremely diverse, in that at Gatwick airport there its the British Caledonian headquarters and its main operating base, a substantial British Airways presence and the presence of many independent airlines, as well as the headquarters of the British Airports Authority, the activities of which will be affected in no little way by the reviews that are being conducted. Therefore, I am gird about with problems.
  I say to my right hon. Friend the Secretary of State that the PSBR imperative must, for once, take a back seal in dealing with this problem. It is a matter of crucial national importance. The industry is vital to the nation in every respect. It is not just a partisan argument between British Airways and British Caledonian. My right hon. Friend faces a difficult task, and I am glad that I am not in his shoes. His responsibilities go extremely wide. With fare structures, routeing, airports and aircraft movements, it is a formidable task.
  I pay a warm and unqualified tribute to British Airways; to Lord King and Mr. Colin Marshall and his outstanding management team, who have wrought miracles with British Airways in the recent past. Particularly in my constituency, British Airtours has achieved a remarkable turnround. I also pay tribute to the enterprising spirit, resilience and guts of the independent airlines, which have had a long, hard struggle in past years, particularly British Caledonian, which has taken outstanding initiatives on European fares in the recent past.
  In the CAA's interim assessment, the most telling sentence in that excellent paper read:
  "Nose to nose competition between British Airways and British Caledonian exists on only two longhaul routes."
  In answer to a written question from me about the objectives of the Government's civil aviation policy, my right hon. Friend said that they were
  "to further the interests of users of air transport services by seeing that British airlines provide services that satisfy all substantial categories of public demand at the lowest charges, consistent with a high standard of safety, an economic return to efficient

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  operators, and the sound development of the civil air transport industry of the United Kingdom". — [Official Report, 18 November 1983; Vol. 84, c. 584.]
  Real progress has been and is being made in this matter, but the central problem must be attacked. The sheer size and dominance of British Airways does not stem from 39 years of superior performance in world markets. Although successive Governments — Labour and Conservative — have, since 1945, rejected the concept of "a single chosen instrument", the fact is that the largest international scheduled route network in the world arose from preferment at the expense of the independent sector. At present, British Airways controls more than 80 per cent. of Britain's scheduled air service output. British Caledonian has 15 per cent. and the other independent airlines about 2 per cent.
  My right hon. Friend made much of competition. By any standard, more than 80 per cent. of any industry's output must add up to a monopoly. To allow BA to be sold off intact would contrast sharply with the recent Government decision to refuse to allow P and O or European Ferries to acquire Sealink, on the ground of domination. Correcting the present imbalance would not, as some would have it, merely enable other airlines to grow at the expense of BA.
  Britain's position at the aviation crossroads of the world, together with its immense and boundless expertise and enterprise, could enable a more competitively balanced British aviation industry to lead the world, not just by size but by its long-term success. We need a powerful state of competitive tension among British airlines which will force them to compete to be in the forefront of marketing, customer service, innovation and reputation. Only in such a competitive environment will efficiency and excellence be stimulated.
  Claims that route transfers would ruin BA's chances of a successful flotation cannot be substantiated. However, I have some sympathy with, and understand, the burden of BA's argument in this respect. We await with great interest the CAA report, but the objective must remain constant and paramount, and that is the creation of an overall healthy British aviation industry for every airline.
  The currency of airline and airport development is unquestionably the route licence. Only through the redistribution of this wealth can competition and the sound development of the British airline industry be achieved. In consequence, I am bound to support the arguments and proposals put forward by British Caledonian and the BAA in so far as they are vital to the development and interests of Gatwick airport, and that includes a substantial BA presence.
  With a wide range of scheduled service products, Gatwick would become fulfilled in its politically designated role as an international gateway for London, and the livelihood and security of all in the area would be assured. It is of equal importance that the objectives of airline competition, combined with the sound development of the British airline industry, should be met.
  1.34 pm
  Mr. Terry Dicks: Like my hon. Friend the Member for Crawley (Mr. Soames), I have a strong interest in the subject under debate because
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  Heathrow airport is in my constituency, and I need not list the number of airlines and activities that are involved there.
  Some may be forgiven for thinking that this is a day to attack British Airways. It is not, and any suggestion that BA has in some way done wrong by making a success out of what was an unsuccessful activity is totally out of court. It is criticised when it makes a loss, and now that it has made a profit it is still being criticised. Its management should be congratulated for what it has done.
  In an ideal world, all suppliers should and would have unfettered access to the market. Unfortunately, we do not live in an ideal world and we must face the position as we find it. I know of no other industry where people seeking to obtain a better share of it would ask others in the industry to give up some of their profitable activities in their favour.
  We must consider the problem at Heathrow, where the ceiling is 275,000 flight movements. Many people may not know that 60,000 of those movements are for small aircraft carrying fewer than 100 passengers. It is nonsense for a major international airport to allow 60,000 flight movements for small aircraft. Those movements should be directed to Stansted. I feel very strongly about that matter and hope that my right hon. Friend will take it into consideration when completing his review.
  The BAA holds a monopoly position at Heathrow. It is the major employer and has a great impact on my constituency. Heathrow now has the highest peak time landing charges in the world. The BAA uses those high charges to cross-subsidise airports in other parts of Britain which, on normal commercial judgment, should have been closed a long time ago. It is nonsense that major airlines coming into Britain and wanting to use Heathrow should have to pay for the privilege of keeping open uneconomic airports such as Prestwick.
  The duty-free shops at Heathrow and Gatwick have the highest charges in the world. It often pays people to shop in European supermarkets instead of using the facilities at Heathrow and Gatwick. I find that amazing.
  The BAA has taken a dictatorial attitude towards the occupation of terminal 4. BA originally wanted the terminal for its sole use. It is a national airline, and I see nothing wrong with it wanting to put all its activities into that particular basket. But, for some obscure reason, the BAA has insisted that the smaller airlines should use terminal 4.
  Another example of BAA's dictatorial attitude was shown towards BA when it requested flipover boards for flight information in terminal 4, rather than the television screens that people find difficult to read because they constantly change. The BAA would not allow that, despite the fact that the airline knows best how to meet its passengers' needs. The dictators at the BAA said, "We know what your passengers want and they will have it, even if no one else thinks that that is what they want." We must do something about the BAA.
  The BAA wants to remain in being as a whole when privatisation comes. It wants to retain its unprofitable airports by switching money around the country. It wants to direct airlines to airports when, on a commercial judgment, the airlines would not make such a move. I find that a nonsensical policy and quite contrary to the commercial judgment that the Government want to bring into the civil aviation industry.

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  The BAA is opposed to terminal 5 because it wants Stansted to be developed. It wants to build on its empire and ensure that it retains a dominant position in the industry. It believes that it can direct airlines and passengers towards Stansted, regardless of the fact that they do not want to go there. Passengers and airlines see Heathrow as the London airport. Surely, if we are to have competition, consumer sovereignty must be taken into account. If people want to fly into Heathrow, perhaps on their way to central London or to Europe, they should be allowed to do so — provided, of course, that they are prepared to pay for it. They should not be told by either the Government or the BAA, "We know what is best. We know where you want to go, even though you think you do not want to go there."
  In a document produced last year BAA said that concessions and contracts within the airports were let on a competitive basis. It said that competition was encouraged at all levels to ensure efficiency and responsiveness to consumer requirements.
  Why take a different line on competition between airports? It is logical and necessary, and for the benefit of consumers, to break up the BAA monopoly. We should form "Heathrow Ltd.". The Secretary of State said that if we did that, Gatwick would not have a good time and things might go wrong for it; but I thought that competition was about placing one company, organisation or airport against another. If we are to have competition between routes for flights around the world, why not introduce competition between the airports? If Gatwick cannot make it and goes into the red, that is hard lines and bad luck. I thought that was what competition was all about.
  It is strange that we should spend hours discussing competition between routes and airlines and say nothing about airports. The Secretary of State dismissed the issue out of hand and said that the London airports would be grouped together. Why? He said that we want to extend competition whenever we have the opportunity. We now have a heaven-sent opportunity to break up the incompetent monopoly of the British Airports Authority and to do something for the airlines and the passengers whom they serve.
  The Secretary of State said that the Government were the champions of the consumer. I ask him politely to put action where his words are and show us that he is the champion of the consumer by breaking up the dead hand of the BAA at airports in London and elsewhere.
  1.41 pm
  Mr. Toby Jessel: I cannot agree that the British Airports Authority is a "dead hand" or an "incompetent monopoly". It seems to me to be extremely efficient in the way in which it runs the various airports round London. I do not receive many complaints about services from the large number of constituents who travel through Heathrow and Gatwick. All hon. Members who represent articulate communities receive large postbags, but I have received few letters over the years complaining about what goes on inside Heathrow. I think that the BAA does an excellent job on the whole, although one can argue about small matters, as one can on most things.
  The Secretary of State referred to environmental aspects of airport policy, particularly in terms of noise nuisance. He said that the Government were "determined to bring relief" to people affected by aircraft noise. I was glad to hear that, but I stress that relief means less noise,
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  not holding the noise to its present level. When British Airways argues for a fifth terminal at Heathrow, it says that, because of the increased number of wide-bodied aircraft, the total noise will not increase. But it is not enough for the amount of noise not to increase; we require it to be less. My constituents want a substantial and permanent reduction in noise.
  The Secretary of State gave examples of what he is doing to reduce aircraft noise. He mentioned quieter engines. I see that my hon. Friend the Member for Esher (Mr. Mather) is on the Front Bench. For 14 years, he and I have battled for quieter engines, along with other hon. Members representing constituencies near Heathrow.
  It is essential to uphold the restraint on night jet takeoffs. It is equally essential to uphold the restraint on the number of Heathrow flights each year. A total of 275,000 movements sounds astronomical. Most people will not have worked out that it means 750 flights each day on average. That is a large number. It is more than enough, and it would be intolerable if that number were increased. I was glad to know that the Secretary of State has decided to take a clear line. I understand the difficulties in the range of options.
  The number of movements has not been "reduced" to 275,000, as my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) said: it never was to be more than that. A planning condition was imposed when permission was given to build the fourth Heathrow terminal. It is not playing the game for someone who has received planning permission to come back later and demand that one of the crucial conditions should be broken in order to make more money. That would be an attempt to cheat, and the House should regard it as such.
  The most important action that the Government can take to bring relief from aircraft noise is to refuse permission for the construction of a fifth terminal at Heathrow. The public inquiry was completed last year. I am aware that my right hon. Friends the Secretaries of State for Transport and for the Environment will both be in a quasi-judicial capacity, so I cannot expect my right hon. Friend the Secretary of State for Transport to comment much today on the inquiry report. However, I cannot do other than make it clear that there is tremendous strength of feeling among large numbers of peope living round Heathrow that a fifth terminal should not be built, which was said to be Government policy by a previous Secretary of State. The feeling is strong and widespread, and it must not be ignored.
  Mr. Justice Glidewell, the inspector before whom the planning inquiry into the forth terminal was held, said in his report:
  "It is in my view essential that if they"—
  the two Secretaries of State—
  "decide to permit Terminal 4 they should at the same time reiterate that it is the Government's policy that there will be neither a fifth terminal nor any other major expansion at Heathrow."
  The aircraft noise problem remains serious. The noise distresses people and interferes with their lives in all sorts of ways. It prevents the quiet enjoyment of their homes and gardens, it interrupts the work of schools, offices and hospitals and worship in churches; it is a major nuisance in the communities affected by it.
  In this context, it is essential that the Government do not rely too much on the statistics produced in the noise and number index. To say that only 300,000 people will

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  be affected by aircraft noise in a few years time, instead of 1 million, sounds doubtful. I would not believe that part of the brief with which my right hon. Friend has been provided without seeing some proof of this. I wonder whether the 300,000 includes my constituents. I have seen so-called "footprints" under the noise and number index which exclude Twickenham, although the concentration of flight paths over Twickenham is such that the planes fly over certain open spaces, such as Hounslow heath and Richmond park, as a so-called noise abatement measure. However, it means that the build-up areas in between have a severe noise problem with which to cope.
  The noise and number index does not allow for the fact that constituencies such as mine, which suffer from aircraft taking off, although not from those landing, tend to experience the over-flying of aircraft taking off on eastbound take-off days when it is most likely to be fine weather. When there is a prevailing east wind, which determines the direction of take-off, and which often goes on for a spell of several weeks in the summer, the people living in those places experience the over-flying of aircraft taking off from Heathrow day after day and week after week at one of the periods of the year when they most want to be in their gardens. That is not reflected in the noise and number index, and it is another reason for regarding the index and its formula as suspect.
  The road traffic aspect must also be considered. My hon. Friend the Member for Hayes and Harlington (Mr. Dicks) spoke of "consumer sovereignty" and said that if consumers wanted to use Heathrow they should be allowed to do so, and that that argument should be paramount. However, it is no use to the sovereign consumer to be able to use Heathrow if there are traffic jams and they simply cannot get through.
  The departmental document of my right hon. Friend the Secretary of State for Transport was submitted to the public inquiry. That document, No. DTP25, said:
  "it is clear that neither the M4 nor the M25 could take additional traffic"—
  which the fifth terminal would generate—
  "without becoming very severely overloaded. The Department have no proposals for any further roads in the area, and indeed see no scope for providing any additional capacity in the M4/A4 corridor into Central London."
  Incidentally, at present there are problems on the A4 at the Talgarth road and Cromwell road intersection, because the GLC's traffic scheme has reduced the number of lanes into London from three to two. No doubt, Mr. Deputy Speaker, you have experienced the problem when driving into London from the west country. I cannot believe that that scheme will be allowed to persist indefinitely.
  We are talking of an expansion of Heathrow by a fourth and fifth terminal. At present, 25 million to 27 million passengers go through Heathrow every year. The fourth terminal has been built, but has not yet been opened. When it is open, that number will increase to 39 million a year, and with a fifth terminal it would go up to 52 million or 54 million a year, or roughly double the present level with three terminals open. The Cromwell road has already reached peak capacity, and not much more traffic can get through. One has to accept the professional expert advice from the Department of Transport that there will be severe overloading and traffic jams.
  I am equally concerned about the effect on the M25. My constituents and many other people have been waiting
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  for years for the M25 to be completely open. In a year or so, the south-west and western sectors will be fully open from Reigate hill round past the M3 and M4 to the north. There is a risk that with a fifth terminal the benefits of that road may be taken away from them. Most motorways are straight, or almost straight, so if they are severely overloaded and the traffic has to slow down to 40 or 50 mph, drivers do not usually take another parallel route.
  However, a curved motorway such as the M25 would not have the same effect. If that became jammed up, drivers would be tempted to cut the corner, and to take a shorter route than that of the wide sweep encircling greater London. More of the traffic would then use roads in my constituency via Hampton Court bridge. Therefore, a fifth terminal would be damaging to the environment of those living on the western and south western outskirts of London.
  The hon. Member for Kingston upon Hull, East (Mr. Prescott) referred to the Campaign for the North, which seeks to attract more air traffic to the northern airports. He has been supported by some hon. Members who represent constituencies in Essex and Hertfordshire and who are opposed to the expansion of Stansted. However, I suspect that the hon. Gentleman and those from the northern constituencies who think like him are unwittingly threatening the interests of hundreds of thousands of people who live round Heathrow.
  It is said that Stansted should not be expanded because it would be better to attract more traffic to the north, and northern airports can take it. But if those northern airports fail to attract as many passengers as they hope for, a fifth terminal might go up at Heathrow if Stansted were dropped. Therefore, the policy of Campaign for the North would damage my constituents and those of many other hon. Members around Heathrow. That is not the intention of the policy but that could be the result. I hope that the consequences of the campaign will be considered further.
  1.55 pm
  Mr. Prescott: With the leave of the House, Mr. Deputy Speaker, I should like to make a short contribution and leave sufficient time for the Minister to reply to the many issues which have been raised in a good debate. The contributions to the debate reflected the strong divisions of opinion that are represented in this place and the various interests that are involved.
  My hon. Friend the Member for Ealing, Southall (Mr. Bidwell) rightly expressed the concern of those who are employed in the civil aviation industry. He emphasised that they have made great sacrifices and that there has been little industrial trouble in the industry.
  Constituency interests have similarly been expressed, especially by those who represent constituencies near to airports. As the hon. Member for Twickenham (Mr. Jessel) said, there is a clear view on the development of future airports such as Stansted. There is a demand for more traffic to be handled in the north, and account must be taken of the problems of the Scottish airports.
  The views that have been expressed have raised crucial airport development policy issues. The Secretary of State has said that there are a number of reports before him which he will attempt to bring before the House shortly. We shall be able to make our judgments when they come before us.

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  Helicopter and gliding interests have been taken up in the debate, and it is right that those interests should be properly ventilated.
  The Secretary of State made it clear that if the 275,000 movements at Heathrow, which both Conservative and Labour Governments have endorsed, are exceeded when terminal 4 comes on line, he will proceed to cut back on the extra movements.
  We have heard from those who are demanding more flights into Heathrow. It is suggested that there could be more flights following the introduction of quieter aircraft. I am sure that those living near Heathrow would not be happy if that solution were adopted. Equally, they would not be happy if helicopter movements became Boeing 747 movements. Such solutions would not give a great deal of comfort to those living in the Heathrow area. I hope that we shall hear the Minister's thinking on this issue. He has been frank enough to say that he does not wish the limit of 275,000 movements to be exceeded, but all the projections suggest that it will be exceeded at some stage this year.
  Industrial interests have been well represented. The hon. Members for Crawley (Mr. Soames) and for Brentwood and Ongar (Mr. McCrindle) reflected the interests that have been represented by Bristow Helicopters Ltd. There is talk about the golden chance that is provided by the privatisation of BA, but it is seen as a golden chance to move in and strip BA. Bristow Helicopters Ltd. argue, "Why should BA take the helicopter traffic when we could handle it?"
  The hon. Member for Brentwood and Ongar seemed to be suggesting that we should accept British Caledonian's point of view, which tends to reflect the dominance of two organisations. He would not mind if the competition went into the charter sector. That coincides with BCal's argument. There will be a remarkable similarity of approach following the privatisation of BA. It is clear that there are those who are shaking themselves up to get a share of the action.
  There are strong forces that argue that the motivation of privatisation is a golden opportunity to take some of the routes that have been granted to BA because of its history as a large public corporation. Undoubtedly the big questions for us all, which the Secretary of State will also have to face, are, what is the optimum size for competition —will it be two operators, or seven—will we take the point that regional airports should have independent lines, and should they have a mix of international and domestic lines?
  These matters are of considerable importance, because when British Airways is split up that will affect the situation in which there is a dominant carrier, which brings with it advantages. We may call it a private or a public monopoly, but there are advantages of size, not only in economies of scale, but in the negotiation of international competition. I shall not feel any better if there are six or seven private operators instead of one.
  On balance, I do not want British Airways to be privatised. The Labour party has committed itself to taking it back into the public sector if it is privatised. If the argument holds that a dominant airline operator is an advantage to British civil aviation, I should have to accept that logic whether the airline is private or public. However, I have a political position, as does my party, that this should be a publicly operated company.
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  The other big concerns are route distributions and the problems of airport charges that will arise from that. I shall not spend long on this, but I point out that the criticism of high airport charges is one that can be made of our seaport charges as well. It would be useful to compare the costs of British airports with those of their continental competitors. It would be better to make an informed judgment rather than say that the level of charges is merely a reflection of size or of private or public ownership. That question will have to be answered.
  It is obvious from the debate that any aviation policy has to take into account the interdependence of a policy for airports, a policy for the air operator, and route distributions. Therefore, will the Minister reply to two particular questions about the redistribution of routes? First, although this is a matter for business managers, may we have a debate on the reports that will come out? I assume that another civil aviation debate will have to take place within the 12 months, and before decisions are taken. If the CAA review comes out in mid-July and everyone is rushing to the market for the privatisation of British Airways, the least that the House can do is to look at those conclusions. As the Secretary of State has called for them, I hope that we shall have a chance to express our views on the judgments that are arrived at. Some signs as to the date of such a debate would be helpful.
  Secondly, if the review makes it clear that the CAA requires extra powers to be able to redistribute these routes, and the routes need to be changed, can it be made clear that those routes belong to the state and to the nation, as hon. Members have said, and not to any one operator? That will make it a great deal easier to take this sector back into public control, because no operator can be guaranteed to maintain the route. The fact that competition requires changes in the routes also gives the opportunity to make an assessment of whether the airlines should be private or public. There are a number of ways to skin the rabbit, as we should bear in mind. That is one of the Government's dilemmas.
  The hon. Member for Tayside, North (Mr. Walker) asked about privatisation of British Airways and whether Lord King was aware of what is going on. As I understand it, Lord King was appointed by Sir John Nott, so the speech made by Sir John when he launched the Civil Aviation Act in 1979, which I have already quoted, and in which it was said that there would not be a break-up of British Airways, must still be effective. If that was the remit given at the Dispatch Box, one can only assume that that must still hold good.
  2.4 pm
  The Parliamentary Under-Secretary of State for Transport (Mr. David Mitchell): We have had an interesting, useful and wide-ranging debate. "Mon Dieu et mon droit", which my children tell me means, "My God, I am right." It ranged from gliders at Portmoak in Scotland to whether Virgin Atlantic will fly this week. I can tell the hon. Member for Kingston upon Hull, East (Mr. Prescott) that it will fly this afternoon.
  The debate has confirmed four general matters. First, aviation arouses strong opinions, raises powerful constituency interests and demonstrates a wealth of knowledge among Back-Bench Members that commands respect and deserves to be listened to.
  Secondly, the problems and the opportunities of this rapidly expanding industry are immense and interrelate

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  like a jigsaw puzzle. One cannot slot in one piece without examining the general scene to see how it fits with the rest. That is recognised both by the Government and by the hon. Member for Kingston upon Hull, East.
  Thirdly, we are poised on the threshold of many important decisions. We are not yet ready to make announcements, so we can take into account the views expressed in the House this morning, and we shall certainly do that. The hon. Gentleman asked me when we would next debate civil aviation. Of course, that is a matter for the usual channels, and I am sure that he will use them.
  I have sat through almost the entire debate, because I believe that Transport Ministers must listen as well as talk. I have been listening to representatives of airlines and other operators, and I have listened today to the views of my hon. Friends and of Opposition Members.
  On my fourth general point, my right hon. Friend the Secretary of State invited the hon. Member for Kingston upon Hull, East to state his policy. Alas, the hon. Gentleman was rather like Old Mother Hubbard — his cupboard was bare. We heard nothing new from him. The Labour party has a policy on ports, a sort of policy on shipping and one on railways, but the debate revealed that it has hardly any policy on aviation. Perhaps the industry is not old enough for that great theme of Socialist policy—to look back to the ideas, problems and solutions of the last century.
  It may be that I am being a little unfair. The hon. Gentleman was honest enough to expose to the House the dilemma that faces him and his party. He has travelled to the United States and, because of the way in which Laker forced down fares, he has benefited from the competition that my right hon. Friend has chosen as the plank of his policy. He also genuinely wants other people to enjoy those benefits, but the magic formula for achieving increased competition is so alien to the Labour party's philosophy that he is in a great dilemma.
  In politics one must start firmly from one's philosophy, out of which grows a policy that is put into effect in a programme. Our philosophy is clear: transport is there to serve the needs of the traveller and the mover of goods. It is not there to protect the industries that operate it. Our policy is to allow the pattern of transport services to be decided by customer use and to use competition to make choices available. Competition is the motivator of cost-effective excellence.
  Our programme is well illustrated, first, by what has happened in the United Kingdom market. There has been a great opening of internal routes to competition wherever there is sufficient volume to warrant it. British Midland Airways now competes with British Airways. The shuttle, which was nothing to be proud of, has been replaced by the super-shuttle, and British Airways has every reason to be proud of what is has achieved. My hon. Friend the Member for Tayside, North (Mr. Walker) referred to that achievement, as did many other hon. Members. I remember the grim days when one could not even get a cup of coffee on the old shuttle. Now there are hot meals.
  Increased competition has had three clear results for our internal services. There is greater airline efficiency, a vastly improved service for the traveller, and a growth in the numbers travelling. Those factors are the key to our attempt to secure the same advantages for the traveller in
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  the EEC, to which my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) and other hon. Members have referred. At the moment, there is a series of duopolies and cartels — a rich man's club. Some airlines in Europe see themselves primarily as providers of a service for the business man. They have not yet seen the scope that exists for the ordinary man in the street to use flying as a means of getting around.
  There is a common market in goods. We all know the enormous extent to which the trade in goods has expanded since the treaty of Rome was signed. There is supposed to be a common market in services as well, but the surface of that problem has hardly been scratched. In aviation, it has hardly been touched at all. We intend to see that there is a real common market.
  The diversity of markets in Europe demands a diversity of response. The operators should be able to exercise their commercial judgment in identifying markets with potential, seeking to cater for them and so encouraging them to grow. At present, we have the ridiculous situation that one cannot start a new service or fix a new price without seeking one's competitors' agreement. That cannot be regarded as acceptable competition. The dead hand of restriction has resulted in a dull market. I thank my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) for the sturdy way in which he has supported our attempts to remove the barriers.
  We do not seek total deregulation. As my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) said, there is a problem in Europe connected with the existence of national airlines. Total deregulation would mean that some would grow and that the weakest would go to the wall. There is no volunteer for the ignominy of being the national airline that goes to the wall. We must therefore recognise the limitations and seek to reach agreement, but we must do more than that.
  The European Commission's second memorandum is taking what we regard as faltering steps in the right direction. Senior officials have been put to work, and before the end of the year — probably early in the autumn—they will come forward with recommendations about ways in which liberalisation can be introduced via the machinery of a Common Market regulation. We hope very much that that will be achieved. However, I say to the House and to Europe that people are wrong if they think that that will be the end of the story and that, if the Commission's proposals are not accepted, matters will simply drift on. In another place, Lord Bethell has made it plain that there is a route through the European Court that could be used. If it were to be used, the result would be unpredictable. The national airlines would be prudent to recognise that it is better to make progress by agreement than to have progress forced upon them in a way that they may not welcome.
  In his discussions with the Dutch Minister of Transport, my right hon. Friend the Secretary of State launched a frontal assualt on the lack of competition in Europe. Several hon. Members have paid tribute to his success. The requirement to consult competitor airlines before introducing a new service has been removed by the British Government, and the major expansion in competition between us and the Netherlands is not the end of the matter, as I believe that there will be a domino effect. We have established a bridgehead at Schiphol airport in terms of competition and lower fares. Unlike the British, who have to cross the sea to reach another national airport,

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  many Germans will get into their cars and drive to Schiphol rather than go to Frankfurt. There will also be many Belgians who will drive across the border rather than fly from their national airport. Pressure will therefore be put on the Belgian and German airlines to meet the competition which will otherwise erode their business. As that happens, the entire European system will break down. I envisage many benefits flowing from the bridgehead that my right hon. Friend has established.
  We intend to bring scheduled flying into the reach of the common man and look forward to the day when people will talk not about the man on the Clapham omnibus so much as the man on the Paris shuttle.
  Several hon. Members have mentioned the environment. Noise can be a potent destroyer of the quality of life. The Government care about the environment. We have maintained the ban on the use of noisy aircraft on the United Kingdom register after the end of December 1985. We support and will operate the EC directive that tightens up on noisy aircraft after 1987. Helicopters seem to have a special pitch of vibrating noise. My hon. Friend the Member for Twickenham (Mr. Jessel), my right hon. Friend the Member for Spelthorne (Sir. H. Atkins) — who led a deputation and had a long discussion with me about helicopters — and my hon. Friends the Members for Feltham and Heston (Mr. Ground), for Esher (Mr. Mather) and for Epsom and Ewell (Mr. Hamilton) have all actively taken up the problem with which I shall now deal.
  British Caledonian and British Airways Helicopters Ltd. applied to the Civil Aviation Authority for a licence to operate between Heathrow and Gatwick for a further 10 years. The application aroused considerable interest among local environmentalist organisations, and the hearing took 14 days. In the light of the submissions made to it, the CAA decided that the application should be granted for the full 10 years. As the application fell within section 17 of the Civil Aviation Act 1980, which deals with cases of environmental importance, the authority gave notice of its decision to my right hon. Friend. My Department invited all of the parties to the hearing before the authority to make representations on the CAA's decision. My right hon. Friend and I have considered those representations with great care, and, in accordance with section 6 of the Civil Aviation Act 1982, we have consulted the authority and have its comments on our proposal.
  Having reviewed all the evidence, my right hon. Friend and I have decided that, although we recognise the benefits to air travellers and operators of maintaining the Heathrow-Gatwick helicopter service for a further 10 years, in the light of the environmental disturbance caused by the service we could not justify allowing it to continue in operation once a suitable alternative coach service becomes feasible with the opening of the relevant sections of the M25. I recognise that the decision may be unwelcome in some quarters, but we must give due weight to environmental considerations in dealing with such cases.
  Initially, we took the view that the helicopter service between the two airports should end one or two months after completion of the M25 so as to allow time for a fast coach service to become established, but the authority has recommended that the period should be four months. In the interests of a smooth transition from helicopter to fast coach service, we have accepted that advice. In accordance with my right hon. Friend's decision, a
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  direction will shortly be issued to the authority to revoke the licence four months after the opening of the relevant sections of the M25.
  There was a need here to balance the environmentally desirable with the provision of a service to the public and jobs and wealth creation in the aviation industry. It is not easy to strike the right balance, but I hope that the House will agree that, on balance, the Government's decision is right, especially in the light of the super coach services to be introduced in place of the helicopter services.
  Airport policy was discussed by several hon. Members, including my hon. Friend the Member for South Hams (Mr. Steen) and the hon. Member for Ealing, Southall (Mr. Bidwell). We have already announced that we do not intend to privatise the south-east BAA aerodromes separately, and we are still considering the options on how to introduce private capital. The hon. Member for Stockton, South (Mr. Wrigglesworth) suggested franchising, and we are certainly considering that. In particular, he suggested franchising a whole terminal to an operator. There are difficulties about matching requirement and terminal capacity in making that a reality, but we shall certainly consider the point.
  A number of hon. Members raised the subject of Stansted. We expect the inspector's report before the end of the summer, but it will take some months to consider the result of that very important inquiry. As Ministers act in a quasi-judicial capacity in these matters, the House will understand if I say nothing more about that.
  Existing policy on Scottish lowland airports has been in operation since 1946 and was reaffirmed in 1961. It is right that these matters should be reviewed from time to time, and that is what we are now doing. A consultation paper is to be published so that we can draw upon a wide spectrum of advice.
  The question of the Highlands airfields was raised by the right hon. Member for Western Isles (Mr. Stewart) and by my hon. Friend the Member for Tayside, North. My hon. Friend suggested that we should get rid of all the aerodromes, get rid of fixed-wing aircraft and operate a helicopter service. Although a helicopter service would cost more, there is an initial attraction in the idea of getting rid of all the costs of fixed aerodromes. We have considered the idea, but the economics do not come down in favour of it. The right hon. Member for Western Isles said that some councils might not want to take over the airfields, and we take note of that point. Nevertheless, we intend to offer them to local authorities and the private sector. I am reasonably confident that that change will be made later this year. I shall return later in my speech to the point about ensuring fair competition.
  Regional airports were mentioned by several hon. Members, especially my hon. Friend the Member for Dorset, North (Mr. Baker) and the hon. Member for Stockton, South. We have tried to do all that we can to help regional airports, and we have been generous with capital expenditure allocation approvals. We have authorised a substantial programme of developments at local authority airports, and capital expenditure allocations have totalled £185 million since 1979–80. That compares favourably with the much lower figures under the previous Labour Administration.
  We have demonstrated in a practical way our commitment to help the regional airports to fulfill their full potential where it is reasonable and commercially viable to do so. The major problem that they face is finding

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  commercial traffic. Several hon. Members, including the hon. Member for Kingston upon Hull, East and my hon. Friend the Member for Tayside, North, referred to the air transport movement limit. A limit of 275,000, announced in December 1979, was based broadly on accommodating the expected demand pattern. In fact, the demand has not developed in the pattern that we expected. There is a lower proportion of very big aircraft. There were 258,000 movements last year. There is a danger that we shall exceed the limit of 275,000 by October 1985, when terminal 4 comes into operation. It is ironic—the House will recognise this — that after expenditure of £200 million, when the terminal comes into operation we might have to reduce the number if the industry does not do so itself in the meantime to accommodate the figure of 275,000.
  Therefore, it is prudent to consider how that is to be done. We can do one of two things. We can push people out of Heathrow or induce them to go somewhere else. We are publishing a consultation document so that hon. Members can examine the ways in which it can be done. It could be done by either regulation or price. We want to have the views of the users, the operators and Members of Parliament. I shall arrange for that consultation document to be placed in the Library, when it is available.
  I referred to both pushing and pulling. We want to attract people to Gatwick. The train service from Victoria to Gatwick is the best for any major airport in the world. It is a non-stop dedicated train going at 90 mph. It runs every 25 minutes and completes the journey in half an hour — dead on the dot. I did it yesterday. It is air-conditioned and clean. There is adequate provision for luggage. A friend of mine travelled from Scotland last weekend. He said to me, "My goodness, I travelled from Gatwick on the train; I shall not be going to Heathrow any more." He was impressed by the change. It will have a significant effect on the way that people choose to travel to London.
  The future pattern of airlines and route structures was mentioned by several hon. Members. I recognise that this is a sensitive time for people in the industry, while the CAA carries out its review. It is right that it should be done well before the privatisation of British Airways is
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  considered. The issue is very sensitive, as my hon. Friend the Member for Romsey and Waterside recognised. People have referred to the feelings of Lord King and the BA staff who have achieved so much. I pay tribute to what they have achieved, but it would be wrong for me today to enter into any debate about the views that the CAA might express.
  We shall take into account the points that were made in the debate, particularly the danger of predatory pricing, which was referred to by my hon. Friends the Members for Woking (Mr. Onslow) and for Feltham and Heston and by the right hon. Member for Western Isles and others. There are fears that BA might indulge in predatory pricing. I shall not make any comment at the moment. I should like to have firm evidence, if there is any.
  My hon. Friend the Member for South Hams referred to BA's purchase of 14 Boeing aircraft before the CAA report is received. I assure my hon. Friend that those aircraft have not been purchased; they have been leased. Therefore, there is nothing in that deal that binds BA or anyone for the longer term.
  Several other matters were raised by hon. Members, but unfortunately I do not have time to deal with all of them. I shall write to my hon. Friend the Member for Feltham and Heston about ice and other things falling from aircraft, although that is covered by most householders' comprehensive policies. I understand the concern of my hon. Friend the Member for Tayside, North about Portmoak. I shall write to my hon. Friend the Member for South Hams about the penetrating points that he raised.
  The hon. Member for Ealing, Southall said that employees of BA did not want privatisation. I appreciate his view. It is fundamental to the division in politics in this country today. He believes in concentrating power, wealth and decision making in the hands of the state. We believe in spreading them throughout the community. The more who can have shares in the company — workers and others—the better, for they will have a genuine stake in the wealth of the nation. That is what we shall seek to achieve in the privatisation of BA.
  Many who work for the company will welcome the opportunities, which there will be in various forms, to apply for shares, even for free——
  It being half-past Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

  Warrant Officer J. E. Moss
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Archie Hamilton.]
  2.30 pm
  Mr. Neil Thorne: It would seem appropriate for me to be following a debate on the civil aviation industry, for the matter I wish to discuss concerns the Royal Air Force.
  I am grateful for this opportunity to raise on the Adjournment the case of Warrant Officer J. E. Moss for the award of the cadet forces medal. I have raised the matter in correspondence with the Ministry of Defence and I know that my hon. Friend the Minister will by now have had an opportunity to look into the case with his usual fairness.
  Mr. Moss was first appointed to warrant officer rank in the Dagenham squadron of the Air Training Corps on 13 October 1967, having previously served as an NCO in the Royal Air Force, from which he was discharged with exemplary conduct.
  All went well until the annual summer camp at Thorney island in 1971 where, as a result of what can best be described as a personality clash with his superior officer, he found it necessary to offer to withdraw from the camp. This offer was accepted and a return railway warrant provided. The following week he was asked to resign, but declined to do so, and was then suspended pending appearance before the squadron committee.
  At the hearing he was advised that adverse reports had been received, but there was no report from the officer to whom he had spoken the previous week. He was not advised of the contents of the reports that had been received, nor who had submitted them. Nor was he given an opportunity to defend himself, but, in spite of that, his warrant was withdrawn.
  As this appeared to be a denial of the rules of natural justice, he decided to pursue the matter and asked for copies of the reports. This request was initially refused, although subsequently they were read to him and he was told to submit an application for redress on what he had heard. He was still refused copies, but eventually was allowed to see the reports and take notes.
  Apart from the report from the senior officer concerned, there were reports from other officers making accusations, although no action had been taken by any of them at the time the events were alleged to have taken place, although, clearly charges should have been instituted immediately if the allegations had any foundation.
  As a result of this irregular action, my constituent consulted a solicitor, who wrote to headquarters on his behalf pointing out the unfairness of the matter and asking for copies in order to submit a proper defence. This was again refused, and therefore Mr. Moss submitted an application for redress of grievance as best he could, on the limited information available, and in due course this was rejected.
  He next threatened legal action, and was invited to see the senior staff officer in charge of administration of the national headquarters to discuss the matter. At this interview he was assured that the incident at Thorney island was, in the senior officer's own words,
  "Now water under the bridge"
  and
  "a dead duck,"
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  and that if he could find a squadron that would accept him an application for reinstatement would be favourably considered and his service would not be affected in any way by previous events.
  He applied to, and was accepted by, a squadron, but his application was refused by headquarters, and nobody seemed able or willing to do anything about it. He therefore found it necessary to instruct his solicitor to take counsel's opinion. A copy of that opinion was sent to national headquarters, and it was extremely critical of the method used to remove his warrant. Among other things, it emphasised that in the first place he should have been given notice of the charge against him and a right to reply; secondly, that the officer who submitted a report for the prosecution should not have been allowed to sit among the committee as a judge at both the hearing and the appeal — a position which is quite contrary to the rules of natural justice; and, thirdly, that the reports were contradictory and largely supposition and hearsay — again, evidence which would have been unacceptable in any properly constituted court.
  Counsel properly advised headquarters that the hearing was, in fact, a breach of the laws of natural justice and that if it did not reverse its decision proceedings would be taken to the High Court to set aside the decision to remove Mr. Moss's warrant.
  After considerable correspondence, headquarters offered him a post at an east London squadron, and after much consideration about the future of that squadron, which had nothing whatsoever to do with Mr. Moss, his warrant was finally reinstated.
  That appeared to be confirmed by correspondence and was further confirmed by the award to him in October 1975 of the Royal Coat of Arms badge, which is awarded to warrant officers after eight years' service as though there had been no loss of service. Further confirmation occurred in 1979 after 12 years' service, when he was presented with Wing Commander Ridgeon's personal cadet forces medal by the mayor of Havering at the 1979 Battle of Britain parade, as his own medal had not yet arrived. On subsequently pursuing the matter, he was told, to his astonishment, that he did not qualify because of a break in his service.
  Headquarters still insist that a gap of over three years occurred and, therefore, his previous service could not be taken into account. In actual fact, of course, the technical loss of service was caused purely by a decision by headquarters to withdraw his warrant in the most strange circumstances and, subsequently, by its being dilatory in making decisions, replying to correspondence and introducing irrelevant arguments in the period leading to his reappointment.
  I am sure my hon. Friend will agree that the circumstances concerning this case leave unanswered a Lot of questions. We have here a man who has faithfully and diligently carried out his duties on a voluntary basis since 1967, throughout a period when it has been extremely difficult to obtain worthwhile and reliable instructors in the cadet forces.
  I believe I am right in saying that there is no surfeit of offers of help in this particular area and that Mr. Moss fills an important and vital role in the training of these young people, many of whom then become regular service men.
  He has always taken the action he considered to be in the interest of the service regardless of the effect this would have on his personal life. It seems quite

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  extraordinary that he should be so dedicated to his commitment to the Air Training Corps that he should at his own expense fight to retain his warrant, when the vast majority of people in similar circumstances would have said, "If they are not grateful for what I do, I will look elsewhere to give my voluntary services." This he has not done, but has fought every inch of the way to continue doing what he thinks is entirely worth while, to the best of his ability and the benefit of the community.
  It would now seem entirely wrong that he should be penalised in this way. The regulations quite properly lay down rules to ensure that broken service is permitted only in certain circumstances, so that those concerned have the opportunity to find another post within a reasonable period and ensure that they are not dilatory in their commitment.
  In this case, Mr. Moss has shown his willingness at all times to be of service to the Air Training Corps and has gone out of his way to give of his best to this cause, and therefore at no time could he be accused of failing to fulfil his commitment or of being dilatory. Moreover, the technical break in his actual uniformed service which occurred appears to amount to three years and 10 days, and if my hon. Friend feels that in spite of his efforts to maintain continuous service he cannot be credited with that period of time and be eligible for his medal on 13 October 1979, surely, in the interest of natural justice, he should be eligible for the award on 23 October 1982.
  I cannot believe that there is any likelihood of creating a precedent in this matter, for to admit that this might be the case would suggest that dilatory behaviour was to be condoned within the Ministry of Defence. I am confident that my hon. Friend will ensure that that is not so. At the same time, it seems wrong to penalise my constituent for the bureaucratic errors of the past. If my hon. Friend is not in a position to confer the award on my constituent today, I appeal to him to refer the matter to the appropriate service board for special dispensation in the interests of natural justice.
  2.40 pm
  The Parliamentary Under-Secretary of State for Defence Procurement (Mr. John Lee): I congratulate my hon. Friend the Member for Ilford, South (Mr. Thorne) on his success in raising the subject of the award of the cadet forces medal to Warrant Officer J. E. Moss and on the skill and effect with which he has put his case.
  The Air Training Corps — the ATC — is not an organisation which often comes to the attenion of this House for, although it covers the whole country, it goes about its work in a quiet and unobtrusive manner. That work makes a valuable contribution to the education and development of many young people, and I am therefore glad of this opportunity to give the House an idea of the sort of activities which it promotes and of the vital role played by voluntary instructors like Warrant Officer Moss.
  While I am extolling the virtues of the ATC, I should say that it is just one of the many cadet forces which exist; in all, the ATC, the Army Cadet Force, the Sea Cadet Corps and the Combined Cadet Force offer places for over 140,000 young people. I believe both my hon. Friend and I were members of CCF at school. My comments about the ATC apply to all these bodies.
  The ATC was founded in 1941 and has operated since 1946 as a national youth organisation. It is the
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  responsibility of the Ministry of Defence and has very close ties—naturally enough—with the Royal Air Force. Although many cadets do take up service careers—and find their ATC training and background a great help—it is not a recruiting organisation. Its object is to promote and encourage among young people a practical interest in aviation; to provide training which will be useful in later life; and, by fostering a spirit of adventure, to develop leadership and good citizenship.
  At the moment about 36,000 young people are members of the corps. They are organised into about 1,000 units up and down the country and meet on two evenings a week. I have been to a number of functions involving the ATC-1104 Squadron—in my own Pendle constituency and I have been very impressed with their keenness and dedication and the quality of instruction that they have been receiving. I cannot list all the activities which they undertake, but some examples are aero-modelling, navigation, orienteering, local history, gliding and debating. Cadets take part in many sports, an annual camp and visits to operational RAF stations. The ATC is the largest youth organisation participating in the Duke of Edinburgh's award about 9,000 cadets are currently active at bronze, silver and gold levels.
  The ATC has a long list of people who have passed through its squadrons and go on to make a distinguished career for themselves in adult life. Many are senior RAF officers, including the present Chief of Air Staff. Others have come to prominence in all walks of civilian life, among them John Conteh, Richard Burton, Jimmy Savile and my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths). Perhaps other hon. Members can also be claimed by the ATC.
  None of this work or achievement would be possible without the many thousands of hours which the volunteer instructors devote to the corps. Although there is a small staff at HQ air cadets and the Ministry of Defence directs policy, the success of the whole scheme rests on the largely unpaid work of people such as Warrant Officer Moss. The instruction and week-by-week work with the cadets is borne by 6,500 commissioned and warrant officers and civilian instructors who are, for the most part, unpaid.
  In recognition of the service which they give, officers and uniformed instructors become eligible for the cadet forces medal; this is highly prized by those to whom it is awarded. The principal qualification is 12 years' continuous satisfactory service, and clasps are awarded for additional periods of eight years thereafter. The rules for the award do allow an interruption of the 12 years service —of up to three years—in certain circumstances, but, as I will demonstrate in a moment, this has no relevance in Mr. Moss's case. However, service as a civilian instructor does not count towards qualifying for the award of the cadet forces medal.
  As my hon. Friend knows, Warrant Officer Moss has had a disrupted career in the ATC and, if the House will bear with me, I think it would be helpful if I gave a brief resume of the course of events.
  On 13 October 1967, Mr. Moss was appointed to warrant rank in the Air Training Corps, and all went well until 21 August 1971 when an altercation occurred during the course of the annual camp of No. 2048 (Dagenham) Squadron ATC at RAF Thorney island. On their arrival at Thorney island, the Dagenham cadets under the charge of Warrant Officer Moss, together with cadets from Nos. 452

  663
  and 1107 Squadrons, were divided into three groups so that cadets of each squadron were in each group. Each group was then allocated separate accommodation. Warrant Officer Moss objected to this arrangement and directed cadets of No. 2048 Squadron to one room. In spite of being interviewed by the camp commander, Moss would not comply with the accommodation arrangements, and said he would take his cadets home. A little later, a commissioned officer of No. 2048 Squadron arrived, and after some discussion it was agreed that the 2048 Squadron cadets should stay, but that Moss should be sent home. A railway warrant was provided.
  Reports on the incident were submitted by Warrant Officer Moss, by the adjutant of No. 2048 Squadron and by the acting camp liaison officer. The squadron commander of 2048 Squadron considered the reports, interviewed Warrant Officer Moss, and recommended that Moss's service be terminated. This recommendation was considered by the squadron civilian committee, which also interviewed Warrant Officer Moss, and it supported it.
  On 28 September 1971, the recommendations were considered by Headquarters Essex Wing of the ATC which also had before it a report by the camp commandant at Thorney island with whom the original dispute took place. Again Warrant Officer Moss was interviewed, and again the recommendation to discharge was supported. The matter now came into the hands of headquarters Air Cadets Central and East and they advised that Warrant Officer Moss should be told of the procedure for submitting redress of grievance. At about this time, Warrant Officer Moss asked if he could see the papers on the case. He was told that this was not appropriate as no final decision had been made.
  The matter then reached Headquarters Air Cadets, and on 18 January 1972 it directed that Warrant Officer Moss should b interviewed by the regional commandant. This interview took place on 8 February 1972, and Warrant Officer Moss inspected all the relevant papers, as he acknowledged on 14 February 1972.
  Whilst this official action had been in progress, Warrant Officer Moss had been in contact with his solicitors, who wrote to the regional commandant expressing their concern that their client had not had an opportunity of seeing the written evidence against him until 8 February.
  On 12 March 1972, Warrant Officer Moss submitted an application for redress of grievance. This was considered by the squadron commanding officer, who again interviewed Moss, and by the civilian committee. The application was then forwarded to the West Essex Wing Headquarters, and Warrant Officer Moss was again interviewed there on 11 April 1972. The report of the interview and all the papers were forwarded by the regional commandant to Headquarters Air Cadets on 18 April 1972 with his recommendation that the treatment of Warrant Officer Moss did not constitute grounds for redress of grievance.
  The case was considered by the air officer commanding air cadets on 20 April 1972 and his decision was, first, the warrant officer warrant should be withdrawn; second, there were no grounds for a redress of grievance.
  On 28 June 1972, Mr. Moss requested an interview with the air officer commanding, but, after obtaining legal advice, Headquarters Air Cadets replied saying that this would be granted only if fresh evidence were provided.
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  His solicitors questioned this decision but again, after legal advice that their action had been unexceptionable, Headquarters Air Cadets reaffirmed the decision.
  The matter had now been brought to the knowledge of the Ministry of Defence, and, when Mr. Moss's solicitors raised the issue again on 30 January 1974, the matter was referred to the Treasury Solicitor, who replied stating that Warrant Officer Moss's solicitors' complaints of unfair treatment to their client were not accepted. Further exchanges between the legal experts took place, until in May 1974 it was learnt that Mr. Moss was interested in rejoining the ATC as a civilian instructor. His solicitors wrote saying that they had instructions to proceed with legal action if his application were not approved. Mr. Moss was offered, and accepted, appointment as a civilian instructor on 1 July 1974 in No. 1995 (Tower Hamlets) Squadron, but it was made clear to his solicitors that his application was being treated on its merits the Department was under no constraint to accept it, because of his previous history. On 1 May 1975 he was appointed to a vacant warrant officer post.
  On 7 December 1979, Warrant Officer Moss wrote to Headquarters Air Cadets and claimed a cadet forces medal. This claim was rejected because he did not have sufficient qualifying service. Therefore, Mr. Moss will not qualify for the cadet forces medal until 1 May 1987; that is, until, like everybody else, he has fulfilled the conditions laid down. The House may care to know the conditions relating to breaks in service. They are as follows:
  "Continuity of Service—Breaks
  (a) (1) Qualifying service for the award of the medal shall be continuous, exception being made at the discretion of the Defence Council, when a break in qualifying service does not exceed six months.
  (2) The six months break may be extended to three years in the case of those officers and instructors who, by reason of a change in their places of residence, or in circumstances of their civilian employment and who, although still residing in the United Kingdom are no longer able to continue to serve with their Cadet Forces unit. Officers and instructors who wish to resume their service with the Cadet Forces must apply, within one month of being posted off strength of their old unit—for service with a new unit.
  (b)Exception may also be made at the discretion of the Secretary of State for Defence in the following cases:

  (1) When the Cadet Forces service of an officer or instructor is interrupted by service abroad as may be required by his civilian employment and he, within three years of arrival in the United Kingdom, is reposted to a Cadet Forces Unit, or

  (2) When, on transfer from a Cadet Forces unit of the British Commonwealth to a United Kingdom Cadet Forces unit, the break in qualifying service does not exceed three years; provided that application is made for posting to a Cadet Forces Unit within one month of arrival in the United Kingdom."

  For the information of the House, I should make it clear that the instructor service referred to relates to uniformed service. Service as a civilian is not eligible. I have to make it clear, therefore, that none of those exceptions would apply in the case of Warrant Officer Moss, even if his break in service was less than three years.
  Mr. Moss contends that, in re-engaging him as a warrant officer in May 1975, Headquarters Air Cadets and the Ministry of Defence were tacitly accepting that the earlier decision to withdraw the warrant was incorrect and thus all his warrant officer service should count. This is

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  not so; the earlier decision stands. At no time has Headquarters Air Cadets or the Ministry of Defence, as Warrant Officer Moss has put it,
  "agreed to reinstate him on the basis that there had been a misunderstanding and that the matter should be forgotten"
  The whole background to this involved case was thoroughly re-examined following my hon. Friend's letter to the then air officer commanding air cadets on 7 July 1981, and again after his letter to the previous Under-Secretary of State for the Armed Forces on 3 September 1981 and the reply on 9 October 1981. My hon. Friend will also recall his meeting with the Under-Secretary of State on 7 July 1982, when again the matter was fully discussed. I have to say that I fully agree with the views conveyed by the Under-Secretary of State on those occasions that Warrant Officer Moss has insufficient service yet to qualify for the cadet forces medal.
  This has been a convoluted story and there have been, I admit, administrative lapses. The original withdrawal of the warrant was not handled as expeditiously as it might have been; and I gather that there was an odd incident when Warrant Officer Moss was "presented" with someone else's cadet forces medal at a Battle of Britain parade ceremony in 1979.
  The House might like to know that the cadet forces medal erroneously presented to Warrant Officer Moss on 16 September 1979 was in fact the medal belonging to the
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  officer commanding West Essex Wing. He presented Moss with the medal at a Battle of Britain parade held by the wing, at which he was the reviewing officer. It had been assumed by this officer that Moss was qualified to wear the cadet forces medal, and it was simply a matter of the medal not arriving in time for the ceremony. This was not so. The award of the cadet forces medal was considered to be a foregone conclusion by the wing commander and this parade was apparently seen to be a convenient opportunity to make the presentation. When he realised the mistake, the wing commander instructed Moss that in no circumstances was he to wear the ribbon. This verbal instruction was later followed up with a written order. Warrant Officer Moss was also allowed to wear the Royal Coat of Arms Warrant Officer sleeve badge earlier than he was entitled to.
  Although I am satisfied that the original disciplinary decision was correct, I agree that those dealing with Mr. Moss since then have not exactly covered themselves with glory. However, what is important is that the qualifying terms for awards are inviolate any lowering of the qualification would degrade the value of the award.
  The royal warrant for the rightly highly prized cadet forces medal stipulates the service I have mentioned, and not a day less. Until Warrant Officer Moss has completed the required 12 years satisfactory service, I have to say that he does not qualify for the award.
  Question put and agreed to.
  Adjourned accordingly at six minutes to Three o'clock.

PRIME MINISTER
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Preamble
The House met at eleven of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Norwich.

Sealink: Sale Discussions
Lord Carmichael of Kelvingrove: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether any decision has been made concerning the future of Sealink.
Lord Lucas of Chilworth: My Lords, the British Railways Board are currently discussing the sale of Sealink with a number of potential purchasers and hope formally to invite bids soon.
Lord Carmichael of Kelvingrove: My Lords, I thank the Minister for that Answer. Is he aware that there is a feeling of great uncertainty and concern among employees of British Rail as to their future? There is obviously concern about their own jobs. They are concerned that if Sealink is sold there should be a guarantee that it will be sold as a single package and that after it has been sold, even as a single package, it will not be broken up. Can the Minister assure the House that the existing services will be more or less protected? Finally, can he give any indication as to how the container traffic is improving—because that was one of the sticking points—particularly in respect of the Holyhead—Dún Laoghaire service?
Lord Lucas of Chilworth: My Lords, so far as the noble Lord's first two supplementary questions are concerned, I gave his noble friend answers to precisely those two questions on 3rd April, and those answers remain exactly the same. So far as the container traffic is concerned, that is progressing well.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that the questions just put to him from the Opposition Benches suggest that when the sale goes forward there should be all kinds of conditions? If there are, that will affect the price. If, as a result of all kinds of conditions being imposed, the price is much lower than that which the Opposition considers to be right, than the Government will be attacked for selling Sealink below its real value. There have been such attacks on so many other occasions. Sealink ought to be put on sale on merit and without a lot of unnecessary conditions surrounding its sale, which would be bound to affect the price.
Lord Lucas of Chilworth: My Lords, I agree with my noble friend that British Rail are Offering Sealink for sale as an entity, as a complete company.

Juries (Disqualification) Bill
11.8 a.m.
Report received
Clause 1 [Disqualification for jury service of persons who have served or had imposed on them certain sentences]:
Lord Mishcon Lord Mishcon had given notice of his intention to move Amendment No. 1:
Page 1, line 15, leave out from ("detention") to end of line 17.
The noble Lord said: My Lords, I should like to commence any remarks on this amendment by expressing appreciation to what I believe we call "the usual channels" for having arranged for the Report stage to be taken at a time when several of your Lordships have managed to be present. I say that because the Committee stage was taken during the dinner interval and we merely had sufficient numbers of your Lordships present to fill one jury box—which was rather an astonishing situation when dealing with a Bill concerned with a juror's disqualification.
The background to the Report stage of this Bill is that to which I referred at Committee stage, and perhaps I may also mention the proceedings in another place. I do not say this to give the noble and learned Lord an opportunity again to reprimand me, as he did on a previous occasion, in his usual gentle and jovial tones. In another place this Bill had no Second Reading debate and the only stage at which there was a debate was in Committee, which lasted less than one and a half hours. I repeat that this is in no way meant as a criticism of another place for it is not our practice to criticise in that way. I merely refer to it as being a responsibility upon this House when dealing with an important constitutional Bill—of sufficient importance, incidentally, to be included in the Government's party manifesto—to give the proper consideration which your Lordships always give to a Bill before it becomes an enactment.
My noble friends on these Benches are certainly in favour of the principle of the Bill. We were merely looking to see—as I believe many noble Lords in all parts of the House were—whether the Bill itself does do justice to various classes of people who are covered by it. We have no doubt whatsoever that those who have been sentenced to a term of imprisonment—and we even have no doubt where there is a suspended sentence—should, because of experiences over recent years especially, be disqualified, certainly for a period of time, from jury service. There is no difference there at all.
Therefore, we looked at those who were not subjected to any kind of prison sentence. This being a Private Member's Bill, it is obviously a matter for each individual Member of your Lordships' House to be free from any kind of party allegiance on these matters, and I make that clear. But my noble friend and I and, I believe, the noble Lord, Lord Wigoder, and his noble friends, felt that it was wrong to include in this disqualification those who were subject to community service orders. We advanced those reasons in Committee.
I should have said, perfectly frankly, that there can be different views on this matter held with perfect sincerity and that the balance is a very fine one indeed. It is because of that, and because I do not believe that your. Lordships ought to find—I say this in all humility—the same fineness of balance when we come to the next amendment on the subject of probation, that what I propose to do, and I hope that your Lordships will regard this with some favour, is not to bother your Lordships with any arguments on community service orders this morning. I shall withdraw this amendment and concentrate on the aspect that worries many of us; that is, Amendment No. 2, which deals with those who are subject to probation orders. Therefore, I ask leave of your Lordships to withdraw this amendment.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I think that the correct form is for me to ask if the amendment is not moved. That is the point I make now.
[Amendment No. 1 not moved.]
11.15 a.m.
Lord Mishcon Lord Mishcon moved Amendment No. 2:
Page 1, line 18, leave out from ("who") to ("has").
The noble Lord said: My Lords, we now deal with the question whether those who are subject to probation orders should be disqualified from jury service. This amendment immediately admits that those who are subject to probation orders should not be qualified for—indeed, should be disqualified from—jury service during the period of their probation. So we are merely dealing with those subjected to probation orders who have finished their period of probation.
I first quote a statistic. It is the latest that I could cull and relates to 1981. It is a Home Office statistic. Of those who are subject to probation orders, 40 per cent. are under the age of 21, and 50 per cent. are under the age of 29. Therefore, we are dealing substantially with young people who have been subjected to a probation order. The second point which I want to make immediately is that your Lordships, in your experience, will know that there are several occasions when a judge, on coming across an accused and convicted person who has served prison sentences in the past, will, in his mercy, on those occasions when he thinks it suitable, tell the convicted person that he will give him a chance and put him on probation. I do not think we need worry about that sort of case because obviously if there have been prison sentences in the past that will in any event disqualify such a person from serving on a jury for a very substantial period of time under the provisions of this Bill and, indeed, the provisions of the previous Act.
Therefore, we are dealing with the normal type of person who is subject to a probation order. Those of us with experience in the courts—some of your Lordships are members of benches of magistrates and among your Lordships are those who have had experience of these matters—know that often the courts have cases to deal with where there are social problems, personal problems, employment problems, unemployment
556
problems, and that the court decides that even in the most trivial of cases the proper thing to do in order to assist the person before them is to put that person on probation. There is a substantial number of such cases. Is it right that in that sort of case, outside the probation period itself, someone should be disqualified from jury service?
In dealing with this matter on a previous occasion the noble and learned Lord—I repeat, with his customary joviality—laughed and said he had always found it a great relief to find that because of his status in various directions he was exempt from jury service. He thought that, instead of anyone complaining about being disqualified, they might greet it with some amount of joy. If the noble and learned Lord looks at it in that way it must be an opinion to respect. Equally, I think one would respect an opinion which says that it may well be that something that is cast upon the citizen is quite irksome (it may be that several people find it irksome to vote in an election) but if that citizen is told that for some reason—not an honourable one, such as being a member of the Bar or being a member of my side of the legal profession—he is disqualified from that duty, immediately there is some sort of slur upon him. His immediate reaction, however he may have regarded that duty, is one of being disadvantaged. It is in that respect that I plead for this amendment.
I know that the noble Lord, Lord Wigoder, advanced a different point of view at the Committee stage, and it is for him to express why he feels that those who have had a probation order made against them but are outside the period of service should not be disqualified under this Bill.
I hope that your Lordships will regard this as a most serious matter. It is not one that was canvassed to any extent at all in another place, and certainly in no substantial way was it dealt with. It is therefore a burden—your Lordships may think a privilege—of your Lordships to deal very carefully with this amendment and this matter now that we are considering it at the Report stage of this Bill. I beg to move.
Lord Wigoder: My Lords, may I start by differing at once from the noble Lord, Lord Mishcon, in one observation that he made when he said that on a previous occasion I had spoken on behalf of my noble friends? I did not. There is no question of there being any party point of view on this Bill at all. It is not a Government Bill; it is not a Conservative Bill. I know so far as my own noble friends are concerned that they are entirely free—of course they are—to go into the Lobbies, in I hope a very short time, taking their own view of this point and basing it on their own judgment.
I support this Bill. It is a sensible Bill. It plugs a gap in the law. If I may, I congratulate the noble Lord, Lord Renton, on introducing it and monitoring it as he has done in your Lordships' House. It is a sensible Bill because all of us, I think, without arguing the point would agree that real criminals ought not to serve on juries. That I think is a self-evident proposition. The problem arises when one tries to define what is a real criminal.
One might do it, I suppose, by dealing with the nature of the offence. One might set out a series of offences—murder, rape, or whatever it might be—and

557
say that anyone who commits any of those is a real criminal and is disqualified. There are practical difficulties about approaching this problem that way. One might do it in the way that I tried to do it, with the noble Lord, Lord Hams, alongside me, a year or so ago by saying that anybody who committed within a particular period of time two indictable offences could be said to be a real criminal. That was, I think, sensible, but not practicable in administrative terms.
Therefore the other approach has been taken in this Bill, and it is, I think, an intelligent approach. It is the approach, on which the existing Act is based, of saying, "As you cannot define a real criminal in any satisfactory way, let us deal with it from the point of view of penalty. Let us look at the punishment that has been imposed, and let us say, "Well, because of that punishment, it really follows as a matter of common sense that in all probability the person concerned is the sort of person who ought to be disqualified from sitting on a jury".
For that very good reason, the existing law having proved inadequate, there have been additions proposed by this Bill (which I entirely welcome) to the category of penalty which indicates that a person ought to be disqualified, such as suspended sentences which were not in existence when the original Act was introduced. They are now included—quite right. Sentences of less than three months' imprisonment or any custodial sentence are now included—quite right. I do not think that anybody could seriously argue that, where a suspended sentence or a custodial sentence, even a short custodial sentence, has in fact been imposed, the defendant is not a person who comes within the category of being a criminal who ought not to be allowed to serve on juries. Community service orders are perhaps slightly more arguable, but, having regard to the fact that the courts have indicated that community service orders ought to passed only as an alternative to a prison sentence, it did not appear to the noble Lord, Lord Mishcon, and myself appropriate to pursue that any further with your Lordships. So that category is now included; and those three categories I think make this a very useful little Bill.
We then come to the fourth category, where the Bill suddenly goes off at a tangent, and says, "and furthermore, anybody who has been put on probation". If I may say so, that really has nothing to do with the proposition upon which this Bill is based. When people are put on probation, as when people are fined or granted an absolute or a conditional discharge, that is no indication at all of the type of offence that they are likely to have committed, the gravity of the offence, or whether the person involved is the sort of person who should not he allowed to sit on a jury. The noble Lord, Lord Mishcon, has dealt with what was referred to last time as the old lag's chance, where sometimes criminals, serious criminals, are given a chance and put on probation. But, as he has pointed out, that need not trouble us, because that sort of person would be disqualified anyway under the various other provisions of the legislation.
One therefore has to ask the question: who are these people who are being put on probation? The figures are clearly somewhat misleading. Quite who has the misleading figures I am not entirely sure. The noble
558
Lord, Lord Renton, gave us at Committee stage the statistic that in 1982, 17 per cent. of probation orders were for burglaries and another 58 per cent. were for theft or fraudulent handling. I am sure that those figures come from some appropriate table. The only table that I could find when I looked into the matter, which was in the criminal statistics for 1982, and was table 7.14 at page 184, gave rather different figures. That table shows that of the indictable offences for which people were put on probation, only 7 per cent. were for burglary (and not 17 per cent.) and only 8 per cent. were for theft and handling (and not 58 per cent.). As they are almost all indictable offences—burglary, theft and handling—that would mean in fact that, if one took all offences, and included summary offences as well, the proportions would be even lower.
As I say, I am not sure which of us has misread a perhaps rather complicated table, and I am perhaps not very sure indeed that it matters unduly. Many of your Lordships, I know, will have had experience of sitting in courts and will know the sort of offender who is placed on probation. It may be for a trivial offence; it may be for a rather more serious offence. The essence of a probation order is that the court is not paying attention to the actual offence that is being committed so much as paying attention to the circumstances of the offender and the probation officer's report saying that it is desirable that a defendant should be helped. It is as simple as that. That is why I say that this Bill goes off at a tangent.
Probation orders do not indicate the gravity of the offence. Indeed, it may very well involve a much less serious offence and a much less serious criminal than in the case of a person who is being given an absolute or a conditional discharge or a fine; and nobody suggests that this Bill should be extended so as to cover everybody who is convicted of any criminal offence in any court whatsoever.
In those circumstances, as I say, I support this Bill, but I think that it has the one weakness that in including probation orders it is not being true to itself and it is taking a course there which I think will lose it public support. If we are extending the boundaries of disqualification, it is important to make sure that we carry public opinion with us. In those circumstances I hope that your Lordships will individually come to a view and will decide to take an appropriate course when a Division is called.
11.30 a.m.
Lord Campbell of Alloway: My Lords, the views expressed by the noble Lord, Lord Wigoder, and of course the noble Lord, Lord Mishcon, always command the utmost respect. However, I am unable to support this amendment. It is true, as the noble Lord, Lord Wigoder, says, that disposal affords no certain yardstick to the gravity of the offence, especially as regards probation where the range of gravity of the offences for which it is imposed is so wide. The range extends from the most serious offence—so serious that it would be common ground that in the circumstances the disqualification should run—to the relatively slight offence committed by the man who is given the chance, to whom the noble Lord, Lord Mishcon, referred.

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But on a workable, practical plane how else can one judge gravity? The Bill is not perfect—few Bills are—but respectfully I join issue with the noble Lord, Lord Wigoder, when he says that the Bill goes off at a tangent on the question of probation. I agree that it rides off on a slightly different course because of the very nature of probation. However, the basic principle holds, because it provides a reasonable and requisite safeguard, which may be tilted in favour of the general safeguard rather than in favour of individual considerations, such as the slur of disadvantage to which the noble Lord, Lord Mishcon, referred. Surely that is just what is required. Surely it plugs the gap to which the noble Lord, Lord Wigoder, referred. If it were tilted the other way, in favour of considerations that are individual and against the general safeguard, it would not serve the interests of due administration, and much of the evil with which it is designed to deal would remain.
Lord Edmund-Davies: My Lords, a mere two or three years ago Parliament had occasion to consider Schedule 1 to the Juries Act 1974, an Act which emanated from the admirable report of a greatly loved member of your Lordships' House, and a close friend of mine, Lord Morris of Borth-y-Gest. I confess I have not read the debate which was conducted in both Houses of Parliament two years ago. But one of two things happened: either it then occurred to nobody to include, under the disqualifications, those who had been placed upon probation; or secondly they considered and rejected it.
The peaks and the valleys of criminality continue to present a most depressing picture, and must alert everyone to a necessity for close scrutiny of the penalogical provisions of this country. Having had a long time in the law and a good deal to do with the criminal side of the law, I must say that I do not detect any great difference between the picture presented in 1982, when Parliament last considered this matter of disqualification, and the present day. I recall that the foundation of the present system of probation is derived from the Criminal Justice Act 1948.
Since there was what, most respectfully I venture to describe as a certain amount of loose talk at the Committee stage about the attitude of the courts towards cases where they were minded to make a probation order, I wish, most respectfully, to remind the noble Lords and noble Baronesses that the two requirements for consideration under the 1948 Act remain untouched today; namely, that one has regard, first, to the nature of the offence, and, secondly, to the antecedents of the offender. I believe that it is only in the rarest of cases that a person with a bad criminal record is placed on probation. If a person has a bad criminal record, as the noble Lord, Lord Mishcon, has said, he probably comes under earlier provisions of the Act as it stands at the moment and under the proposed amendment. It is only in the rarest cases that a person who has anything like a tendency towards habitual infringements of the criminal law is placed on probation. So in the vast number of cases those who are placed on probation are people who have had a comparatively good record hitherto. In order to be placed on probation their antecedents, and the nature of the offence then under consideration and giving rise
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to the criminal proceedings, must be other than of a deeply criminal character.
So I have to say that while I am very alive to the necessity, as I have already said, of scrutinising from time to time what are our penalogical provisions, I am not satisfied that there has been any material change in the position of criminal offences between 1982, when your Lordships' House and the other place scrutinised Schedule 1 to the Juries Act 1974, and today. Accordingly, I identify myself with those who have criticised the second paragraph, the last paragraph here.
Lord Morris: My Lords, I think the misunderstanding on this particular point has arisen from the Short Title of the Bill itself, with the inclusion of the word "Disqualification", as though the Bill is taking something away. I most sincerely believe that to serve on a jury should never be considered as either a right or a privilege. It is nothing other than a very onerous duty.
I have listened with very great care to the arguments of the noble and learned Lord on the Cross-Benches. I certainly felt far more in tune with that approach than I did with the approach of the noble Lord, Lord Mishcon, who came out with this astonishing phrase, which I think lays the ghost of this particular matter, when he referred to a normal type of person who has served a probation order. Surely a normal type of person who has served a probation order would not be considered by the people in this country as being a right and proper person to serve on a jury among 12 good men and true. I think that this amendment should be resisted.
Lord Renton: My Lords, I think we should be grateful, as the noble Lord, Lord Mishcon, said on the last amendment, to the usual channels because they have enabled us to have this most interesting debate. May I say how much one appreciates the interest and the value of the contributions made by all those noble Lords who have spoken? I wonder whether I may first of all deal with the point just made by the noble and learned Lord, Lord Edmund-Davies. Before doing so, may I say that it is such a great advantage to the House when a Lord of Appeal in Ordinary retires, because he then gains the freedom which he was not fully able to exercise previously in taking part in our debates.
However I have the misfortune to disagree with the noble and learned Lord when he says that there is no difference between 1974 and now—
Lord Edmund-Davies: 1982.
Lord Renton: I am sorry. I misheard the noble Lord—between 1982 and now. There is, indeed, a difference, alas! There has been a difference in each year since 1974, and continuing through 1982 and 1983, in that there is more crime in this country. The administration of criminal justice has been under greater strain and there has been more jury nobbling. Jury nobbling is made much easier when jurors themselves have a past criminal record.
I must make it clear, as the promoter in this House of this Bill, that I am unable to advise your Lordships to accept this amendment tabled by the noble Lord

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which would have the effect of enabling those—and indeed requiring those—who have been on probation to sit on juries within five years of the making of the probation order after the order has expired or been discharged. I must correct several impressions that have been given by the noble Lords, Lord Mishcon and Lord Wigoder, greatly though one respects their views. The first impression is that a large proportion of probation orders are given to first offenders. Of probation orders given in 1982, 10 per cent. were to those who had a previous record that was unknown, while of the 90 per cent. given to those whose record was known, only 23 per cent. had no previous convictions, 16 per cent. had been previously on probation and 24 per cent. had been in custody. Therefore, the balance between 23 per cent. and 90 per cent. had been previously convicted and had had the fates that I mentioned.
Then the noble Lord, Lord Mishcon, said that probation orders apply to a great extent to young offenders. Of course, a great many of the young offenders placed on probation would be too young to sit on juries, anyway. That is common ground between us. They will not sit on juries. However, if we compare those aged from 17 to 20 years inclusive and those aged over 21 we find that the percentage of first offenders between those two age groups is about the same. The figures that I gave just now relating to those placed on probation who had no previous convictions, who had previously been placed in custody and who had previously been on probation are about the same for those under 21 as for those of the age of 21 and over.
Probation, I suggest to your Lordships, contrary to what has been mentioned, does not signify a trivial offence. If the offence is trivial, there are other ways of dealing with the offender short of probation. One way is in the hands of the police. They can just give a caution, and that is sometimes done. It used to be said that the boy who was found stealing apples was given a good cuff over the head by a police officer; but that of course causes trouble if it is done these days. However, a caution is sometimes appropriate in those circumstances. The court can award a discharge, absolute or conditional, for a trivial offence. Or, coming a little closer to probation, the court can bind the offender over for a period to be of good behaviour. So, for the trivial offences, there are matters short of probation. I suggest to your Lordships—many of you have at least as much experience as I have, and I have a lot of experience of these things—that probation is not lightly given by the courts.
I must refer to the figures quoted by the noble Lord, Lord Wigoder. The noble Lord stated that the figures I quoted at Committee stage were not correct. I have just had them verified. They are in fact correct and I will give them to the House.
Lord Wigoder: My Lords, I was careful not to say that the figures were not correct. I could only say that his figures differed very remarkably from mine. It may be that the tables were drawn up on a totally different basis. I would certainly not accuse the noble Lord of being incorrect.
Lord Renton: Of course, my Lords, it is not unknown for different statisticians within the government service to give different answers to the same problem. All that I can say is this. I have got my figures from those collated from probation officers all over the country and handed to me by the Home Office. I shall repeat them. In 1982, 17 per cent. of those placed on probation had been convicted of burglary; 7 per cent. of violence of one kind and another; and no fewer than 52 per cent. for theft or handling stolen goods. It is very pertinent and rather interesting to refer to a study made by the Home Office in 1979, and I would have thought that the experience gained then is possibly an indication of what still happens and may happen in the future. The study in 1979 of those convicted in 1971 showed that 63 per cent. of them of all ages were reconvicted within six years. Sixty-three per cent.! That is surely a figure that is most material to the arguments used in support of the amendment, including the argument used by the noble and learned Lord.
One must also bear in mind that probation is—and, on the direction of the Court of Appeal, the courts have a duty to consider it—sometimes awarded to those who have been in prison many times, sometimes to old lags. It does not happen often. I did it myself on one or two occasions in pursuance of the direction of the Court of Appeal, and experimentally. But it does happen. Another figure is that 54 per cent. of first offenders—they were of course a minority—aged 17 to 20 who were placed on probation had been reconvicted within six years of the probation order.
Of course, statistics never tell the whole story. We are here having to consider a principle. Whatever the statistics may show, I suggest to your Lordships that we should not lose sight of the principle. I think that we must conclude that probationers are more likely than not to offend again between the end of probation and the period of five years that is envisaged by the Bill following the probation order, and that it would be a serious risk to the system and a serious risk to the administration of justice if we allowed those who have been placed on probation to sit as jurors. We owe a duty to the public to see not only that justice is done but that justice appears to be done. If the public see people sitting on juries who have been convicted in recent years and placed on probation they will lose confidence to a greater extent than have some of them in the system of justice.
I wish to conclude by referring to a point that I do not feel carries conviction made by the noble Lord, Lord Mishcon, when he said—and I am paraphrasing his words—that it is wrong to deprive someone of a civil right, the right to sit on a jury, a right of which he may not be conscious, but if you tell him that he has lost it he would be indignant. What is being said is,
"Where ignorance is bliss, 'tis folly to be wise".
But I think that many of those who have been convicted are much wiser than the noble Lord assumes. Then he says, "Oh, but it's a slur not to be allowed to sit on juries; whatever the public may think about it, it's a slur on the individual". I can only say that it is a slur which he has brought about himself by his criminal behaviour.
Baroness Macleod of Borve: My Lords, I should like to intervene very briefly. I agree with what the noble Lord, Lord Renton, has said about the confidence of the public—and not only of the public, but of the defendant. It is very important that he should know that he is being tried by a jury of people who are otherwise blameless, or anyway have not been caught. As everybody knows, statistics can be made to prove any case that anybody cares to make; therefore, I am not going into that. But I do say that anybody who has been before any court of law and has been put on probation has already been found guilty of an offence. For that reason, I think that they should not sit on a jury.
11.52 a.m.
Lord Elwyn-Jones: My Lords, I will willingly give way to the noble and learned Lord the Lord Chancellor, but as I am going to agree with the amendment perhaps he ought to hear me first—
The Lord Chancellor: Yes, my Lords.
Lord Elwyn-Jones:—because I venture to suspect that he may not support the amendment. In those circumstances, if the noble and learned Lord will forgive me, I will not detain the House for long.
My own reactions are in favour of the amendment and in support of the views expressed by the noble and learned Lord, Lord Edmund-Davies, and the others who have supported the amendment. I have sat at the feet of the noble and learned Lord on many occasions—and I am very happy to do so again today—both when he was recorder and in other circumstances and conditions. One of the matters that I think we should remember from the beginning, particularly in the light of the observations of the noble Lord, Lord Renton, is that the existing disqualification of persons sentenced to imprisonment remains unaffected; the "old lag" syndrome is well and truly covered by that disqualification. We need not worry unduly about that.
The point of significance that was made by the noble and learned Lord, Lord Edmund-Davies, was that this matter of jury service was examined with great care and in great detail in 1982, under the chairmanship of the late Lord Morris of Borth-y-Gest. I remember the discussions we had upon that. At that time there was no suggestion that probation should be a disqualification. It is said that there has been more crime since 1982. That is true, but, then, there have been more severe penalties available and imposed since that time to cope with that particular situation.
The imposing of a probation order is very often done, for instance, even as an alternative to absolute discharge, because the judge may take the view that the offender in the particular case needs the support of the probation service. What I find regrettable in this debate is how little help is available to your Lordships from bodies like the Probation Officers' Association and other bodies which might have been able to assist us in our consideration of this matter. One of the difficulties on a Private Member's Bill is that the Private Member cannot call in aid the kind of support, with information, that I think the House needs on an important measure of this kind.
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It is easy to scoff at the consequences of a probation order disqualifying the person concerned from future service. When notices come out ordering him to do jury service—perhaps he is a young offender—it may come as quite a surprise to him, if not as a shock, to learn that he is something of a second-class citizen. The scoffing is no answer to this. It does impose upon him a limited status. Most people would be delighted; I think that is quite true. But whether or not that is so, whether that is too righteous a view of the mentality of those who might be affected, I do not know.
One could contrast the way in which those subject to probation orders are identified for special treatment in this respect with the imposing of enormous fines on crooks, on fraudsmen, who may have cheated the revenue, the public purse, of hundreds of thousands of pounds. They are not going to be disqualified from jury service. What a strange distinction and differentiation there is here. They ought to be far more deserving of the reproach of the community involved in what is proposed here in regard to probationers—far more deserving of being excluded from the serious responsibility of making a decision of guilt or innocence on an accused person.
Without traversing the ground again, I respectfully invite the House to consider, with anxious care, the experience—I make no apology for this, although it will embarrass him—of noble and learned Lords who, like the noble and learned Lord, Lord Edmund-Davies, have been through the whole range of responsibility in this field, including recordership, over years and years. I invite the House to the view that what is proposed by the inclusion of probation service is a backward step. I do not think it will increase respect for jury service; on the contrary, I think it will be diminished if this amendment is not carried.
Lord Edmund-Davies: My Lords, despite my appreciation of the graceful—
Baroness Trumpington: My Lords, order!
Noble Lords: By leave of the House.
Baroness Trumpington: Yes, my Lords.
Lord Edmund-Davies: My Lords, if I may have leave, I should like to point out an error which the noble and learned Lord made in the course of his contribution. It is a purely factual error, which I am sure he would regret immediately Hansard appeared. But I do not press it. He did give a wrong date; that was all. May I have leave to correct it for the record?
The Lord Chancellor: My Lords, I did venture to say on Second Reading that I thought the noble Lord, Lord Mishcon, and the noble and learned Lord, Lord Elwyn-Jones, were probably making too big a meal of this. We have now had three courses to that meal—on Second Reading, Committee, and now Report. We also had a fourth course, in the shape of an hors d'œuvre, in the short speech in which the noble Lord, Lord Mishcon, did not move his first amendment.
But I must begin by adverting to the hors d'œuvre first. He did venture to say, for the second time, despite my protest, that the Commons had debated this Bill

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too little. He mentioned the Second Reading, or absence of it. He mentioned the Committee stage, which was an hour and a half, but he omitted to say that there was a debate between about 9.30 in the morning and about 2.40 in the afternoon on Third Reading, ending in a Division in which two members of his party stood as tellers and nobody voted with them. So whatever else happens here, we have debated this for a shorter time in three courses than the Commons did in one.
Lord Wigoder: My Lords, I know that the noble and learned Lord will not wish in any way to give a false impression to the House. The debate in another place which he is talking about consisted almost entirely of a long filibuster (did it not?) by two Members there.
The Lord Chancellor: My Lords, I was only dealing with the point which the noble Lord, Lord Mishcon, omitted to state; and he did omit to state it. I do not think we ought to debate what happened in another place—I said so on Second Reading—but it does seem to me that my point was a valid one, as far as it can be.
There were originally two amendments. I ventured to say on Second Reading—and I say again now—that the origin of all political error is based on either false premises or false analogy. This one suffers from both faults. Perhaps I may interpose for a moment the point which was made by the noble and learned Lord, Lord Edmund-Davies. He was of course in honour bound, as he did, to correct the noble and learned Lord, Lord Elwyn-Jones, about the date of the Morris Report, which formed an integral part of the argument of the noble and learned Lord, Lord Elwyn-Jones, in support of the noble and learned Lord, Lord Edmund-Davies. But I would venture with respect to say that the point made by the noble and learned Lord, Lord Edmund-Davies, was also a false one.
The present law is based on, I think it is, Schedule 1 to the Juries Act 1974. That was a consolidation Act and therefore could not contain an amendment to the law. There was an amending Act, as I think the noble and learned Lord said, in 1982; but that was an amendment to the consolidation Act which changed the consolidation Act only to the extent of taking account of youth custody, and therefore it is totally irrelevant for the purpose which the noble and learned Lord was seeking to put forward. It was not carefully considered by Parliament at that time. A consolidation Act was amended in order to take account of a subsequent change in the law. So the point is a bad one.
Having said that—and said it I hope without unkindness—I come back to the purpose for which this Bill was intended. To complete the point that I was making a moment ago, perhaps I ought to have said that from the very next year, 1983, there have been repeated attempts in Parliament to effect the very purpose of this Bill. One such attempt was in another place by the Member for the New Forest, Mr. McNair-Wilson, and one was by the noble Lord, Lord Wigoder. Both of them sought to amend the law in this very respect and they only failed basically because, although they were trying to do the very thing which this Bill is trying to do, they tried to do it by a route which proved, for practical purposes only, to be
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unworkable, although in fact in some ways their attempts were more logical because they based the new disqualification on conviction and not on disposal.
I go back to the purpose of the Bill. The purpose of the Bill, universally endorsed now on all sides of the House, is to ensure that in trials on indictment we do not have criminals on the jury—and here I am virtually quoting from the noble Lord, Lord Wigoder. The right, both of the prosecution and of the defence—and here I am virtually quoting from my noble friend Lady Macleod of Borve—is to have on the jury 12 lawful men and women, 12 legales homines. It is widely conceded, and it was admitted on Second Reading, that all too often we do not achieve that purpose of having 12 lawful men and women on the jury. This imposes a potential injustice both on the prosecution and on the defence, because it is not necessarily to the advantage of the defendant to have corrupt members on a jury. Therefore, we have sought on three occasions, of which this is the third, to put the matter right.
The two amendments—one of which has not been moved—suggested by the noble Lord, Lord Mishcon, would have had the effect of putting back on the jury candidates who had been sentenced either to community service or to probation. Community service has now disappeared. But I must remind the House—devoting myself solely to probation for the purposes of my argument—that my noble friend Lord Renton was perfectly right. The fact is that those placed on probation more often than not have previous convictions of serious crime and stand a 6: 4 chance on, of committing another offence within the period of five years, which is the period with which we are concerned for the purposes of disqualification. So the effect of the amendment which now remains after the noble Lord failed to move his first amendment, is that we are dealing with a class of person who more often than not has previous convictions and who more often than not will be convicted again within a period of five years, which is the only relevant period we are considering. Quite frankly, this is not acceptable to me. As I have said, the chances are both that they have previous convictions and that they will offend again.
So far as concerns a comparison between the amendments, I can only say that that relating to probation is rather worse than that relating to community service. Community service is usually limited at the most to 100 hours; but probation may last for three years. I really do not think that it is suitable—quite apart from all the other arguments which have been adduced against this amendment—that, when a person is still under the supervision of the state by reason of the fact that he is on probation and therefore not a totally free agent, he should serve in a judicial capacity. It seems to me that that is the true point to which we ought to have addressed ourselves. But the fallacy of which noble Lords who support this amendment are guilty—and I except from this the noble Lord, Lord Wigoder, to whose argument I shall come in a moment—is the fallacy of false analogy.
The question of disposal was only introduced into this series of Bills—of which this is the third and I hope successful attempt to legislate—because of practical difficulties in the way of the other and more logical

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system which was based on the nature of the offence or the number of convictions. Therefore, the question of sentencing policy, but for one other argument which I will adduce in a moment, is totally irrelevant to our considerations in this debate; it is an argument based on a totally false analogy.
The noble Lord, Lord Mishcon, whose heart on this occasion has slightly tended to rule his head, told us during the Committee stage on 7th June at column 832 of Hansard—but he virtually said the same this morning and on Second Reading—with almost sobs in his voice:
"One finds terribly often that we have rights, and we are not terribly proud of them, and nor do we value them, until somebody tries to take a right away from us".
Wiping away for a moment the tears from my eyes at the pitiful picture of the young offender doing 100 years' community service in an old persons' home, or rather 100 hours' community service in an old persons' home—
Lord Mishcon: My Lords, I hope that the noble and learned Lord will forgive me, but he must not continue to exaggerate!
The Lord Chancellor: My Lords, I apologise for the slip of the tongue. But I have the picture of this poor boy doing 100 hours' community service in an old persons' home or serving three years on probation, sobbing away to himself and saying, "Not only that, but I am a second class citizen. They have even taken away my right to serve on a jury in the Crown Court at Snaresbrook". This is cloud cuckoo land. Surely the noble Lord, Lord Wigoder, was right in Committee when he swept that argument aside and blew it sky high by saying at column 836:
"I doubt if it is helpful to talk about the rights of people to serve on juries, because, frankly, 90 per cent. of the community would disclaim the opportunity if they had the chance of doing so. What it is I think is a duty … It is an arduous duty. It is time-consuming. Particularly with women jurors it may impose a considerable strain on their family life … Very often it gives rise to real financial hardship".
The noble Lord, Lord Wigoder, in Committee brought in his powerful guns in support of the noble Lord, Lord Mishcon, on a totally different and in fact demonstrably inconsistent line of country. On Committee, at any rate, the line of country that he pursued was that he was very concerned with the potential pool of jurors. He said that it would narrow the pool of potential jurors. I was particularly grateful to the noble Lord, Lord Wigoder, for blowing sky-high the fundamental assumption of the noble Lord, Lord Mishcon, and for his solicitude for the potential pool of jurors. But, as the Minister responsible for summoning jurors, I have to tell him that, difficult as it is to find willing volunteers, the press-gang is not yet quite so hard put to it that we have to find pressed men who are more likely than not to commit a criminal offence in the future, who more likely than not have committed more than one in the past, and who have certainly committed at least one in order to have been given a probation order.
There is one other point, and I do not stress it quite as strongly as those on which I have been expanding a little. We try to persuade judges not to impose
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custodial sentences, except in the last resort, even for an indictable offence and even when the record is bad. In many such cases, in particular those of juveniles, community service or probation is a wholly desirable alternative. But can we be absolutely certain that the same would be true if the judge had to say to himself, "If I do not send him to prison for this offence, even for a couple of days, the next thing will be that I shall find him at Newington Causeway glowering at me out of the jury box."? For those reasons I can only advise the House to reject this amendment.
Lord Mishcon: My Lords, on a Friday afternoon your Lordships have been treated not to a meal but to a feast of robust advocacy. I honestly believe that if the noble and learned Lord were to revert to his previous much admired status of counsel and prosecuted in a case in which the jury consisted of 12 old lags, they would convict the accused and add a rider that they thought he ought to have an extremely guilty conscience.
I always find—and I know that the noble and learned Lord will forgive me when I say this—that the more robust he is in his advocacy, the greater is his realisation that he has a rather weak case to defend; but, my word, he will defend it! Therefore, allegations of false analogies and false premises are hurled about, and inconsistencies are found between the noble Lord, Lord Wigoder, and myself. But it has been great fun, and we have all enjoyed it.
Having said that, I should like to speak for only a few moments before your Lordships express a view. Obviously, I am now treating this subject seriously. The noble and learned Lord said that this House was making a meal of something. I do not object in the very slightest to your Lordships making a meal of this when—and I must repeat this—in another place it was merely a snack. It really is essential that your Lordships heed the very authoritative opinion, delivered with his usual quietness and moderation, of the noble and learned Lord, Lord Edmund-Davies. Your Lordships heard then from not only the experience of one of our great judges, but also the judgment of one of our great judges.
The issue is a simple one. We are disqualifying from jury service various elements. We have agreed on all of them except one. There is not the slightest doubt that, in regard to that one element of those who are subjected to a probation order your Lordships are dealing not with the old lag example—which, as the noble Lord again emphasised, was in any event covered by the present legislation, because he is an old lag and he would have been sentenced to terms of imprisonment and therefore would be disqualified in any event—but essentially with young people who, for one reason or other (and there are many) have been put on probation.
The noble and learned Lord the Lord Chancellor referred to probation periods as long as three years. It does not matter how long is the probation period because this amendment provides that certainly during the period of probation the disqualification appears and should be effected. If I were to go on talking until lunchtime, I would not only interfere with your Lordships' pleasure on a Friday afternoon, but I

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might dissipate your Lordships' patience and tolerance of the arguments that have been advanced. I think that all those arguments are now before the House and, without a sob in my voice, I ask your Lordships to divide.
12.16 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 27; Not-Contents, 80.

DIVISION NO. 1

CONTENTS

Ardwick, L. [Teller.]

John-Mackie, L.

Bernstein, L.

Leatherland, L.

Boston of Faversham, L.

Maybray-King, L.

Brockway, L.

Mishcon, L.

Caradon, L.

Mulley, L.

Carmichael of Kelvingrove, L.

Oram, L.

Parry, L.

Collison, L.

Ponsonby of Shulbrede, L.

Edmund-Davies, L.

Shackleton, L.

Elwyn-Jones, L.

Stoddart of Swindon, L.

Gaitskell, B.

Stone, L.

Graham of Edmonton, L.

Taylor of Blackburn, L.

Halsbury, E.

White, B.

Jenkins of Putney, L.

Wigoder, L. [Teller.]

NOT-CONTENTS

Airey of Abingdon, B.

Killearn, L.

Alexander of Tunis, E.

King of Wartnaby, L.

Amherst, E.

Kinloss, Ly.

Annan, L.

Lane-Fox, B.

Attlee, E.

Lawrence, L.

Avon, E.

Lloyd of Kilgerran, L.

Belhaven and Stenton, L.

Long, V.

Bessborough, E.

Lucas of Chilworth, L.

Boothby, L.

Macleod of Borve, B.

Caccia, L.

Mancroft, L.

Caithness, E.

Masham of Ilton, B.

Campbell of Alloway, L.[Teller.]

Merrivale, L.

Meston, L.

Campbell of Croy, L.

Molson, L.

Cockfield, L.

Morris, L. [Teller.]

Coleraine, L.

Mowbray and Stourton, L.

Cork and Orrery, E.

Cottesloe, L.

Moyne, L.

Cowley, E.

Nathan, L.

Denham, L.

Northchurch, B.

Diamond, L.

Portland, D.

Eccles, V.

Reay, L.

Effingham, E.

Renton, L.

Ellenborough, L.

Richardson, L.

Elton, L.

Roberthall, L.

Fletcher, L.

Sainsbury, L.

Fraser of Kilmorack, L.

St. Aldwyn, E.

Gainford, L.

St. Davids, V.

Glanusk, L.

Sempill, Ly.

Glenarthur, L.

Skelmersdale, L.

Granville of Eye, L.

Spens, L.

Greenway, L.

Strabolgi, L.

Hailsham of Saint Marylebone, L.

Strathcona and Mount Royal, L.

Hampton, L.

Swansea, L.

Hanworth, V.

Swinton, E.

Harris of Greenwich, L.

Terrington, L.

Henley, L.

Trefgarne, L.

Holderness, L.

Trumpington, B.

Home of the Hirsel, L.

Vickers, B.

Hornsby-Smith, B.

Whitelaw, V.

Ironside, L.

Wise, L.

Resolved in the negative, and amendment disagreed to accordingly.
[Amendment No. 3 not moved.]

Ordnance Factories and Military Services Bill
12.24 p.m.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, I rise to move that this Bill be now read a second time.
The purpose of the Bill is to enable the Royal Ordnance Factories, which are at present an integral part of the Ministry of Defence, to become an independent commercial organisation established as a Companies Act company, initially wholly owned by the Government. Under its terms the Secretary of State for Defence can transfer Government assets—largely those which are at present in the ROF Trading Fund—to the company, taking complementary action to extinguish the trading fund. The non-industrial and industrial staff currently paid by the fund or who are engaged in work closely connected with its operations, will transfer with the assets to become company employees.
Since the Second World War the Royal Ordnance Factories organisation has moved progressively towards more commercial disciplines and accountability. The ROF Trading Fund was the first such fund to be established under the Government Trading Fund Act 1973. It was set up in 1974 and the ROFs have operated since then with considerable success—winning the Queen's Award for exports in 1976, 1978 and again this year. Yes, the ROFs have done well, but the Government believe that under our proposals they could do even better. They are at present obliged to operate within the constraints of the Civil Service, and this inhibits the ability of management to conduct their trading activities in a fully effective way. The next logical step is to complete the transition begun by the Trading Fund and to make the organisation a fully fledged commercial one which will be better able to build on the strengths that already exist.
Our proposals follow studies made by my noble friend Lord Strathcona when Minister of State in the Ministry of Defence, and one made earlier, by the Mallabar Committee in 1971, as the result of which the present ROF Trading Fund was established. The Mallabar Committee, looking at the issues more than a decade ago, did not believe that hiving off the ROFs would be feasible because of the close links between the ROFs and MOD as suppliers of munitions. It remains the case that the majority of ROF business is done with MOD, but in recent years the ROFs have dramatically increased their overseas sales. In these outside markets, particularly, the constraints imposed by the current organisational structure are operating against the best commercial practice. MOD can continue to secure its requirements with a privatised organisation, but privatisation will also open up the field to the ROFs to expand in other directions. This would not be possible if it remained part of Government.
The Government also attach very considerable importance to securing an increase in competition,

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with all the benefits that that will secure for us in the way of products and their pricing. As the Statement on the Defence Estimates 1984, which we have recently debated, explains, it is central to our strategy to promote more extensive and effective competition in the supply of defence equipment. Competition is vital for the achievement of the best value for money, the most efficient use of industrial resources and the stimulation of innovation and new ideas.
The Government accordingly made clear in the previous Parliament, and again during the general election last June, our intention to change the status of the Royal Ordnance Factories, thereby enabling the subsequent introduction of private capital.
We plan accordingly to incorporate the ROFs as a public limited company with the structure of a holding company with four wholly-owned subsidiary companies acting as operating divisions. To the four subsidiary companies—which will cover small arms, ammunition, weapons and fighting vehicles, and explosives—will be assigned the 11 factories and the two agency factories presently in the ROF Trading Fund. To the explosives company will also go parts of the Propellants, Explosives and Rocket Motor Establishment (PERME) which are an integral part of the Ministry at present, and also the agency factory managed by IMI at Sumerfield.
Thus, the manufacturing operation which the ROFs essentially were while managed as a Trading Fund will be transformed into one which will have its own research and development capacity, based upon the PERME capability; and the ROFs will then be on all fours with their major competitors in the defence industry. While the company is building up its R and D capability from this base, it will be able to sub-contract, back to MOD, R and D work on land systems. The ROFs already have—as a result of a transfer of responsibilities from the Defence Sales Organisation in April of last year—their own sales and marketing organisation. The Government are determined to establish an ROF Company which—as a free-standing enterprise—is capable of carrying through new products from concept to production.
It is our intention that the directors of the company should be fully responsible for the management of the enterprise and that the Government should not interfere in the business operation. But while the company is under Government control the relationship between the Government as shareholder and the chairman of the board will be determined by a memorandum of understanding which we would hope to publish. This MOU, on the basis of the annual submission to the department of the company's corporate plan and the regular provision of company accounts and other information, will enable the Secretary of State to discuss the company's forward plans with its board in relation both to his responsibilities to Parliament and to our desire that, in the wholly-owned phase and beyond, the ROFs should maintain, and increase, their profitability. In addition, we shall be taking powers in the articles of association of the company to ensure that the company, once privatised, should not fall under foreign control.
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The Government—that is the Ministry of Defence—have of course a particular interest in the ROFs as the major customer for their products. The continuity of supply to the services of a wide range of equipment, and particularly that, perhaps, such as ammunition, where the ROFs are a major supplier, is vital. It is equally vital that the ROFs should go on meeting the necessary quality audit and safety standards. My honourable friend the Minister of State for Defence Procurement has made clear in another place that what has been known as the preferred source policy—under which the ROFs had first claim, non-competitively, for the production of various MOD needs—would cease on vesting day. In the future we shall secure our requirements from the company in the way we secure them from all other defence suppliers: by competition where we can, and with arrangements agreed in a specific contract. We have no reason to suppose that our needs cannot be met totally satisfactorily in this way.
The Bill is concerned with the incorporation of the ROFs as Companies Act companies and with the transfer of public assets to them. For an initial period these companies will continue to be owned by the Crown. But I should say a few words about our proposals to introduce private capital thereafter. We are at an early point in the process of turning an integral part of a Government department into a fully-fledged independent commercial operation, and the Bill is only a first step. It will enable us to create a framework for the ROFs which will allow for the introduction of private capital into the venture. The first step is to set up the companies and to transfer to them the property and assets which will constitute their trading capital. Thereafter they will be trading on a commercial basis.
We cannot decide now the exact means, whether by flotation of shares in the whole organisation, by direct sale of parts or of subsidiary companies, or by entering into joint ventures. My right honourable friend the Secretary of State has, however, made it clear that the Government's preferred course, if feasible, would be a Stock Exchange flotation of shares in the whole enterprise. We see no reason why such a flotation should be long delayed.
Crucial to the success of the ROFs in the past, and crucial in the future, is, or course, the workforce. It is the dedication of this workforce—their skill and expertise, their energy and enthusiasm—which have enabled the British Army, and the services as a whole, to rely with such confidence, both in peace and in war, on a timely and effective supply of munitions.
The individuals who make up that workforce—in many cases carrying on a family tradition—are rightly proud of their record of service to the Crown, and of the essential contribution they have made to the commercial success of particular factories and of the ROF enterprise as a whole. That contribution will continue to be crucial in the future. The Government believe that it is appropriate for the manufacturing operation which they perform to be outside government, rather than inside it, and also that the prospects for future employment in the ROFs are healthier if the public service constraints are removed from the enterprise. But that does not mean that we do

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not understand the regrets and anxieties that employees have about the loss of their Civil Service status which the changes will unavoidably involve. Indeed, the unions expressed their anxieties to me very clearly when I visited the Royal Small Arms Factory at Enfield recently. My ministerial colleagues in the Ministry of Defence, led by my right honourable friend the Secretary of State, have therefore devoted very particular attention to all the practical aspects of the transfer of personnel; and there have been intensive discussions with the trades unions, which continue, on all the issues arising.
The personnel provisions are contained in Clause 4 and Schedule 2 to the Bill. Employees of the trading fund and in the other concerns which are being transferred to the company will go across under the terms of the Transfer of Undertakings (Protection of Employment) Regulations 1981, which means that they will do so on terms and conditions of employment which will mirror very closely those they enjoy at present. There will be no change as a result of transfer in such things as employees' pay, leave or in retirement policy. In addition, the current rights of trades unions, whether Civil Service or otherwise, to negotiate on behalf of their members will be transferred unchanged.
Superannuation arrangements are specifically excluded from the regulations, and staff who are transferred from the Civil Service cannot remain in the PCSPS. A new company scheme is therefore being devised which will provide for transferees comparable benefits to those of the Civil Service scheme, including the continuation of index-linking. There will be a separate scheme for new entrants to the company after vesting day. The proposed schemes will be governed by trust deeds. Transferring employees may elect either to leave their accrued pensions entitlement in the principal Civil Service scheme or to transfer those entitlements to the new company scheme. In respect of those who elect to transfer, the Government will make transfer payments into the company scheme to enable that scheme to pay those accrued pensions when the time comes. I appreciate that the unions are not yet fully satisfied that the company scheme will in all circumstances match the Civil Service scheme. But discussions continue and will, I hope, result finally in an outcome acceptable to all parties. It is the Government's intention that there should be no detriment in this respect.
One other crucial personnel issue is that of redundancy compensation. On this, I would emphasise that compensation levels for transferring employees will match those currently provided for in the Civil Service pension scheme. On this issue, too, we are in continuing discussion with the unions.
Turning to the other provisions in the Bill, I would point out that what we are discussing is essentially an enabling measure. Clause 1 enables the Secretary of State to make schemes transferring to a company or companies set up for this purpose under the Companies Act property, rights and liabilities which are at present being used for, or attributable to, the operation of the ROFs. The Secretary of State will receive in return for the assets transferred to the company securities in the form of shares and debentures of an equivalent value.
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Clauses 2 and 3 supplement the provisions of Clause 1 by defining the ambit of the property, rights and liabilities that may be transferred initially, and by laying down some general rules regarding the operation of schemes and the publication of their contents. In this last connection, your Lordships will observe that the Secretary of State is bound to lay schemes before Parliament within one month of their being made. That is in Clause 3(9). Clause 4 brings in Schedule 2, which contains the provisions relating to the transfer of employment which I have already mentioned.
These four clauses are the heart of the Bill. Clauses 5 to 10 deal with incidentals.
Clause 11, with Schedule 3, deals with the important matter of ROF security and gives effect to the Government's intention that the factories and establishments being transferred to the new company should continue to be guarded by MOD police, with their existing powers and responsibilities, until we are satisfied that it would be safe, from the point of view of the physical security of the weapons and other material held on the various sites, to withdraw them.
There are other minor and consequential provisions in Clauses 12 to 14 and 16 to 17. Clause 15 deals with International Military Services Limited, and has an entirely separate purpose from that of the rest of the Bill. International Military Services Limited is already constituted as a private limited company under the Companies Acts, and has the same legal status as any private sector company. The purpose of the clause is to provide statutory authority for the contingent financial liability incurred by the Secretary of State for Defence when he assumed ministerial responsibility for the company and became sole owner of its shares. At the time a ministerial undertaking was given that legislation giving authority for the exercise of the continuing functions of the Secretary of State in respect of the company would be introduced as soon as an opportunity occurred. The clause, as I have said, is concerned with a contingent liability. There has been no recourse to public funds so far. The recent trading performance of IMS has been impressive, with substantially increased turnover and reserves.
Before leaving the detail of the Bill, it may be appropriate for me to tell your Lordships that I have it in mind, in the light of very recent consideration, to bring forward an amendment at Committee stage. This will be in the form of an additional clause to the Bill, the effect of which would be to dis-apply to the ROFs after vesting day the provisions of the Building Restrictions (War-Time Contraventions) Act 1946. I will, of course, explain the background more fully when we come to Committee.
The Bill is a short one and is indeed a limited enabling measure. But the change of status for the Royal Ordance factories which it will make possible is an important step forward in their evolution. It will give them full freedom to control their own commercial future. This will be best for the company, it will provide the best long-term guarantee of employment for the workforce, and it will suit the Ministry best as a customer. I therefore commend the

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Bill to your Lordships, and I beg to move that it should now be read a second time.
Moved, That the Bill be now read a second time.—(Lord Trefgarne.]
12.43 p.m.
Lord Graham of Edmonton: My Lords, however the Minister describes the Bill, it is part of a programme to "flog off' the assets of the nation. The Government have never hidden from the public their distaste of the public sector. Regardless of the needs of the nation, and whether or not that segment of the public sector is profitable, but especially if it is profitable and has a record which will appeal to the City and to investors, it is a prime target for privatisation. The crime of which the Royal Ordnance factories stand condemned in the eyes of this Government—a Government which know the cost of everything and the value of nothing—is that they have served the nation well, that they are successful and profitable, and that there is a market for their shares. There must be something sick in the mind of a Government when they jeopardise the security of a nation in the pursuit of such dogma.
The Minister in another place could not have been more clear—nor indeed the Minister in this debate—as to the purpose and intent of the Bill. At the Second Reading in another place the Minister said:
"The purpose of the Bill is to enable the Royal Ordnance factories, which are at present an integral part of the Ministry of Defence, to become an independent commercial organisation established under the Companies Acts".—[official Report, Commons, 16,1/84; col. 26.]
I would remind the House that that same step was the first taken when the Government privatised the National Freight Corporation, Amersham International, British Shipbuilders in 1983 and the iron and steel companies in 1982. The Minister has said—and these words have been repeated by the Minister here today:
"The Bill is only a first step. The next step is to set up the companies and to transfer to them the properties and assets which will constitute the trading capital".
But as to how the privatisation of those public assets will be achieved, nothing yet is clear.
Ministers have been very coy as to how the public purse will benefit from privatisation, if at all. At a meeting with the trades unions involved on March 6th, the Secretary of State said:
"If there is a gain for the public purse, that would be purely coincidental".
The mind boggles! Here is a situation where the national interest is being best served by a policy of, "Leave well alone". But, no! In December it was announced that the sale of the 11 factories may raise £300 million but that the MOD would be paying about £250 million into the new pension fund.
Noble Lords should note that on that basis there is a once-and-for-all gain of a paltry £50 million—less than last year's profits—for the sale of a crucial national asset. And who is likely to buy these factories? Why, of course, their competitors, including some foreign companies. Privatisation will reduce, and not increase, competition. Is that what this competition-mad Government really want? Many of my former
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constituents work at the Royal Small Arms Factory at Enfield. I am glad to know of the visit to Enfield by the Minister. A loyal, skilled workforce has given to the nation a perpetual stream of high-quality defence weapons. I remind your Lordships' House of their world-famous Lee-Enfield rifle.
At Enfield, as in other factories, they have been stunned by these proposals. They just cannot believe that this Government can be so stupid. They feel betrayed. They are fearful for their future. They tell me that if what is in store for them is the reward for good service, what is the price of failure? Let us remind ourselves in this debate of the record of the Royal Ordnance factories over the past ten years, since the trading fund set up following the Mallabar Report—a trading profit of some £270 million in those ten years; £68 million last year; a forecast £50 million this year. Furthermore, as the Minister has said, three times in those ten years have the ROFs received The Queen's Award for Export. My noble friend Lord Stoddart will pay even closer attention to the profit record of the ROFs over the past ten years.
The current project of the factories include the Challenger tank, Swingfire, Rapier, Sea Dart. Sea Skua, Sea Wolf, Sea Eagle, Sidewinder, JP233, SP70, Stingray and Spearfish torpedoes—plus, plus, et cetera. The factories and their predecessors have served the nation well for 400 years: through the Napoleonic wars, through two world wars and through the Falklands conflict, and now, in time of peace, with the development of the most up-to-date equipment to meet an increasingly sophisticated threat. They are experts. The world appreciates this, but in our view this Government by this action, do not. As the Minister knows—and as was stressed time and again by the Minister's friends in another place before, alas!, they voted for this Bill—the record of service to the national interest by the Royal Ordnance factories, their employees and the management (and I repeat, "and the management") has been not only good but outstanding.
Universally across the whole spectrum of affected parties—and I include the taxpayer—there has been incredulity that such a devoted record should be rewarded by a kick in the teeth. It is no use the Minister dressing up the proposals with the cloak of smooth parliamentary jargon—"fully fledged independent companies", "legal and organisational framework", "trading on a commercial basis", "a flotation of shares". Such smooth talk fails to turn this shabby, disreputable Bill into anything other than what it is: a Bill designed ultimately, but not initially, to "flog off" another part of the nation's assets to the highest bidder.
Yes, my Lords, we shall be told that there are safeguards for the national interest and special terms to attract employee and management participation: but Ministers have been quite unable to refute the charge that the present inviolate and absolute adhesion of all that is encompassed within our ordnance factories absolutely to the national interest will remain so under any new management. In another place Mrs. Ann Winterton, the Member of Parliament for Congleton, as reported in col. 69 on 16th January last, said:

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"Privatisation will not increase competition for the ROFs but may well do exactly the opposite with parts of the existing set-up being sold to the private sector and possibly bought by those competing in the same sphere".
Mrs. Winterton went on to say:
"How do we know—I share the anxieties of many honourable Members who have expressed concern in the debate—who will buy into the companies or into whose hands they may fall? It will be extremely difficult to control the destination of privately produced bullets, shells and rockets."
Sir Ian Gilmour, at column 43 of the Official Report for the same day, said:
While listening to my honourable Friend the Minister's interesting speech, I thought that at one time he was speaking as though he were buying the Royal Ordnance Factories, rather than selling them … The facts are against the Bill and few people who have had anything to do with the ROFs would support it."
We do not need to search very far for a central reason why this Government are acting as they are over a once public and publically-owned service. In the grand total of public and civil servants there stands a total of approximately 20,000 ROF employees. Not for the first time in the past five years have we seen civil servants disappear. It is simple, you privatise. Hospitals? You contract out, Schools? You contract out, Parks? You contract out. Housing? You contract out. Even if the work miraculously continues, those who continue to perform the function are no longer on the public payroll but on that of the private contractor.
Every departmental head, as the Minister knows, has been given by the Cabinet a target to aim at—not to aim at; to achieve, or else. Regardless of national imperatives, the over-riding consideration is to reduce the size of the Civil Service. Even when it endangers the security of the realm, as in this instance, it must be done. In my view, it is a squalid exercise but not out of keeping with this Government's view of national priorities. The very base on which our national defence has rested—a firm partnership between our ordnance factories and what I call the defence industries—is undergoing a revolution as a result of this Bill, and no-one, including the Minister, can tell the House to where ultimately that will lead.
At no stage has Parliament, the taxpayer and employees and their families been given a convincing reason for this Bill. Jargon words have been used and yet no-one has told us why the Bill is necessary—why it is necessary to sell off profitable and productive factories. Not a word about manifesto commitments here. The Government justify their rate capping and the abolition of democratic institutions on the grounds that they had a mandate. Where is the mandate for this? Sir Ian Gilmour had it about right when he said at column 43 of the debate:
"Presumably it was not included because the Government did not quite know what they intended to do about the matter".
Here we have factories which have provided the armed forces with weapons and ammunition of the highest quality at a reasonable price for a very long time, made by a dedicated and loyal workforce.
Who will benefit from this exercise? Not the country, not our defences; but the taxpayer, not the employees. We all know who will benefit—those who manage money; those who lend money; those who advise on the use of money; those who write prospectuses; those who sell shares; those who buy shares; those who deal in the sale of arms. The honourable
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Member for Kingston upon Hull, North, Mr. Kevin McNamara, told the other place on 21st May (at column 767 of Hansard) that,
"seven firms of primary underwriters and financial advisers, three firms of legal advisers and six firms of stockbrokers",
received no less than £22,694,000 when other public assets were sold to private companies and individuals. All those people and their ilk will be grateful to this Government for giving them the chance to pick up a slice of the action. The Government know who will benefit and why.
In Committee the Minister will expect us to subject his plans to a severe scrutiny as far as pensions and redundancy terms for employees are concerned. The unions representing their members tell us that, despite the most categoric assurances given over the period, they still remain apprehensive—even distrustful—of the value of ministerial statements. After five months of debate in another place there is still no agreement on pensions, no agreement on pensions rights, on categories of pensions, on comparability of pensions, on index linking of pensions, redundancy terms, or compensation for the loss of Civil Service status.
I agree that the Minister today has made some helpful noises. References have been made to "no detriment" for these matters in the future. We will—with no disrespect to Ministers—consider it essential to have these matters written into the face of the Bill or signified to us that the employees are satisfied that their interests are fully secured.
The House will be aware that the Government were wise enough to draw back from their original plan with regard to the security of ordnance factories of moving them somewhat substantially out of the hands of the Ministry of Defence police and putting them into the hands of private security firms—in my view, just about the daftest proposal in this Bill. But the Minister will know that there are many unanswered questions in the minds of the Defence Police Federation. For instance—and I appreciate that it may not be possible to give direct answers at this stage—will the Minister confirm his statement that any in-house security organisation will be organised and trained by joint agreement between the MDP and the new private ordnance factory company management, and that this arrangement will be of long standing? Will the Minister reaffirm his intention to retain the MoD police at those ordnance factories where the incidence of national defence potential and national security needs are paramount to national safety? Can the Minister describe the formula to be used in ascertaining which ordnance factories shall have the requirement for MDP and those which will require a lesser police and security force? Answers to those questions and many others, which my noble friend Lord Stoddart intends to raise, must be given to us, if not here then when we reach Committee.
The scene changes; the scenario remains the same; but the players with widely differing backgrounds can play a crucial part here in your Lordships' House over the next period. Here in your Lordship's House we have the benefit of a unique range of service to this country from devoted men and women unrivalled certainly to a far higher degree than in another place—valuable as the experience in another place

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undoubtedly is. The Benches in your Lordship's House accommodate those who know from their professional lives that our ordnance factories have met, are meeting, and are capable of continuing to meet every demand made of them by this or any future Government. Every rank, from Field Marshall to Captain; from Admiral of the Fleet to Lieutenant Commander; from Wing Commander to Squadron Commander; all of these have graced the Benches of your Lordships' House recently, and I very much hope will make their views felt on this Bill at the Committee stage.
We also have in this House Members of the Security Commission, those who have served as high civil servants in sensitive departments, members of the Diplomatic Corps and in the higher echelons of our trade union movement. I find it difficult to believe that, regardless of party or party whips, many of those with that kind of experience could stand idly by, let alone support, this senseless butchery of a once proud and valued public service. If they put their country before party, they will support our efforts at Committee stage to stop this Government committing a national blunder of monumental proportions.
In conclusion, we will in Committee seek to gain support for improvements aimed at removing from this Bill some of its terrible provisions, and to insert some safeguards vital for the welfare of ROF employees. Above all else, we will seek to ensure that the sovereignty of Parliament over the Executive, especially in the spheres of defence and security, is emphatically restored.
12.58 p.m.
Lord Diamond: My Lords, we on these Benches believe strongly in the mixed economy. We have a high regard for the achievements in the private sector and we have a high regard for the achievements in the public sector. We are perfectly prepared therefore to examine on its merits any proposed transfer from public to private or from private to public. That is what I propose to do, as shortly as may be possible, but I propose to have regard mainly to the principles of what the Bill deals with, not to the methods by which the Bill proposes to achieve those ends. As to the means, perhaps we could leave those to the Committee stage, but I must make it absolutely clear that there will be many amendments from these Benches at that stage in an endeavour to improve the Bill.
It is always extremely pleasant to be able to begin a speech by drawing attention to the common ground that exists between the two main parties and in all sections of Parliament on a particular measure. It is for that reason that I delight in refreshing your Lordships' memory of the common ground that exists with regard to the ordnance factories. I would much prefer to quote the comments of the Minister in this House, but of course I should have to rely on memory. Therefore, I am compelled to quote the comments of his right honourable colleague in another place.
As has already been mentioned, at col. 26 on 16th January the Minister of State for Defence Procurement made it clear at the start of his speech in another place that the present organisation—that is, of the
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ordnance factories—and its antecedents have served the country well for nearly 400 years. He went on to say that,
"the ROFs are staffed by a loyal and dedicated work force numbering just under 18,500. Their efforts have made the organisation a success not only in terms of the quality of its products, which are second to none in the world"—
a no doubt much deserved and very high tribute—
"but in its trading performance".
He finally reminded us that the trading fund was set up in 1974,
"and has operated since then with great success, winning the Queen's Award for Exports in 1976 and 1978".
The Minister has been good enough to advise us of a further award this year. The Minister of State in another place said:
"the ROFs have consistently returned a trading profit".
We also know that the ROFs are highly competitive and that 40 per cent. of their products are now exported. I would remind the House that the trading fund, which is a very important part of this organisation, was authorised by the Conservative Government in 1973 and implemented by the Labour Government in 1974. Again there is bipartisan support for the present system.
If I may summarise the common ground, we have, in the ROFs as at presently constituted, a proven, integrated organisation, a loyal dedicated workforce, products second to none in the world, high exports in competition with the world's private sector manufacturers and consistently good trading results. Any superficial observer might conclude, when all are agreed that, from every important standpoint, everything is fine, that one might leave well alone. But your Lordships will naturally want to know, however well it has been done, whether it could be done even better. We have the best evidence that is available, the Mallabar Report.
That inquiry reported—I am referring to col. 39 of Hansard of another place of 16th January—that it found that the degree of identification (that is, of the workforce) with the armed forces was apparent in all the factories and that this identification
"provided a strong motivation towards the manufacture of a high quality, reliable and safe product".
It also found that the factories were well managed and controlled. It went on to consider an alternative proposal:
"We were initially attracted to the idea of hiving the ROFs off from the MOD".
Your Lordships will remember that instead of the horrid word "privatisation" Parliament used to refer to "hiving off' to describe the process of transfer from the public sector to the private sector.
"We were initially attracted to the idea of hiving the ROFs off from the MOD, on the lines suggested by the Fulton Committee, but as we came to understand the nature of the ROFs' task—
a very important qualification because I am hoping that, as everybody comes to understand the nature of the ROFs' task, they will reach a similar conclusion—
"and the underlying reasons for the financial and organisational relationships between them and the MOD, we gradually came to accept that hiving off was not feasible for this Organisation. Indeed we were inclined to believe that had we been asked to advise on setting up an organisation …we would probably have recommended something very like the present arrangement".

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So we are still in the same position. All the arguments that one is able to find, or that I have found so far, lead to the same conclusion: that things that are well should be left well alone.
But if your Lordships, as I expect is the case, are not, and indeed should not be, satisfied without considering all possible gains and losses, let me go shortly through the remaining ones. First, there is competition. If this were to increase competition, there would be some argument but, alas! it is quite the other way, as we all know. The noble Lord the Minister referred to the possibility of foreign shareholders. The noble Lord did not say and could not say that he could prevent existing private sector competitors from buying heavily on the share market in shares in these companies. There is no method of doing so. The net result—I speak as one who spent 30 years in active work as financial director of a private sector munitions supply company—is that the private sector will be very interested indeed in acquiring these shares. The inevitable result is that competition will be reduced.
The next argument is the cash argument which can be dealt with very quickly and which has already been mentioned. That argument is neither here nor there, for there will be a cash receipt for the surrender of future profits amounting to about £300 million and a cash payment for the avoidance of future pension payments amounting to about £250 million. The net figure of £50 million, which might well be less if all the assets are not sold off profitably, will not weigh with any one of us and certainly will not weigh with the Chancellor. It would be an insult to him to suggest that it would.
Finally, I come to the most important question of all, which I have deliberately left to the end; that is, the vital question of maintaining secure facilities for supplying our forces with the means of defending our country. To that question there are clear answers available from the point of view of both the recipient—that is to say, the forces—and the supplier. No one is better equipped to look at it from the point of view of the forces than the man who was Secretary of State for Defence at the time of the Mallabar inquiry report. He said on 16th January, as reported in the Hansard of another place—but, of course, I do not quote his exact words—that the structure of the ROFs would be damaged by the proposed transfer. That is the view of the man who was the Minister most responsible at that time.
His reasons were given in his speech. He asked how, for example, where you had a private sector manufacturer, that manufacturer would judge priorities between orders for our forces and orders for the forces of other countries? Who, he asked, would accept those orders at present not tendered for by any private contractors because they are unprofitable, and carried out by the ROFs because they are compelled to do so? Who would tender in the future? Who, he asked, would be able to keep excess capacity for emergencies?
I can give him the answer. No private manufacturer could keep such resources available for emergency. No private manufacturer would be allowed by the Government's accountants to include in his costings
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the very great cost of providing such idle emergency capacity. If you need to build up in a great hurry in an emergency your supplies of armaments and munitions of one kind or another, you will not have your own resources available for that purpose, resources which you can control and, indeed, have done from time to time when an emergency has arisen. So I refer again to the need for manufacturers in both sectors; to deny the forces the special facilities of ROFs as at present constituted would be damaging and could indeed be dangerous. We are told by the Minister in the other place that during the Falklands war the ROFs served this country well. My Lords, I need say no more.
1.14 p.m.
Lord Strathcona and Mount Royal: My Lords, my noble friend Lady Vickers has asked me to change places with her, so I find myself in the happy position of following the noble Lord, Lord Diamond, who referred extensively to the Mallabar report of 1971. But I have to tell him, if he is not already aware, that the working party which I had the privilege of chairing, and which worked hard for six months, came to a somewhat different conclusion 10 years later, but perhaps the passage of time had something to do with that. On that working party there were three distinguished figures from industry and commerce.
The other point which I should like to make at the outset is that, speaking for myself, I did not approach the task of examining the role of the Royal Ordnance factories with a burning desire to privatise. Incidentally, I would rather not have used that word, because I deplore the word as the noble Lord, Lord Diamond, does. My interest and that of the working party—and they say so—was to look at the interests of the Royal Ordnance factories, and the people who work in them, and the national interest, and I hope to show that we made a convincing case for saying that there would be advantages in change.
If I have a criticism of where we are now, it is that it has taken so long. Possibly, the labour turnover and the lack of job security in the job of Minister of State for Defence may have something to do with the fact that the process has taken rather longer than one might have hoped. I shall try to stick to some of the principles and some of the reasons for which we recommended change.
Let me say also at the beginning that I fully recognise that nobody likes change. It is particularly true of the trade unions that they are conservative with a small "c", and there is nothing wrong with that. I also think it is true—and it has been said frequently—that any organisation which has confidence in itself ought to have the courage occasionally to go in for some self-examination, to try to discover whether it could do things better. It has also been said several times this afternoon already that the Royal Ordnance factories are successful. They have an excellent profit record since the trading fund was introduced. I may add that I have great admiration from personal knowledge of the managing director and many of the trade union officials who work in the Royal Ordnance factories. But I believe that this success has been achieved in spite of various constraints, to which I shall refer in a moment, and

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that those constraints would gradually show themselves to be more severe as we advanced into an increasingly competitive environment in the years ahead.
When we were working on this report, I told the members of the trade unions that I sincerely believed that the removal of those constraints would be in the best interests of the workforce and that is still my belief today. In passing, obviously, you cannot expect the trade unions, when they are Civil Service trade unions, to be very happy about contemplating the possibility that 18,000 members or potential members are going to be removed from the ambit of the Civil Service, but that is a purely organisational matter which can clearly be managed. But when we find the trade unions opposing this Bill, I slightly find myself thinking of the famous remark of Mandy Rice-Davies, who said:
"They would say that wouldn't they?"
But, again, I am not attempting in any way to belittle their contribution.
I was glad that the Minister again today attempted to reassure us on the question of the preservation of pension rights, which clearly is fundamental. Whatever we may think with the benefit of hindsight about index-linked pensions, the plain fact is that the workforce enjoyed that privilege and clearly, if you wish to make a change, it would be wrong for that to be detrimental to their future. It reminds one of the old Welsh adage, "If I was going there, I wouldn't start from here". The fact is that one is starting with index-linked pensions and I am glad that my noble friend once again asserted the Government's intention to ensure that there is no detriment: but I have no doubt that we shall have a further argument about that point in Committee.
The one area where the constraints of being in government are evident is in the financial sector. The trading fund is subject to Treasury control. They cannot buy and sell shares, and it is very difficult for Royal Ordnance factories to set up joint companies for major development projects, which any of us who work in the defence industry know is increasingly the way in which projects are handled today.
Furthermore, there are technical questions, such as the factories' lack of access to the Exchange Credits Guarantee Department and the fact that the factories' borrowings are aggregated for the public sector borrowing requirement. For me the difficulty was illustrated on an occasion I remember extremely well when the board of Royal Ordnance factories was meeting at one of the factories in Manchester. The sales director said, "Tomorrow, I am leaving for the Middle East to negotiate a contract in the order of 150 million. Can you please tell me what price I am to quote for this piece of equipment?". The board was not able to give the sales director an answer, and it took six months before Treasury agreement was forthcoming. That is a fairly difficult environment for a commercial organisation to work under.
As to the question of being within the Civil Service, I yield to no one in my admiration for the Civil Service as an administrative arm. Certainly, when one encounters it as a Minister one is amazed at the competence and helpfulness. But I believe that, as my
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noble friend Lord Trefgarne said, there are public service constraints which make the Civil Service structure quite unsuited for an industrial organisation such as the Royal Ordnance factories. Their very attitude and their moves are quite different.
Specifically, there is the bad situation where the criterion by which one judges the numbers required to operate a business is not the measure of how many people one can have, but the fact that the Government wish to reduce the size of the Civil Service. I believe this is something that is very widely accepted—but not by everybody. One has the absurd situation where, if Royal Ordnance factories were successful in obtaining a major contract which involved taking on more staff, it would appear to be a disaster because such action would be contrary to the Government's policy of reducing the number of civil servants. What a ridiculous state of affairs!
If one examines the question of communications and industrial relations, would any industrialist tolerate a situation where the industrial relations were not even the responsibility of the Ministry to whom he reports, but were the responsibility of another Ministry? The lines of communications are really grotesque for dealing with negotiations about pay and conditions in an industrial situation.
Finally, there were organisational problems. I was pleased to hear the Minister reminding us that these have been addressed and that they are on their way to being put right. One cannot contemplate an industrial organisation that does not have its own marketing department and which has a very limited research and development capability—certainly not if it is to be in the forefront of the defence business. I am sure that it was right to give the Royal Ordnance factories their own marketing department and for them to take over some of the research and development capability which existed elsewhere within the Ministry of Defence.
The lifeblood of any industrial organisation must be communications with its customers and its sensitivity to customers' requirements. If it does not have its own marketing organisation, its lines of communication will be tenuous and difficult. As my noble friend said, steps have been taken already to put that matter right. It has to be admitted that that in itself is not an argument for becoming a Companies Act company, though I believe that those requirements are most easily met within the ambit of a Companies Act company.
Another issue to which I should like to refer is the preferred source policy. I completely disagree with the conclusions of the noble Lord, Lord Diamond: in particular, those in respect of the question of excess capacity. What troubles me is that there can be hidden costs, which are borne by somebody. One of the advantages of separating the Royal Ordnance factories more rigidly from the Ministry of Defence is that there will be less danger of fudging and hiding costs of that kind. I have to disagree with the noble Lord on a purely practical issue. If one wants to maintain excess capacity—whether it be in the shipbuilding industry, the armaments industry, the aircraft industry, or any other industry—it is perfectly possible to do so. An industrialist would maintain excess capacity for you,

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but you would have to pay for it, and so you would have to identify the costs of what you were doing. That seems to me to be desirable in purely managerial terms.
I believe also that the elimination of the preferred source policy will lead to more competitive bidding for the Ministry of Defence. There is one practical illustration we should bear in mind when we are tempted to talk about how satisfactory is the present set-up. I do not think anyone would deny that the German battle tank industry is a fairly successful one, and that industry is not in government hands. I would even suggest that it is more successful than our main battle tank business.
I have tried to give some of the reasons why I believe that Royal Ordnance factories, which are already a successful organisation, give every indication that they will become an even more successful undertaking if they are removed from the constraints of being within government.
I believe that those constraints would become more severe with the passage of time and that opportunities would be opened up by moving the factories into the private sector, which is suggested as being the ultimate objective in this Bill.
There is nothing sacrosanct about the present grouping of Royal Ordnance factories. Again, in managerial terms, the notion of putting them into four operating units strikes me as being a sound one. I am sure that the arrangements proposed are not necessarily perfect and that there will be plenty of opportunity to suggest improvements. But what I would urge everyone—in particular the trade unions and also the Opposition, who were certainly speaking this morning with a trade union voice—to consider is this. Here one has what I believe is the opening up of a new opportunity for the workforce in the Royal Ordnance factories, for the business of the Royal Ordnance factories and, ultimately, for the good of the country. I urge them to accept that this can be turned to their benefit and to concentrate on getting any detailed alterations which they consider necessary; but. please, please, do try to understand that they are not being flogged off. A new door to opportunity is being opened to them, if only they will walk through it.
Lord Diamond: My Lords, I am grateful to the noble Lord for giving way. I did not interrupt him earlier because he did not interrupt me at all; I thank him for that courtesy. The whole House pays high regard to any noble Lord who has sat in his position and considered all these matters carefully. I regret that I have not yet read his report but, of course, will do so. May I ask him about that report? His speech so far has concentrated on the restrictions which will grow, on the difficulties which will be removed and on all sorts of things for the future. If he will forgive me for saying so, what he said amounts to little more than a declaration of faith. My question is: did he and his colleagues find evidence of the difficulties and restrictions stated in the report which have prevented the Royal Ordnance factories from doing as well as they might have done?
Lord Strathcona and Mount Royal: My Lords, the short answer to that is "yes". In a very general way I
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have attempted to summarise some of the constraints. They specifically mentioned a whole list of impediments that the Royal Ordnance factories were experiencing at that time, some of which, as I said, have already been improved. The working party report was quite clear that the Royal Ordnance factories did experience certain disadvantages as compared with their competitors in private industry and they listed them in some detail.
Lord Diamond: My Lords, are there any specific examples?
Lord Strathcona and Mount Royal: My Lords, I do not think there are examples of specific pieces of weaponry and specific competitors, but there are a couple of pages of the various constraints which they identify and I am sure illustrations would be readily forthcoming if the noble Lord was to talk to someone who is still in touch with the situation and has much greater knowledge of it than I have now.
1.33 p.m.
Lord Taylor of Blackburn: My Lords, I usually stick to my own subjects in this House but I venture to change my course on this subject because it is a matter on which I feel very strongly. I do so because I know a little about the Royal Ordnance factories, especially the factory in Blackburn and the work that it has done over many years.
As an educationist and one who has been able to visit the factory quite often to see the training carried out in it, especially of apprentices, I can state that it is second to none. The standard of training is first class. The results of that training have been extended throughout the factory and, because of that, it has been able to give first-class products to those people who use them. The same applies to the industrial relations within the factory. Again, it has been an example for other employers within Lancashire to follow. Apart from an odd day's dispute, I do not think that there has been more than that for many years, although I stand to be corrected. As far as I know there have been very few disputes within the factory.
The people employed there have been a regular force. Turnover has been negligible. That has been a good thing. Those who have left the service there and gone into other industry have taken with them great skill and great benefit to the industry they have joined, thereby helping the whole community and commerce. Again, the relationship between the Royal Ordnance factories and the educational establishments, the training schools, colleges and universities in Lancashire has been helped a great deal because of this two-way exchange.
I am not qualified to discuss or to speak about the financial aspects. I can only speak as one who has lived very close to this operation and seen how it has worked. I shall reserve my thoughts and comments until we get down to the next stage where I feel we can probably go more into detail.
I want to say how satisfied many of us are who have been associated with the Royal Ordnance factories. I am sure that from reading and listening to the comments made from all sides in the other place it is

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apparent that there is a good organisation. I admit that even a good organisation can be imroved, but even taking that into account it is far better to keep the factories as they are and reconsidering some of their practices.
1.36 p.m.
Baroness Vickers: My Lords, my reason for joining in this debate is that during the last war I was working in the Ministry of Supply and one of my jobs was to go round these factories, both day and night, to see the work, particularly among the women and young girls who were probably working in industry for the first time in their lives. They did a magnificent job. They were always keen and they worked hard, and although in some cases they had to be kept in for security reasons, they never grumbled. At one of them, the largest that I visited, it was fortunate for them that a GI camp came into the district so restrictions were lifted and they were able to have a better time.
In view of the fact that the Royal Ordnance factories have played such an excellent part for over 300 years, why has the Minister thought it necessary to take action now? I realise that there was a loss of profit in 1980–81 owing to cancellation of orders from Iran, but I understand that new markets have been opened and in 1982–83 sales in real terms were higher than in any previous year. Eleven ROF and two PERME establishments are to be sold. Are they to be sold en bloc? What will happen if purchasers do not want all of them? Will they be sold separately, or will some not be sold at all and have to remain in Government hands? What is to happen?
Will the employees be able to buy shares on the Stock Exchange, or however they are to be sold—under Clause 7—so that they can take part in the future of the organisations? It has been reported recently that, in real terms, profits have gone up and that there was a profit of £68 million for the last year. I understand that there are outstanding contracts with leading missile producers for rocket motors. There are good prospects for a more substantial mortar system and ammunition. I am informed that great efforts are being made to open new markets and there have been some notable successes recently. This was in the face of very severe international competition. Therefore, why is it now time to change these factories over to private enterprise?
How much is still owed to the National Loan Fund? Why, for example, if there are to be profits, should those profits not go to the Government and to the taxpayer instead of to the public market? Will the Government control overseas sales? I think that we are all rather nervous that a foreign firm might get in and take over one of the factories, as has been mentioned before. It has also been mentioned that pensions are being transferred. Will they be made completely safe before the Act comes into being?
The noble Lord who spoke first mentioned the Queen's awards. I think that the ROFs have done extemely well in winning those. I am against selling arms in any case, but that is not what we are discussing today. I thought that I should mention that as one of the reasons why I am speaking.
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Finally, I understand that the Secretary of State, with the consent of the Treasury, will be able to make certain changes. Why does he have to get the consent of the Treasury and not of Parliament? I very much hope that the noble Lord the Minister, when he comes to reply, will answer those few points.
1.41 p.m.
Lord Stoddart of Swindon: My Lords, I do not think that I have ever heard, or had experience of, a debate in which such praise has been heaped on an organisation that is later to be virtually decapitated. Today we have heard the noble Lord the Minister describe the ROFs as factories and organisations which have done well. He described the work force as loyal and devoted and said that we are rightly proud of their expertise and record. The noble Lord, Lord Diamond, quoted at length from the comments of Ministers in another place, where again the praise heaped on the ROFs, their record, and the work force was lavish indeed. We have heard from the noble Baroness, who has had great experience of them, how devoted and loyal the people working in them have been over a very long period of time. She rightly asked the question: why are we doing this now? That is the question which the House is entitled to ask, and which she has put so well. It is a question that we shall expect to be answered by the Minister when he winds up, and, indeed, during the later stages of this Bill.
In his opening remarks the noble Lord the Minister said that the Government will ensure that the ROFs do not fall under foreign control. How will they ensure that? Again, I think that this House, and Parliament as a whole, are entitled to a full and unequivocal answer to that question. The very defences of our nation are at stake. I hope that the noble Lord will answer that question today. If he does not, we shall certainly expect an answer at a later stage.
We have heard a great deal about the success of the ROFs, including their financial success. In his opening speech my noble friend Lord Graham not only joined in high praise of them, but detailed their finances and achievements in virtually every field of armaments. He also pointed to their financial success. I want to discuss that a little more. When I read the Defence Estimates, I saw on page 19 the details of the success of the ROFs. What do we find by looking at those accounts? First, total ROF sales have risen from £263·2 million in 1977–78 to £448·5 million in 1982–83, which is a rise of £185 million. We also find that sales in the United Kingdom have gone up by £133 million and sales to overseas customers have also gone up considerably.
If we look at the profit record over the eight years, we find, again, that the Government and the Treasury have benefited considerably from the profits that the ROFs have made. In total they have made £176·6 million over those eight years. That is no mean sum by any standards. Indeed, in the debate on the Defence Estimates on Monday of this week in another place, the Secretary of State announced that he was going to equip a fifth tank regiment. The cost of providing tanks for a new tank regiment is roughly £93 million. The ROF factories and the people working in them have given the Government sufficient profits over the past eight years to equip not one new tank regiment.

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but two regiments. That is a real measure of the success of the ROF factories over this period.
Have the ROFs done that by employing more and more people? The answer is, most certainly not. They have reduced the number employed from 23,200 in 1977–78 to 18,900 in 1982–83. Have they improved their value added? The answer is that they most certainly have. In 1977–78 the value added per employee amounted to £6,400 and in 1982–83 the value added per employee had increased to £13,300, which is an increase of £6,900. That is quite good going by whatever standards the Government wish to employ.
Have the ROFs met their financial objectives? The financial objective set for them for the period 1st April 1979 to 31st March 1984 was 5 per cent. per annum on average net assets employed. That objective was not only achieved over the eight years, but exceeded many times over. In 1975–76, for example, their return on net assets employed was 16.4 per cent. In 1976–77 it was 39.4 per cent. In 1982–83 it was 49·8 per cent.—10 times the financial objective set by Her Majesty's Government, and a Conservative Government at that. The average rate of return over the eight years has been 23·6 per cent. What a success story that is!
In the face of this brilliant success story, it is the height of absurdity to propose their privatisation. Common sense and the financial interests of the taxpayer are being sacrificed to blind and stupid Tory dogma, and indeed it is being done in spite against a publicly-owned industry and its employees. If the Government deny the charge that I make against them of putting dogma before the public interest, perhaps the noble Minister in his reply can tell us what benefit there is in this Bill for the public, for those employed in ROFs and for the proper defence of our country. How can it be that the forgoing of profits of £62 million per year, which is the present rate of profits, for a measly £50 million once-and-for-all net payment, which invested at 10 per cent. would bring to the Exchequer only £5 million per annum, benefits the public in general? How can it be? How can the Minister justify that kind of business proposition?
Henry VIII, in whose reign I believe the factories were first started, was a bit of a despard but by God! he had a good business head on his shoulders and if he was reigning at the moment then the noble Lord opposite, if he did not have his head chopped off on the block, would find himself in the Tower for daring to deprive his Majesty's Exchequer of this sum of money every year.
Of course the fact of the matter is that there is no financial benefit. It is plain that the public will lose £57 million per year and the Government's city friends will gain a corresponding amount. In this debate so far the Government have not had many friends. The noble Lord, Lord Strathcona, to whom we listen with great respect because of his experience and knowledge, inclined to support the Government. Nevertheless, even he had his doubts. No doubt that was because of the experience he gained when he examined the ROFs through his committee; but I think he will agree that one of the conclusions that was reached—and he made some passing remarks about Mandy Rice-Davies and
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the trade unions, and that they would say they did not want privatisation wouldn't they? But I remind him that his own committee agreed that any proposed change should be broadly acceptable to the ROF workforce.
The workforce do not accept this. They do not agree with this change. They think the change is bad for them and bad for the nation. So if the noble Lord follows the recommendation in his own report, then I believe he will be supporting the Opposition when this Bill comes to Committee.
What is more is that his own committee, in their first recommendation, which was labelled "a.", recommended that the present trading fund organisation should be improved "by removing some of the impediments which we identified". There were two other possibilities but that was the one that they put first. When the noble Lord reflects on this Bill, I hope that he will return to his own committee's report and accept that option "a." is the right one to have.
Lord Diamond: My Lords, is the noble Lord going to leave the question of the Strathcona Report? If so, before he does that may I ask him whether he is able to confirm, as was alleged in the debate in the other place, that the Strathcona Report included the following comments. The first was that it gave as its verdict that the organisation had demonstrated its management strengths. The second was that since the introduction of the new arrangements in purely financial terms the Royal ordnance factory organisation has also been very successful. The third one, was that benefits accrue to both sides from the present relationship between the Royal ordnance factories and the rest of the Ministry of Defence. Can the noble Lord say whether or not these quotations are correct, and whether therefore the speech we heard was a fair sample of the report?
Lord Stoddart of Swindon: My Lords, yes, I can confirm that what the noble Lord said is correct. Those items were indeed in the report. I am not prepared to comment further on the noble Lord, Lord Strathcona's speech, but I hope he will now re-read his own report before the Committee stage and I am quite sure he will be very helpful when we come to discuss the matter further on Committee.
I should now like to turn to the need for a public presence in armament manufacture. Government spokesmen in defence of this Bill say, "What is all the fuss about? ROFs constitute only 4 per cent. of the total arms industry in Britain." They have some sort of point; but the conclusions I draw are quite different from those of the Government. The figure of 4 per cent. is far too small and the public presence in arms supply ought to be far greater. The Bill before us today ought not to be a Bill designed to obliterate the public presence in the arms industry—because, my Lords, that is the eventual outcome of this Bill, make no mistake about it—it should be a Bill to extend the state presence in the arms industry, and I am sorry that the Bill is not designed to do that.
There are many reasons why there should be a large and significant state ownership and involvement in arms manufacture; but there are three outstanding

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reasons. First it is the paramount duty of government—and we on this side of the House believe that, just as much as the noble Lords opposite believe it—to ensure the defence of the realm. To do so they need to have a direct involvement in the sure supply, the quantity and quality of equipment. Such a duty should not and cannot be left entirely to private firms whose paramount need and duty is to maximise profits.
The second reason is because in time of war or emergency the Government will need to act quickly and decisively to increase arms and equipment supply and the more expertise and presence they have in the arms industry the better and more effective will be their influence. The third reason is that a significant state presence enables a test of price and efficiency to be made against private British arms manufacturers —and foreign ones for that matter—who are increasingly tending towards monopoly. That is why we need a significant presence in the arms industry. That is why this Bill is a bad one.
Before I finish, I want to say a few words about security. In his opening remarks I had hoped the noble Lord was going to say that for all time security for ROFs would remain with MoD police. He did not say that. What he said was that there was a possibility of privatisation. Many people are very concerned at that possibility. They are concerned that the security at Royal Ordnance factories would be put out to tender to individual security firms. In spite of the schedule added to the Bill at Report stage in another place, and which appears as Schedule III in this Bill, it remains a possibility that privatisation of security will be introduced at some future point in time.
There are very telling reasons why security at ordnance factories should not be handed over to private security firms. First of all, there will be an acknowledged lack of training available to private employees. Secondly, there will be a lack of powers and difficulties relating to the obtaining and the use of arms in certain circumstances. There will be the ease of infiltration of private security firms by potential terrorists. We have seen some examples of this recorded in our newspapers lately. There is an appalling record of some security firms. There is the possibility that individuals might not be properly vetted by private security firms. There is the possibility that relations between the police and private firms would not he as good and as effective as those hitherto prevailing between the police and MoD.
Finally, there is the inability of a private security firm to create a rapid deployment force to deal with any emergency at any particular base. I find it particularly surprising that Her Majesty's Government should tinker and meddle with security at ROFs, especially bearing in mind the superb record of the Ministry of Defence police over such a long period of time. They have kept ROF establishments safe with great efficiency and effectiveness and there is every reason why they should continue to do so on a permanent basis irrespective of the ownership status of ROFs.
Lord Strathcona and Mount Royal: My Lords, I resisted the provocation earlier. The noble Lord said
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that the ROFs account for 4 per cent. of the supply to the Ministry of Defence. What is his comment on the 96 per cent.? How is their security being managed? Is he suggesting that the Ministry of Defence police, an admirable body, should take over the security of the whole of the armaments industry of the country? Otherwise what is the difference between one armaments factory and another?
Lord Stoddart of Swindon: As a matter of fact, my Lords, I would feel much safer if they did, but I have no knowledge of their particular arrangements at present. What I do know is that, so far as these factories are concerned, they have been policed very efficiently. With the growing incidence of terrorism, I believe that the state should be very involved in the safety of establishments like this. Indeed, I was going on to say that I find it strange and worrying that the Prime Minister was a signatory to the London economic summit declaration on international terrorism at the same time as this Bill was before the House. What did the declaration say? The Heads of State at the London economic summit said that they were disturbed to note the ease with which terrorists move across international boundaries and gain access to weapons, explosives, training and finance. This is what the economic summit said, and our Prime Minister was a signatory to that particular passage in that particular communiqué. They recommended scrutiny by each country of gaps in its national legislation that might be exploited by terrorists. Yet here we have a Bill before us that proposes to hand over the policing of ROF establishments to private organisations. I hope that, in the light of the declaration of the economic summit, this will be reviewed.
Perhaps the Minister will answer some questions on security. Will the Minister make provision by amending the new schedule dealing with special constables in relation to Section 3 of the Special Constables Act 1923 to ensure that any such special constables nominated shall be members of the MOD police? Secondly, will the Minister comment on the type of training required by the in-house guards and whether there is an intention to train in the use of arms any in-house guards who may be nominated as special constables? If it is the intention to arm any such nominated special constables, who will be responsible for the control, issue and authority to use arms? Will the Minister consider recommending to the ordnance factories' management the possibility of contracting for Ministry of Defence police as is intended for private security firms? Is it the intention of the Government to allow in-house security guards or ordnance factory management to have some limited access to the police and national intelligence information required in anti-insurgent or political incidents? Will the Minister report on the reaction of chief officers of police in the districts where it was or is proposed to withdraw MOD police on vesting day?
Finally, I want to make it clear that, although, in accordance with the conventions of this House, we shall not seek to divide on Second Reading today, the Opposition nevertheless consider this Bill to be a bad and unnecessary one, produced out of sheer blind dogma. It is a Bill that will damage Britain's defences, will rob the taxpayer, will endanger the future of a

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profitable and successful publicly owned industry of 300 or 400 years' standing and will damage the future jobs and conditions of the work force and undermine their security and confidence. We shall seek at Committee stage to make substantial amendments to protect the rights of Parliament, to secure the future pay conditions and job security of the workforce and to prevent the break up and sale to private organisations of ROFs and PERME establishments. That is our view. I hope that the Minister will be able to answer the questions that have been asked during the debate. I give him notice of a good fight at Committee Stage.
2.6 p.m.
Lord Trefgarne: My Lords, during our debate today your Lordships have rightly referred to the long and distinguished history of the ROFs, the quality of their products, and the loyalty, integrity and dedication of the ROF work force. We are all on common ground in paying such a tribute to the ROFs' past. But the best practical tribute is to look to the future and to seek the best way forward. Defence procurement strategy is necessarily evolving as economic circumstances change. A review of the structure and role of this vital part of the defence industry is both timely and necessary if we are to get the best value for money in defence.
The proposals that enactment of this Bill would enable us to put into effect will remove the current constraints on the operations of the ROFs as part of the Ministry of Defence and will give them better and brighter prospects for expansion and improved efficiency in the private sector. The ROFs have a small but significant share of the defence procurement budget. We fully expect them to use that business as a launching pad for further expansion in both domestic and world markets. The Government recognise that this change of status has created some anxiety among the work force, particularly as they are moving from being civil servants to being employees of a commercial company. My ministerial colleagues have been at great pains during the proceedings on the Bill in another place to set the record straight about the future terms and conditions of employment of the work force.
The Government have taken very seriously their responsibilities towards these employees. We have taken all the steps we can to ensure that their terms of employment will be no worse than those they enjoy currently. Of course, there will be some changes in the details of their terms of employment, but these are not changes of substance, save for the fact that, as part of the manufacturing operation, as essentially they are at present, they will be working in a rather different environment for a commercial organisation.
As I said in my opening remarks, negotiations with the trade unions representing the employees of the ROFs have been in train for some time, and are continuing. For our part, we have approached these negotiations with an open mind and with the aim of securing agreement on the employment framework to be set up in the new company. I trust that these negotiations will help to reassure all employees that they have nothing to fear from our proposals, and much, in terms of long-term job prospects, to gain.
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No doubt many of the points that have been raised during the course of the debate this afternoon will be raised again during the Committee stage, and I shall be very willing to answer them then as fully as I can. I do not want to duck from answering them now, but perhaps it would be appropriate if I deal just with some of the more important ones that have been raised.
The noble Lord, Lord Graham, and one or two other noble Lords as well, referred to the possibility of receipts amounting to about £300 million, with possible costs of £250 million with regard to pensions. The pension costs are costs which in any event will have to be met in the long term. They are liabilities which already exist as far as the pension fund is concerned. Indeed, it is open to me to suggest that the cost to the Exchequer of making a payment now, particularly in respect of those who transfer to the new pension scheme, might well be less than some costs that might have to be met in the future, in the long term.
But as for the receipts, the Government have not yet made a decision on how we should put this company into the private sector. I referred to that in my opening remarks. It is not possible yet for me to say whether we shall achieve £300 million or more, but my personal expectation is that if we do proceed along the line of the flotation, as my right honourable friend is hoping, then the receipts may well be at least as much as that, and possibly more.
My noble friend Lord Strathcona referred particularly, from the depth of his own experience in this matter, to the constraints that he and his colleagues saw as applying to the ROFs during the time of the working party that he chaired. I would ask your Lordships to consider again the points that my noble friend made, and particularly to look again at the terms of his report on those points.
My noble friend Lady Vickers asked me about the debts outstanding to the National Loans Fund. At present there are no debts outstanding to the National Loans Fund, so the question of writing off any such debts does not arise. If we do proceed to a flotation arrangement such as I referred to in my opening remarks, there will most certainly be an employee share scheme arranged as part of that flotation. As I said in my opening remarks, although we are not yet in a position to make a final announcement about this we anticipate floating the company in that way when the time comes. They will be shares in the whole enterprise, not in individual factories. My noble friend was wondering about this.
My noble friend also referred to the question of overseas arms sales. Perhaps that is another matter, but I would remind my noble friend that we have a very stringent export licensing system, and the constraints that we impose upon our defence industry in that regard are very well known. I was asked also about the prospect of foreign control. The articles of association of the company, when privatised, will provide that the number of shares, or interests in shares, which can be held by foreigners shall not exceed 15 per cent. of the total issued share capital. The articles will, of course, have legal force under the Companies Acts. Your Lordships may recall that this was a matter of particular concern when the British

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Aerospace legislation was being enacted, and I think that these provisions will closely mirror those provisions.
The noble Lord, Lord Stoddart, asked me particularly about the security arrangements. In my opening speech I explained the policy underlying the introduction of the new Schedule 3 concerning security arrangements at ROF sites after incorporation of the new company, which we hope will be later this year. To reiterate our position: we have taken powers in the Bill to enable the MOD police to remain at ROF sites for as long as we consider necessary; but in parallel with this, the ROFs will be setting up their own company guard force to take on the responsibility of guarding ROF premises where this is considered appropriate.
A number of detailed questions were put to me about the organisation and training of the new company guard force. I am afraid it is still too early to give full answers to all of these questions. The Ministry of Defence will be liaising very closely with the ROFs on the question of recruiting and training such a guard force with the aim of creating a reliable and efficient system. The new company guard force will not be armed, but I believe that the deterrent value of the access of MOD police to firearms should not be overrated. Security arrangements will have to be cleared with local police authorities and contingency plans will be made for civil police support, where necessary, at each of the sites. As your Lordships know, there are arrangements for the civil police to draw arms should the situation so warrant, and contingency plans will include the possible need to call upon armed police.
As the new company guard force is built up, liaison arrangements with the existing MOD police guarding each site will be worked out. I should emphasise that MOD policemen will remain subject to the ultimate control of the Secretary of State for Defence and that command and control arrangements will reflect this chain of command.
I was asked, too, about the special constables under Clause 3. I can confirm that they will be MOD police. Incidentally, I can confirm that we have made clear that we are not going to use private security firms.
We have had today a wide-ranging and important debate. The Government's proposals for the future of the Royal Ordnance factories for which this Bill gives legislative authority, are positive and forward looking. The proper place for the ROFs as a manufacturing industry is not within the civil service, nor indeed as part of the public sector. Their move to commercial status, coupled with the Government's policy of encouraging competition within industry, will give them a healthy future and we believe will provide a stimulus to innovative enterprise in the defence industry.
I tried in my opening remarks to set in context the provisions which are in the Bill before your Lordships. I think that I should now return to that context, to the Government's determination to achieve greater competition in defence procurement whenever it is sensible and practicable to do so. The Royal Ordnance factories have a sound track record, but we and they
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want to see an improvement of that record. The record is a sound one indeed. Historical cost profits have totalled £250 million over the life of the trading fund of which £82 million has been paid in dividends and £165 million retained in the business. The dividend paid to the Treasury by the trading fund in the financial year 1982–83 was £25 million. Although the accounts for 1983–84 have not yet been finalised, the promise is that last year was another successful one for the ROFs. Total sales for the year are likely to be nearly £500 million, an improvement of 9 per cent. over the 1982–83 results, with profits forecast to be in the region of £60 million.
The increase in profits over recent years has been helped by a programme of cost reductions, the success of which is illustrated by the size of the total wage bill. This has remained virtually constant over the last two years despite higher production and despite an increase of about 17 per cent. in average earnings during the period. The value added per employee, as my noble friend Lord Ironside pointed out in our debate last week on the Statement on the Defence Estimates, doubled in the last three years.
It is our aim and purpose to help the ROFs once, as a Company Act company, they are freed from bureaucratic restraints, to improve on this record for the benefit of themselves, the Ministry of Defence and, therefore, the three services as a customer, and the country as a whole. The ROFs have a number of substantial customers in different parts of the world and a vigorous export market especially with traditional friends and allies in the Commonwealth and the Middle East. We are now looking beyond these markets most notably to North America, but they will also remain important suppliers to the British Government.
I would remind your Lordships of the major order announced earlier this week, referred to by at least one noble Lord, for another 60 Challenger tanks to equip an additional armoured regiment in BAOR. This large order is a signal of our desire to make major purchases from the ROFs in the future provided that the price and the product are right. It is by being enabled to operate in the market place and becoming fully effective that we can have the best assurance that this company will be successful and it should lead to a bright future for the new company.
Lord Diamond: My Lords, before the noble Lord sits down—and I am grateful to him for giving way—will he turn his mind to the main thrust of the debate? The main thrust of the debate was not whether the ROFs are doing very well indeed and have done very well indeed—and I am grateful to the noble Lord for saying in his winding up speech that they have done even better than he said in his earlier speech; the main thrust of the debate is: who is going to assure the forces of this country, if we are left with no public sector but only with a private sector, that they can get the supplies they need, first, in an emergency through spare capacity being available and, secondly, at any time when no private supplier will supply them because it is uncommercial to attempt to do so—whereas the ROFs are compelled to do so under the present arrangements for the MOD?
Lord Trefgarne: My Lords, it simply is not proven that for the Ministry of Defence or any other armed forces organisation to be able to get their supplies, those supplies have to come from some organisation in the public sector. As several noble Lords have already pointed out, I think that 96 per cent. of Ministry of Defence supplies already come from the private sector. Other armed forces around the world obtain 100 per cent. of their supplies from the private sector.
I do not believe that the ROFs need to be in the public sector to be able to continue the splendid work that they have done. On the contrary, I believe that by removing these constraints from them we shall enable them better to provide for the requirements of the Ministry of Defence, not least from an important base of overseas markets. For that reason, I commend this Bill to your Lordships.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Lebanon
2.21 p.m.
Lord Kennet Lord Kennet rose to ask Her Majesty's Government what is their present policy towards Lebanon.
The noble Lord said: My Lords, in rising to ask the Question which stands in my name on the Order Paper, may I say how distressed I am to see that the noble Lord. Lord Trefgarne, has to do everything this afternoon: to introduce the Second Reading of a Bill, to wind up the Second Reading debate, and then to take an Unstarred Question. He is doing all the Government's business from the Government Front Bench in one sitting day of this House. I have never known that to happen before. If I had known that it would happen, I should have offered to do what I could to prevent it happening and, frankly, I question the wisdom of the Government in allowing it to happen. No personal judgment is intended, but it is an exhausting thing for anyone to have to do.
Over the years there has been a demographic change in Lebanon, which the constitution and the political system of that country have not proved flexible enough to meet. It is rather like what has happened in Northern Ireland. The constitution was framed enshrining the Christian majority. There is no longer a Christian majority; there is a Moslem majority, and the state has gradually broken up into disorder and warring factions due to purely internal circumstances. Added to that there has been massive intervention by both its neighbours.
Over the years the state of Israel has suffered very much from the inability of the greatly weakened state of Lebanon to prevent the PLO establishing itself in the southern part of Lebanon and bombarding Israel across its legitimate frontier. Not all Israeli frontiers are legitimate. The frontier with the Lebanon is legitimate and Israel put up with bombardments over it for many years. During that period the disintegration of the Lebanon caused an invitation to be issued to its other neighbour, Syria, to come in and give military help to stabilise the northern end of the country.
Israel took the law into its own hands in June 1982. In order finally to put an end to the many years of
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terroristic bombardment across the frontier, Israel invaded southern Lebanon, thereby completing the hegemony over that part of the country which they had partially achieved through the agency of their dependant, Major Haddad, with his militias over several years, and, in the course of the invasion, walked over a small United Nations force which had been deployed there at an earlier time. The Israeli army continued to walk up the country, bombarded Beirut, and finished in a position where its guns covered Damascus, the capital of Syria, and there it remains.
At a certain point during the shambles the invitation to Syria from the Lebanese Government was withdrawn. The diplomatic situation remained stalled. One half of the country was under Syrian occupation, which was invited, and the invitation was then withdrawn; the other half of the country was under Israeli occupation, which was by right of invasion alone.
We come now to the Western intervention in Lebanon. I want to give a short account of the various reasons which have been advanced for it and to invite the Government to ponder on the undesirability of having discrepant reasons for putting their troops in other countries. I say in advance that I shall not be blaming our Government very much for this. They were rather consistent, but we were tagging along behind the United States Government which, as I shall show, did not know its own mind.
In July 1982 the United States, President Reagan, agreed to put American troops into Lebanon as part of a multilateral force to cover the evacuation of the PLO. The evacuation of the PLO had been the main object of the Israeli invasion, and in order to guarantee its peaceful evacuation the United States offered to put its troops in. President Reagan said that it would not be for more than 30 days, and he demanded guarantees for the safety of the United States forces. Unhappily, of course, that was quite unreal. If anybody could guarantee the safety of the United States forces they could have guaranteed the safety of the departure of the PLO in the first place. This was not tourism.
The forces were put in, the PLO was evacuated—on the whole peacefully—and American forces pulled out, and they came straight back in again when the President of Lebanon, the first President Gemayel, was assassinated. Only two months later, in September, President Reagan had committed US marines to the Lebanon until:
"all foreign forces are withdrawn [and until the Lebanese Government] can preserve order in its own country".
In October of that year President Reagan used the words:
"President Gemayel can rely on the help of the United States".
A week after that President Gemayel said, rather pointedly, that it would require 30,000 to 60,000 troops if order was to be restored in the Lebanon.
One month after that, in November 1982, we come to the first British statement of our intentions in getting involved in the Lebanon. Mr. Pym, as Foreign Secretary, said:
"We fully support American efforts to bring about a speedy withdrawal of foreign forces from the Lebanon which is the key to the restoration of Lebanese sovereignty and independence".
At that stage the British Government fully backed the American purpose of getting all foreign forces—meaning both Syria and Israel—to withdraw. After that, sobriety supervened in London and there was an exchange of notes with the Lebanese Government in January 1983 where our purpose in going in with the Americans and putting our tiny contingent of 100 ashore with their contingent of 1,600 or 1,800 was laid down as follows:
"To assist the Lebanese Government and the Lebanese armed forces in the Beirut area"—
mark, in the Beirut area—
"to restore Lebanese Government sovereignty and authority over the Beirut area, and thereby to further efforts of my Government"—
that is our Government in Britain—
"to assure the safety of persons in the area".
Mark the curious use of the word "persons". We are quite used to assuring the safety of British subjects, but this seemed to be assuring the safety of a rather wider group of persons than that.
We then come to the first appearance in this House of the matter when the noble Lord, Lord Skelmersdale, on behalf of the Government, said much later, on 11th May 1983, at column 459:
"the role of our contingent is to patrol undesignated routes and to report any trouble it finds to the Lebanese armed forces, who will of course deal with it as appropriate, it being in the Lebanon".
I think "undesignated" was probably a mistake for "designated", but we now see the British troops appearing in a quite different role: acting as scouts for the Lebanese Government and reporting trouble, which the Lebanese armed forces were presumably incapable of detecting on their own.
A week later there came the Israeli-Lebanon agreement by which Israel was to pull out. This was greeted with hope at the time. The hope was unjustified because the agreement allowed the Israeli armed forces to come back in on joint patrols with the Lebanese armed forces, and required the Lebanese Government to obtain Israeli agreement before flying military aircraft over their own territory in the Lebanon. So it naturally did not stand much chance of obtaining Syrian agreement, which by this stage was necessary to everything if it was to be any good.
By September last year the United States' language had changed. I quote President Reagan:
"Our mission has not changed, [that] of being a stabilising force as Lebanon tries to reinstate itself as a sovereign nation".
But of course their language had changed, because their original purpose was to ensure the departure of all foreign forces, as I have just reminded the House.
At this stage also we began to hear much of the right to self-defence enjoyed by the United States forces. By September that year there were United States bombardments in support of the Lebanese army which could not conceivably be related to self-defence by the United States contingent.
In September 1983 Secretary of State Schultz said that the United States forces were essential for:
"a kind of equilibrium which will encourage a ceasefire".
Here is a fourth definition of the United States role:
"a kind of equilibrium which will encourage a ceasefire".
This presupposes that the equilibrium is to be achieved by their propping up a minority which would otherwise be out of equilibrium; and the minority concerned was, of course, that of the Lebanese Government.
In October of that year President Reagan said that the American forces would be there:
"until the situation is under control".
He did not specify under whose control. Then he used the gloomy phrases:
"Lebanon is central to our credibility on a global scale",
"the struggle for peace is indivisible".
And he linked it to Grenada. There was a fifth justification for the presence of the American forces—United States credibility round the world.
A week later we had:
"vital interests in Lebanon"—
another United States specification—and:
"our actions in Lebanon are in the cause of world peace".
We now return to the sober voice of this country. Mr. Luce in the House of Commons said:
"The aim of the multinational force contributors is to help create the conditions in which national reconciliation and reconstruction can take place".
Good. Nevertheless, at the time we noticed that HMS "Fearless" and the Buccaneers were standing off in Cyprus. It might have been thought to be too much; or it might have been merely to cover our necessary retreat, which began to seem inevitable about this time.
In December 1983 Mr. Rifkind in the House of Commons said that we were there to help the,
"Lebanese Government restore stability and create conditions in which the Lebanese people can themselves sort out their differences free from outside interference".—[Official Report, Commons, 5/12/83; col. 19.]
So we were no longer in support of the Government, but for the Lebanese people who are by a majority Moslems, as all knew, and therefore against the present Lebanese constitution and against President Gemayel.
The same day Mr. Rifkind said in the House of Commons:
"We would not support the use of British or other forces in the multinational force for other than peacekeeping purposes".—[Col. 21.]
The voice of reason is getting stronger and stronger. On the same day Mr. Rifkind again said:
"The Government could not support the use of the MNF to remove the Syrians or anyone else from the Lebanon".—[Col. 22.]
The voice of reason is really getting very strong.
In January this year a new British justification appeared. This is only the third British justification to six or seven American ones.
"The function of the troops in Beirut is to provide physical evidence of the presence of the multinational force by patrolling in Beirut".—[Official Report, Commons, 19/1/84.]
The presence of the multinational force is now justified by its presence. The argument becomes completely re-entrant.
A month later, in February this year, Sir Geoffrey Howe—at last we begin to see a way out—said:
"The presence of our contingent during this period has helped to provide an opportunity for political reconciliation. Sadly that

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opportunity has not been taken".—[Official Report, Commons, 8/2/84; col. 887.]
The first paving stone is laid on the lines for the necessary retreat, which took place a month later in February 1984.
The United States battleship "New Jersey" went on bombarding defenceless villages for a few days after the withdrawal of the multinational force. I doubt whether anyone in Washington knew which villages or why, and I suppose the informed views of those very few United States diplomats who had remained in Lebanon were overruled—as has so often been the case with this American administration in other parts of the world. It was painful to see uninformed optimism turn to impotent rage, but it was not surprising. There is no substitute for information.
The moral, I believe, for Her Majesty's Government is that this country should have the courage of its convictions. I do not know whether we really wanted to keep out all along. I believe that we should have been wiser to do so; but, having once got in, we had good information, we had a good understanding of the Near East, and the Government are to be congratulated on not having put in more troops. That was wisdom. And they may also be felicitated in not having suffered the appalling loss of life which was suffered by the United States and the French troops. That, I think, was luck. We were lucky to get away in one piece, and we were lucky that it was a small piece that we got away with. I would give advice to the Government, if I may, as one would to a daughter: "Never tag along with anyone unless you are sure".
As to the future, the settlement of the Lebanese question depends, we all know, upon two things. It depends upon the agreement of Syria and the withdrawal of Israel, which will render possible the withdrawal of Syria. The question then arises: under United States auspices or not? I think it is clear that, if the United States has a role in this—and we must not forget that the Government of Lebanon has roundly declared that it has not—if it has a role, then so has the Government of the Soviet Union. If one super-power is to be in, then both have to be in. Once the position of the Soviet Union in this is admitted to any degree, then, plainly, it becomes, a United Nations situation and we might as well go at the same time for an overall settlement of the Arab-Israel conflict in a United Nations framework.
The United Nations approach is the coming approach, I believe. The Government agree, China agrees, incidentally (and it is quite interesting that that highly informed observer from far away should agree) and the Lebanese Government appears to be quite close to agreeing. Syria, of course, has been asking for it all along, as we know. I leave my Question there and ask whether the Government agree with much of what I have said; with little of it; with none of it, or even with all of it; and whether they can go a step forward in the wise things that they have already been saying about a United Nations settlement of this matter.
2.37 p.m.
Viscount Buckmaster: My Lords, I warmly welcome this debate this afternoon initiated by the noble Lord, Lord Kennet. As your Lordships know, it has been
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postponed many times but, by an extraordinary chance, this debate is now taking place almost exactly two years after the last Unstarred Question on Lebanon asked in your Lordships' House by the noble Lord, Lord Mayhew, on 21st June 1982. I find to my surprise that I am the only noble Lord speaking in this debate who also spoke in that debate. When I spoke on that occasion, I came to the conclusion, very reluctantly but not without considerable thought, that there seemed no reasonable solution to the problems of the Lebanon other than some sort of federal or cantonal arrangement. Two years later, there is no end to the violence, the terror, the torture and the senseless slaughter; and we find in much of that lovely country, which I have known as a diplomat and a traveller for more than 40 years, that blood and tears are flowing more abundantly than milk and honey.
There is a faint hope, of course, even now, that a properly unified Lebanon may re-emerge, but my Lebanese friends tell me that so great has been the destruction, so strong the pull of fissiparous tendencies in the various tribal and religious groups, that any hope of reconstructing the Lebanon as it was is an unrealisable ideal. In fact, we may even have reached what one would call a "Humpty Dumpty" situation. Humpty Dumpty has had such a great fall that all the Christian horses and all the Arab men will never be able to put him back again. I hope, my Lords, that I am wrong.
Before considering the main point in this Question, which is of course Her Majesty's Government's policy towards the Lebanon, I should like to look at two aspects of the baffling kaleidescope of Lebanese politics which may not be well known but which are, I think, of considerable importance. The first is the position of the Shia Moslems. The point to make here is that, thanks to their very high birth rate, which I am told is higher than that of any of the other religious group, they are the largest denominational entity in Lebanon. There are now about I million Shia—there may even be 1·1 million—compared with 900,000 Maronites and about 600,000 Sunnis, who were formerly the largest Moslem group. Under their able leader Nabih Berri, about whom I shall speak briefly in a moment, the Shia have extended their influence very effectively in the southern part of Lebanon, so that most of the area south of Beirut now lies under Shia control and they are also gaining ground in the north. As an example of that, I would say that when Nabih Berri called not long ago for student demonstrations against the Israelis, he achieved considerable support in the northern part of Lebanon, which is of course essentially Sunni.
What of Nabih Beni himself as the new leader? He is leader of the Amal militia; he is a man of about 40; he has powerful links with the Druze; and he came to prominence not long ago—in fact, it was in February of this year—at the time of the Shia-Druze takeover of West Beirut. At that time he was able to curb the excesses of some of his followers. I should perhaps remark that there are among the Shia a number of extremists who follow Khomeini, but they are in the minority.
Nabih Bern has the rather remarkable title in the new Government of National Unity of Minister of State for South Lebanon and for the Reconstruction of

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Beirut and the Southern Suburbs. He has two brigades under his command and he seems to be exercising his command effectively. But his main aim is of course to achieve the withdrawal of the Israelis from Southern Lebanon. So much for Nabih Berri.
The second leader who has come to power recently, and about whom very much less is known, is a man called Antoine Land, who took over what I might describe as the ragtag and bobtail army, formerly led by Fuad Haddad. As Haddad grew sicker and weaker, so morale in that extraordinary force deteriorated. Haddad's men were generally described, particularly by the Israelis, as little better than bandits. These two men could not be more different. This is an important point to make. Haddad was of course an Israeli puppet. When one went to call on him in his office at Merj Ayoun, he was always flanked by two Israeli officers. On the other hand, Antoine Land seems to have kept his distance from the Israelis. His role seems to be rather more civil than military. He appears to be working to stabilise the situation in the south pending a takeover by the Lebanese army. But both these men—this is the important point—are working for the withdrawal of the Israelis.
There has been a lot of talk in the Arab press—the Arab League has made statements about it—and, indeed, there have been remarks even in the British press about the extent of Israeli aggression against civil institutions and places of worship in South Lebanon. I do not want to go into that; some of it is distortion. However, may I quote very briefly from an article which appeared in The Times on 29th March:
"Israeli troops stormed the southern Lebanese village of Jibchit with tanks yesterday and fired into a crowd of stone-throwing demonstrators, killing at least six…Among the six was a teenage girl who bled to death after Israeli soldiers refused to allow ambulances and Red Cross workers into the village."
That is a report which we have to accept.
It is relevant and very important to our debate to consider the Israeli presence in the Lebanon. One of the facts which I regret greatly is that the resources of your Lordships' House do not run to a map. If they did, we should see that the Israelis are now in occupation of just about 20 per cent. of the whole country. They are in possession south and east of the Awali River, and some of their guns are only 15 miles from Damascus. There are 15,000 troops there, and their upkeep costs 1.3 million dollars a day.
There is a very considerable feeling in Israel in favour of the withdrawal of this force. As your Lordships may have read in the press, they have suffered very heavy casualties. It is reported that 583 have been killed in the last two years, and the total of the wounded exceeds the total of the Israeli wounded in the 1973 war. But the Israeli Cabinet seems to be unable to make up its mind. However, there has been a very interesting development: a statement by the leader of the Labour Party, Simon Peres, who is tipped to win the next election in July. He has said that if Labour get to power he will withdraw the Israeli forces and leave only small observation posts.
Although some of your Lordships may hold opposing views, I feel that whatever the Israeli Government may say they are unlikely to withdraw, for four reasons. First, there is the long-term Zionist (I
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must call it) aim, which goes way back before the foundation of the State of Israel, to expand north to the Litani River, which lies about 17 miles north of the Awali River, where the Israeli troops now are. That was enunciated way back in 1890. Linked with that is the Israeli desire to make use of the waters of the Litani.
Thirdly, and the most obvious point of all, the Israelis want to counter the PLO activities in the south and ensure that they are no longer in a position to bombard the Galilee settlements. Fourthly, and finally, one could say, looked at from the Israeli side, that Syria is vulnerable and that Southern Lebanon represents an ideal springboard. I feel very strongly that the Israelis are likely to stay on. If I may be a little flippant, I am reminded of that chorus in The Pirates of Penzance when the policemen are being urged to leave. They keep on saying, "We go, we go", and the chorus comes back immediately. "But you don't go".
As for the other occupying forces, I can deal with them briefly. The Syrians are fairly unpopular in much of Lebanon. But there are close ethnic links between the Syrian Sunnis and the Lebanese Sunnis, and there is quite a useful dialogue emerging between the Syrians and the Maronites. Their role—this is an important point—is to try to recreate a unified Lebanon and to promote stability. The Palestinians are only there to counter the Israelis. Several Palestinian leaders have told me that, and I think we can accept it.
What of Her Majesty's Government's attitude? The noble Lord, Lord Kennet, has spoken of the defence aspect, and I should like to touch on other areas where Her Majesty's Government can play a useful role. The presence of our small force, by far the smallest of all the four, was greatly welcomed and we have achieved over the years a great deal in the way of developing cultural relations with Lebanon. I hope that those may be continued. There is of course the possibility of expansion of aid—a very important area—and trade, too. Perhaps I could mention that there is now in Beirut a school for teaching English which was established way back in 1964, exactly 20 years ago, by British initiative and. despite all the trials and tribulations and alarums and excursions, that school is still going strong.
I should like to end on a slightly different note. I should like to remind your Lordships of the genesis of the present troubles. The escalation of violence began after an incident on 13th April 1975, when a Maronite boy of only 14 held up a bus containing Palestinians at a little village called Ain al Rummaneh. He made them get out from the bus, he mowed them all down and 27 were killed. Those are the facts.
I mention that incident because I believe that that 14 year-old boy was no different from any 14 year-old boy among the sons of your Lordships, but he had been corrupted. His mind had been twisted and corrupted by the terrible escalation of terrorism. It is a situation which we find not only in Lebanon. We find it in Iran, for example, where teenage children are being dragged into the army. We see it among the Palestinians—the so-called ashbal, wolfcub guerrillas. The same situation applies in parts of Africa and in Latin America, too. I feel that at some time or other someone has got to try to examine what it is which

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causes this terrible escalation of terrorism and the corruption of the minds of the young. In other words, we should examine what it is that turns a man into a monster and a boy into a beast.
2.53 p.m.
Lord Weidenfeld: My Lords, on the day that I first saw mention of this debate, for which we are so greatly indebted to my noble friend Lord Kennet, I distinctly noticed six headings on the front page of my morning paper, all focusing on the Middle East: news of horror, terror, war in the Gulf, the West Bank, Southern Sudan, the edge of the Sahara, Chad, the streets of London, and of course the Lebanon—a grim reminder of the polycentric and indeed hydra-headed turmoil in the Arab world. This observation is relevant to our approach to any individual crisis in the area, and thus to any discussion of how Her Majesty's Government and the European Community should view the Lebanon. For we must focus on each problem on its own merit and not persist in that obsessive notion epitomised by the hapless Venice Declaration, that all ills in the area stem from, lead to and pale before the Arab-Israeli conflict and the Palestian issue.
In a more recent article in The Times, Sir Anthony Parsons contrasts the hectic and panicky reaction of the West after the 1973–74 war and oil scare, with the calmer, more aloof and even-handed approach to the current Gulf crisis. Calm, aloofness and evenhandedness must be our order of the day in the present phase of the Lebanese tragedy.
No student of the Lebanon would disagree that the campaign of 1982 is but an episode in the seemingly unending horror story which, like some bloodthirsty soap opera, has gone on so long that the viewers seem to have forgotten where it began; 1975 perhaps, or 1958, or 1941—or, perhaps more relevantly, in 1918? But as in any continuous series, it is unfair to take one episode out of context and cast one's villains, saints and sinners with an air of stentorian self-righteousness. History will judge much more conclusively than we can today the true significance of Israeli intervention. History will judge also the wisdom of America's action and inaction in the pursuit of her goals.
But there are certain issues that are less of a danger to peace and stability today than they had been before June 1982. I submit that the destruction of the menacing military infrastructure of the PLO in Lebanon was a positive move. To have removed a band of pyromaniacs from a powder keg has been not only an act of pre-emptive self-defence but a service to the cause of peace in the region.
The other fact that is clearly beyond all doubt is that the Lebanese themselves—of every persuasion and provenance—wish to be left alone; Moslems as well as Christians. They may not get on wih each other but they do not want outside domination. But, of course, each one being too weak to achieve success alone, they form tactical alliances with outsiders—Syrians, Israelis, Americans, Iranians, and Europeans. Then they get trapped into commitments and try to jettison and replace them with breathtakingly sudden reversals of alliances. Such, at any rate, has been the habitual cycle of Lebanese politics.
Our interests in the West converge with those of the majority of Lebanese people. The West needs a free
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and sovereign Lebanon, not one whose governing personnel and policies are dictated and directed from Damascus, Jerusalem, Washington, or Riyadh. That Lebanon is part of the Arab world is, of course, a truism. She trades with, she borders on, and she has strong cultural ties with other Arab countries. Half of her people have religious links with the two main strands of the Islamic family, but Lebanon's role and wish is to be neutral—and a neutral must not be dragged into the feuds and passions of the litigants.
Lebanon has every reason to be friends with Syria and not to harm Syrian interests. But she has also on her southern border Israel—a country with which she genuinely wants to converse and trade, and this should be encouraged by all peace-loving parties in the West. To deny her this right and this opportunity is a blatant infringement of her sovereignty.
In Europe we have three neutrals who are, unquestionably, Western and democratic, both culturally and politically. Yet they feel free to deal with East and West while scrupulously avoiding military entanglements with either bloc. The majority of Lebanon's population wants to be as neutral as Sweden, Switzerland and Austria. That also must be Europe's and Britain's wish and declared aim.
It must be one of our main endeavours to urge that all foreign armies be withdrawn, within a reasonable space of time, from Lebanese soil. To single out the Israelis for unconditional withdrawal confers unwarrantable legitimacy on Syria's claims. It is of course true, as the noble Viscount said, that in 1975 an embattled Lebanese Government, through the Arab League, called in the Syrians, but successive Lebanese governments and presidents have made it clear that they want the Syrians to leave. No one could begrudge Syria far-reaching security arrangements, but President Assad refuses to negotiate even the principle unless the Israelis leave first. To concede to Syria a special relationship which confers historic claims and historic rights in Lebanon would not be wholly dissimilar from conceding, for instance, to a German nationalist a rightful aspiration to Alsace-Lorraine, or from sympathising with an Italian nationalist who is still chanting, "Savoia, Nizza, Corsica!" That is about the measure of the legitimacy of the Syrians' claim to the Lebanon and other parts of that Greater Syrian Empire which in their minds encompasses both Jewish and Arab Palestine.
We talked about the May agreement of 1983. I do not quite agree with my noble friend or, indeed, with the noble Viscount, that this agreement gave Israel an unfair advantage. It must be repeated that although she would have had certain special rights, the Israelis made it clear, and the Americans made it clear, that they would invite a similar symmetrical deal with the Syrians to safeguard their interests. Quite a few people in Europe and Britain saw this agreement as an obstacle to reconciliation in Lebanon and its cancellation as the removal of a road-block to peace. But now that it has been unilaterally cancelled, what has changed? Murder still stalks the streets of Beirut. Disunity abounds. Syria shows no sigh of withdrawing. She still occupies 60 per cent. of Lebanese territory and employs every method of brutal pressure to force her will on the Lebanese leaders.

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Let us not forget that it was Syria who allowed hundreds of Iranian military and religious shock troops to enter Lebanon to convert and subvert the population, making their strongholds in the Bekaa a front line of the Iranian revolution in the Arab world. Now, whereas the Syrians still see as their goal continued domination, the present Israeli Government and, without doubt, any alternative Israeli Government in the future, would wish to withdraw lock, stock and barrel from the Southern Lebanon as soon as adequate security arrangements could be achieved.
I had the opportunity recently of talking to Israeli Government Ministers and opposition leaders, and, to my mind, there is unanimity about one point. I want to assure the noble Viscount, in all sincerity, that Israel has no heart nor stomach for continued physical presence in the Lebanon a minute longer than is necessary. There is unanimity in Jerusalem today that both Syria and Israel have a right to adequate security and that, as soon as both these countries withdraw behind international frontiers, regional or bilateral arrangements should be made to ensure continued calm. A peaceful Israeli handover of the northern part of Southern Lebanon to the Lebanese army, with safeguards for the local population, is essential. A hasty, disorderly withdrawal of Israel would mean endangering the 15,000–17,000 Christians, and some Moslems, including Palestinians, who are still resented by a large part of the indigenous population.
I agree with my noble friend Lord Kennet that there is a positive role to be played by UNIFIL as well as the Lebanese army. The establishment of order in the southernmost part of Lebanon would be best served if the Lebanese army could be immediately strengthened by forces which could induce some trust in the local population.
Since we have a situation in which both Syria and Israel are entitled to security on their borders, but given the mosaic of political currents and ethnic and religious traditions, these Lebanese military elements destined to guard the country's borders must not be out of sympathy with the respective neighbouring power. Thus, the Lebanese army in the Bekaa must include pro-Syrian elements. In Southern Lebanon, the South Lebanese forces under General Lahad—and here, again, I agree with the noble Viscount that General Lahad has proved a very worthwhile and important influence, and his recruiting drive among the Shia, as well as the Christian population, has recently met with much more noticeable success—are in a key position because he entertains correct, if not friendly, relations with the Israelis.
I believe that Europe has an important though discreet role to play. After all, it was two European powers, Britain and France, who were responsible for the order or, if you like, disorder in the Levant in the wake of two victorious world wars.
Since Europe is today militarily, economically and psychologically neither able nor willing to intervene in force and with conviction, it must remain in the wings, compassionate and even-handed. Europe should, specifically, reiterate its view on four basic issues: it should urge the cessation of communal bloodshed and
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the withdrawal of all foreign troops from Lebanon, it should offer to help Lebanon to achieve true sovereignty and be heard and seen to oppose Syrian hegemony.
Europe's attitude towards Israel has—so it is noted in Jerusalem—undergone a slight yet discernible change to the better—perhaps a more realistic perception of Israel as the strongest regional power, and one with a political system that is both stable and flexible—stable in its institutions, and flexible in its capacity for policy changes, thanks to the democratic process. Perhaps it has become evident that to antagonise Israel, to seem to want to split her from her American ally or, conversely, to try to tilt America away from that alliance, can no longer be a main goal of Europe's Middle East policy.
Equally, there has been a sobering realisation of the limited influence of the conservative Arab regimes in resolving conflicts. The Saudis have been disappointing mediators, and I think always will be, for their mercantile prowess is not matched by military or diplomatic clout. The King of Jordan has his hands tied by fear of Syria and ambivalence towards the Palestinian revolution, which is still devouring its own children. While the Gulf is aflame, the Lebanon will not tempt Arab rulers into risky and costly new initiatives. That is why I think that for those in the West who have the true interests of the Arab cause at heart this may well be the moment for a reappraisal of their basic psychological approach.
To nurture illusions and to raise false hopes of decisive intervention is dangerous, and indeed indecent. The best friend is a frank friend, and a frank friend must counsel in the present circumstances a much more realistic attitude to the problems, processes and attainable objectives of peace. I believe that European policy should move away from romantic mirages—the Fata Morgana of facile formulas—and, if I may say so, instead undergo an evolution along Darwinian lines—from prostration and genuflection to an upright stance of friendly equals, striving for a solution in the Lebanon and elsewhere in the Middle East which can ensure the survival of the species.
3.7 p.m.
Lord Caradon: My Lords, our debate has lessened our public support in this House, and we cannot claim that what we say is going to carry great weight among those on the other side of the House or on this: but, nevertheless. I think that the short debate which we have had this afternoon has been of real value, well-timed and indeed most necessary.
Perhaps I might first of all refer to the remarkable speech to which we have just listened. I think that what has been said has been of very great importance. As I listened I went back in my experience to the time when I went up with a British and Free French army into Damascus and Beirut years ago, and worked with the people of the Lebanon in the hope that we could establish a free Lebanon, capable of administering their own affairs. I remember those days, and I wish to say—if I may, with great respect—that the call given to us just now for a declaration from every side that the Lebanese should be free, and enabled to administer

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their own affairs without conflict and bloodshed for the first time for a long time, is I think of very great importance indeed.
I wish to thank my noble friend for his intervention this afternoon, which I think has given increased hope and expectation to us all. We were certainly fortunate in the noble Lord, Lord Kennet, who knows this subject so well and who gave us an excellent historical introduction. Then we had another speech from an expert, the noble Viscount who knows this subject so well and so intimately. So it may be that, late as we are in our timing, the debate may have been of real value.
I wish to put to noble Lords one main point on this subject. It is certainly clear to me and has been for a long time that there are obviously three purposes to be pursued in the Middle East: first, that the Lebanese should be independent; secondly, that the Palestinians should be free in their own homeland and, thirdly, that the State of Israel should be secure. Yes, security in Israel can come only if there is independence in the Lebanon and freedom for the Palestinians; they go together. Without achieving all three of these objectives you cannot achieve any one of them. That is a basic fact which it seems to me is obvious but also absolutely necessary at this time.
Over this weekend there is the possibility that the Lebanese will be able, with all the effort that has been made, to come together with their new cabinet and to agree on processes for establishing peace and security in the Lebanon. It could happen. It is dependent on the withdrawal of Israel from Southern Lebanon. Of course that cannot be immediate, but there should be a real expectation that that withdrawal can take place, and soon. If that can happen, then the coming together of the Lebanese in their new cabinet can be strengthened and they can be given a new opportunity of uniting that lovely country. At the same time there can be a greater hope that the Palestinians in their own homeland—small though that hope may be—will have an opportunity of taking their own decisions about their own future. So there is a hope that all three can go forward: the freedom of Israel; the freedom of the Palestinians and the independence of Lebanon, and that those three purposes can be achieved. If one fails—if, for instance, there were to be a determination by Israel to dominate, to control Southern Lebanon in Tyre and Sidon—then, even with the other two purposes being achieved, there will be no hope of security for Israel.
At the moment we have the worst of all worlds. We have a situation in southern Lebanon which, as we read in the papers, is encouraging violence day by day instead of giving an opportunity for a new understanding between Israel and the Lebanese cabinet. There could be an understanding. There could be a gesture now from Israel, which might say, "We will certainly withdraw. We have no desire"—as my noble friend has indicated this afternoon—"to stay for a minute longer than necessary and we will work out an arrangement whereby we can withdraw". Then this could be the beginning of new developments in the Lebanon, in Palestinian lands and in the security of Israel which would be to the benefit of everyone.
I believe there is an opportunity. This weekend they are meeting in the new cabinet in the Lebanon,
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anxious, ready and eager to see at any rate this main advance as an encouragement for their future. There is also an opportunity for our country and for France to contribute, because, as has been indicated, our country and France have, historically, special obligations in that part of the world. At the moment I do not think the Americans have much to contribute, but I hope that that may change. But there is the opportunity for the English and the French, who have ties, and confidence, in the Lebanon and in the rest of the Middle East, to take over now the leadership in international affairs and not just to accept everything that the United States says.
There is an opportunity for us to take a determined line of our own to insist that the present opportunity is not lost. Yes, I think that could be. I believe, therefore, that we in this country have a very special obligation at this time. It is not an obligation to say, "Me, too," and to go along with what other people say. No, we have something to say for ourselves, along with the French. I believe. Now could be the time, this weekend. I read in my newspaper this morning of talk of closer association between the various representatives of the Lebanese cabinet, of the insistence on one prerequisite—the withdrawal of Israel from their southern territories.
I believe that at this time we could take a lead which would, God willing, in the end, restore to these lovely countries—we think particularly of the Lebanon today—their self-respect. They are extremely intelligent people, and I have great hopes that they will be able to find a way forward if they are allowed to proceed without foreign intervention.
3.16 p.m.
Lord Trefgarne: My Lords, I welcome the chance to respond to the noble Lord, Lord Kennet's Question, for recent developments in Lebanon, especially the formation of a new government of national unity, hold out some prospect at last of movement towards restoring peace in that unhappy country. It is right, therefore, that we should review at this point what we and others in the West, sympathetic to Lebanon and to the plight of the long-suffering Lebanese people, can do to help the new government in the daunting tasks which they face. I should like to review, briefly, some aspects of the conflict in Lebanon and of our policy in this area, and then look to the future and comment on what Lebanon's friends might be able to do to help.
The renewed fighting which broke out in Lebanon in February this year was only one more twist in the Lebanese tragedy which has inflicted so much suffering there for the past nine years. We have now passed the ninth anniversary of the outbreak of the civil war in Lebanon, which was the start of a cycle of appalling violence which has left thousands dead and injured and even greater numbers of Lebanese living without a roof over their heads.
There are some horrifying statistics which give some idea of the scale of the suffering. It has been calculated, for example, that over 100,000 Lebanese have been killed or wounded since the start of the civil war in 1975. As so often in these conflicts, the civilian population has borne the brunt of the suffering. Few people in Lebanon have been untouched by this

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disaster. I mentioned the year 1975. I recall that that was the last occasion on which I had the privilege of visiting that country. I recall, too, that my noble friend Lady Trumpington was with me on that occasion.
The Government, and many in this House, have followed these events with dismay. Peace initiatives have come and gone. Periods of calm have lasted just long enough to raise hopes that Lebanon was on its way back to peace and prosperity, only to give way to renewed bouts of savage, and often senseless, fighting. We have watched these events closely, not just out of compassion, but because what happens in Lebanon matters to Britain and the West. It is in our interests that stability should be restored to Lebanon. A Lebanon in perpetual crisis will continue to attract the attention, and sometimes active intervention, of other countries in the region, making even more remote the prospects for establishing a comprehensive peace in the Middle East and threatening at any moment the escalation of a local conflict into a major crisis not only involving Lebanon's neighbours, but even bringing the super powers to a dangerous confrontation. That is why we continue to take a close interest in developments in Lebanon. That is why we welcome the formation of the new government of national unity under Mr. Rashid Karame.
The new Government face daunting tasks. The immediate ones are to establish an enduring ceasefire in the Beirut area and elsewhere, to reopen more crossing points between East and West Beirut, to end Lebanon's beleagured state by re-opening the international airport and seaports, and to ease the restrictions on communications within the country. At the same time, the Government are pledged to begin to tackle the fundamental problems which come under the broad heading of national reconciliation—those issues of power-sharing among Lebanon's many communities which have aroused so much passion and violence. It is encouraging that the Government have been able to agree in broad terms on a programme for their work, and that this was endorsed by the Lebanese Parliament on 12th June.
Since, as I have indicated, our interests are affected by the success or failure of these efforts, how, then, can Britain help? I think it is important not to exaggerate what we can, or should, attempt. Indeed, we should distinguish between what outside powers can and cannot realistically do.
Let me look back briefly at what we have already done. Throughout Lebanon's crisis we have spoken out in support of the restoration of Lebanese independence and sovereignty. These principles were endorsed again by the statement of the Foreign Ministers of the Ten on 27th March. We shall hold firm to those principles.
But we have also provided practical help. Your Lordships will recall that for a year, from February 1983 until February this year, we provided a contingent for the multi-national force in Beirut. The British contingent earned a high reputation for the courage and efficiency with which they carried out their tasks, which were to assist the Lebanese authorities by patrolling the streets of Beirut, and, at a later stage, by providing an impartial guard for the ceasefire talks between the Lebanese factions.
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As your Lordships will recall, my right honourable friend the Prime Minister announced on 6th April in another place that Her Majesty has graciously approved the award of the General Service Medal 1962, with "Lebanon" clasp, in recognition of the outstanding service performed by the British contingent of the multi-national force and those supporting it.
The resumption of fighting in Beirut, which put an end to these tasks and greatly increased the risks to our men, led inevitably to the departure of the multinational force. The contributors to that force—the Americans, French, Italians and ourselves—hoped that it would provide a basis for political reconciliation. Unfortunately, this opportunity was not grasped.
Britain has also given further practical help in the form of humanitarian assistance to the victims of the conflict in Lebanon. We have contributed generously to the emergency appeals of the International Committee of the Red Cross and the UN Relief and Works Agency—a total of over £750,000 in 1984. This is in addition to our regular contributions to the core budgets of both organisations. Part of the £5 million which we have contributed to UNRWA's budget this year will also be spent in Lebanon.
What neither we nor other outsiders can or should attempt is to interfere in Lebanon's internal affairs. And the truth which must be faced is that the foundation of any long-term settlement is likely to be concerned with the details of agreed reforms to the delicate structure of Lebanon's institutions and to the unwritten agreements governing the administration of the country. It is not for us to pronounce on whether any changes should take place or what those changes should be, still less to become involved in the necessary complex negotiations on these difficult points. All we can do is wish Lebanon's leaders well in this immensely difficult task.
We recognise, of course, that external factors are also crucial to the return of Lebanon to her former stability and prosperity. The Lebanese will not be able to regain their sovereignty and independence while the greater part of Lebanon remains under the occupation of foreign forces. We and our partners in the Ten, and others in the West, have consistently called for the early withdrawal of all such forces. In our view, national reconciliation and the withdrawal of forces should go hand in hand. It is for the Lebanese Government to address themselves to the question of when and under what conditions the withdrawals should take place. They can rely upon our support.
The Israeli Government have stated that they do not intend to retain a single inch of Lebanese territory. We welcome that very necessary assurance. This month is the unhappy second anniversary of Israel's invasion of Lebanon in June 1982. This attempt by Israel to impose her will by force was profoundly mistaken and rightly condemned by the international community. The Israeli occupation of Southern Lebanon, now entering its third year, is a wearisome burden on the Lebanese people in these areas, who find their communications with the rest of the country severely restricted and the local economy disrupted. We recognise however that Israel's primary concern now is

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with security arrangements for her northern border, to prevent any recurrence of attacks launched from South Lebanon on Israel's northern towns and settlements. At the same time we have been concerned at the activities of the "South Lebanon Army", under General Lahad, a local Lebanese militia recruited and armed by Israel. We cannot believe that this force can do anything to contribute to greater security in South Lebanon. However, we naturally support the principle of security arrangements which ensure safety for citizens on both sides of the border. Peace on that border is clearly in the interests of all concerned, inhabitants of Israel and Lebanon alike.
Nor should we confine our attention to Israeli withdrawal. We hope that Syrian withdrawal too will be discussed soon between the Syrian and Lebanese Governments. Syria, like Israel, has security interests which must be protected. But the security concerns of Syria and Israel cannot be met at the expense of Lebanese independence and sovereignty.
Here too, Lebanon's friends in the West and elsewhere should be active. We shall continue to support the Lebanese Government's efforts in international fora and in our diplomatic contacts with those countries who have influence in Lebanon. We shall continue to urge the better use of international forces already in Lebanon. We voted in April for the renewal of the mandate of the United Nations Interim Force in Lebanon—UNIFIL—and strongly favour the idea that the Secretary-General, who has just visited the Middle East should continue his consultations. We hope these consultations may eventually result in agreement by all parties concerned to a wider and more useful role for UNIFIL in helping the Lebanese Government to maintain security in Southern Lebanon. This will particularly be needed in the event of an Israeli withdrawal, to give added protection to Lebanese and Palestinian civilians who may be at risk.
Finally, we and our partners in the Ten and many others in the international community are pledged to help the Lebanese Government in the immense task of reconstruction, to repair the shattering effects of nine
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years of war. Much of the country's infrastructure is in ruins. The economy has been severely dislocated. We can rely on the skill and perseverance of the Lebanese people to make rapid progress in reconstruction, once the all-important foundation of a durable political settlement of both internal and external problems has been laid. But they cannot do it alone. They need—and deserve—a helping hand. We shall be ready to play our part, within the confines of our necessarily limited resources.
In brief, therefore, we shall continue to do all we can to help the new Lebanese Government in their efforts to move once more towards a peaceful settlement, to help preserve that peace, to relieve the suffering of the victims of the conflict and to contribute to the reconstruction of the country. The plight of the Lebanese people, and our own interests in a peaceful and stable Middle East, demand no less.
House adjourned at twenty-nine minutes past three o'clock.

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