HC Deb 14 December 1981 vol 15 cc67-85

As amended (in the Standing Committee), considered.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

No amendments have been selected.

Mr. George Foulkes (South Ayrshire)

On a point of order, Mr. Deputy Speaker. I am concerned about Mr. Speaker's provisional selection of amendments and the fact that he has selected no amendments, particularly with regard to amendment No. 2, which is in, the name of myself and my hon. Friend the Member for Central Ayrshire (Mr. Lambie).

The amendment deals with a matter that was not raised in Committee and relates specifically to the Scottish airports division of the British Airports Authority. I ask for further consideration to be given to the possibility of the amendment being considered, because the topic has not been properly considered at any stage during discussion of the Bill. No detailed consideration has been given to any amendment that would require the British Airports Authority to spend a part—

Mr. Deputy Speaker

Order. The amendments that were submitted have been considered very carefully. Mr. Speaker is not required to give reasons for any decision and no amendment has been selected.

7.1 pm

The Under-Secretary of State for Trade (Mr. Iain Sproat)

I beg to move, That the Bill be now read the Third time.

I can move the Third Reading fairly briefly, since the Bill was given a fairly good going over not only on Second Reading, but in Committee. When my right hon. Friend the Secretary of State introduced the Second Reading debate, he remarked that it was a straightforward Bill that contained only five clauses. It is exactly that—brief and straightforward—and it aims simply to increase the borrowing power of the British Airports Authority and British Airways to cover their investments and other needs for at least the next five years. It also enacts some overdue preconsolidation amendments.

The urgency behind the Bill arises because British Airways has come close to its limit, mainly as a result of exchange rate movements affecting the value of its foreign borrowings, which the Bill will stop. Otherwise, the Bill does not diminish parliamentary scrutiny or governmental control over the borrowings of British Airways or the British Airports Authority. It does not reduce the Government's determination to ensure that both bodies operate in the most efficient and commercial manner. Therefore, the implications of the Bill are no wider than the straightforward but necessary provisions that it contains.

Nevertheless, on Second Reading and in Committee there were rightly several wide-ranging debates that covered many topics of general interest in civil aviation. That was useful and refreshing and provided the Government with a welcome opportunity to hear and note the many views expressed on both sides of the House towards maintaining and improving a healthy civil aviation sector in the United Kingdom. The Government will continue to work towards that end and I therefore commend the Bill to the House.

7.3 pm

Mr. K. J. Woolmer (Batley and Morley)

The Opposition recognise the urgency behind the Bill, as the Government have sought to increase with particular dispatch the British Airways' borrowing limits. For that reason, the Committee stage took only three sittings. However, that resulted in a less than satisfactory discussion on many issues concerning the British Airports Authority and British Airways and left the Opposition unhappy with many aspects of the Government's policies in those important areas.

A feature in Committee was the long time taken up by Conservative Members developing their views of the state of the civil aviation industry. Currently, in Conservative circles, "developing their views" is the parliamentary term for disagreeing deeply. The Under-Secretary was often as lonely as is the Chancellor of the Exchequer when he stands at the Dispatch Box defending his economic policies.

Hearing the hon. Member for Brentwood and Ongar (Mr. McCrindle)—who I do not see in the Chamber—developing the finer points of civil aviation economics and airline policy was similar to seeing the Minister being stabbed by a telegraph post. An unsatisfactory aspect of the debates was the Minister's unwillingness to respond to many important issues because of the current litigation about the British Airports Authority's landing charges and the recent discussions about air fares across the Atlantic. I understand the Minister's difficulties, but the House will feel that a Bill that lays down the legislative framework for an increase of £775 million worth of borrowing limits by two major nationalised businesses should have had the closest scrutiny of policy in financial terms.

The Secretary of State opened the Second Reading debate on 16 November by saying that the Bill is not a legislative earthquake, but a straightforward Bill with only five clauses which should not be the subject of major controversy." [Official Report, 16 November 1981; Vol. 13, c. 41.] With £775 million of borrowing being involved, the Secretary of State has clearly changed his style since his days on the Treasury Bench.

Although there are many points that the Opposition are unhappy about concerning the British Airports Authority's increased borrowing limits—by up to £175 million in due course—I shall deal with only two. The first concerns the Government's financial policy towards the British Airports Authority and its effects on landing charges. As I understand it, the Government have set the BAA the target of a real rate of return on its assets in current cost accounting terms of 6 per cent. per year to be achieved on average over a three-year period. The twentieth report of the Public Accounts Committee in July 1980 said in paragraph 5: These changes were responsible for the substantial increases in the authority's charges effective from 1 April 1980". Does the Minister still accept that that was the case? This is a classic case of the manner in which the Government have dealt with nationalised industries. The gas industry is another good example of the same trick.

First, the Government insist that the charges or prices are raised as a means of cutting the PSBR. The idea was that we would all pay lower taxes, but pay higher prices instead. However, all except the wealthiest now pay both higher taxes and prices. That more fundamental failing of the Government's strategy is now so well recognised that I suspect that even the Minister will not try to defend it.

Having forced the British Airports Authority to raise its charges sharply to its customers, the Government have found their own Back Benchers blaming the nationalised business for being a monopoly and charging what it—or rather the Government—sees fit. Therefore, the nationalised industry gets the blame for the Tory Government policy. Tory backwoodsmen come out of their woods calling for privatisation, which is the new "in" word for denationalisation, or rather, as I suspect is more often the case, calling for the creation of a private monopoly that will benefit private individuals rather than the nation.

Mr. Robert Atkins (Preston, North)

What objections do the Opposition have to the freedom and the choice that is given to employees of the British Airports Authority to buy shares in the industry in which they work, which has proved successful in British Aerospace? I do not think that any trade union leader or any Opposition Member can be opposed to that policy. If there is such opposition, I should like to know why.

Mr. Deputy Speaker

Order. I decided to allow the hon. Member for Preston, North (Mr. Atkins) to complete his intervention, but I remind hon. Members that we are confined to discussing the contents of the Bill. We must not widen the discussion.

Mr. Woolmer

I well understand that, Mr. Deputy Speaker. I shall deal only briefly with the intervention. If the important bodies to which the hon. Gentleman has referred were to be denationalised, employees would have as much right as anyone else to have a share in the undertakings. However, even if 50,000 put £1,000 each in an organisation of the sort that we are discussing, that would provide only a tiny fraction of the capital that would be required to buy it. The Government are attempting to line the pockets of individuals in the City with the cheap sale of a profitable nationalised industry. Their purpose is not to assist the workers in the industry.

The pressures upon the BAA and its charges to the users of its services are increased by the target of a 6 per cent. real rate of return and by the pressure to have a large part of its capital investment programme financed from internally generated revenues. In broad terms, the larger the proportion of external borrowing to internally generated revenues, the lower can be the charges to present consumers. There is considerable logic in that proposition because present consumers might reasonably be expected not to have to pay for future benefits. Almost every owner occupier has bought his or her house on that principle. They have borrowed to buy the asset that will provide benefits over the years ahead.

The BAA investment programme is expected to be over £700 million over the next six or seven years. We are being asked to approve an increase in borrowing limits of about £175 million or about 25 per cent.—that is an external financing ratio of about 25 per cent. That means that 75 per cent. of a large investment programme has to be financed by raising charges to consumers to a level that is higher than is necessary to run the present services. These considerations are always determined by applying the test of balance, but the Minister has been completely unforthcoming about his reasons for striking the balance that we are being asked to accept as an implication of the Bill.

There appears to be no' doubt about the ability of the BAA to finance its investment by external borrowing. It has a low debt-to-assets ratio, a good profits record and good profits prospects. If the Government want to hold down unnecessary price increases, there appears to be a sufficiently good case for them to find some room for manoeuvre.

The second unsatisfactory feature is the Minister's response to the Public Accounts Committee's twentieth report of July 1980, which called for the development of more clearly measurable performance criteria. I always treat allegedly precise and quantified measurements of non-financial performance with the greatest care. In my experience, a careful selection of criteria together with a judicious choice of the means of measurement and definition can usually produce whatever answer one wants. However, measures of performance there are, and the PAC specifically drew attention to them.

The Minister is responsible ultimately for the performance of the BAA and for the justification of the borrowing limits that we are being asked to approve. No doubt the Minister has studied the present measurements carefully and has considered what further aids to assessment he feels are necessary. We want to know ultimately whether he is satisfied with the performance of the BAA as it is revealed to him through his measurements, or where he considers any improvements are necessary on the part of the authority. When the Minister replies I hope that he will give the House his current assessment of the performance of the authority and what improvements, if any, he is still seeking.

I turn to the part of the Bill that deals with British Airways. We recognise the urgency of increasing British Airways' financial powers, and it is primarily for that reason that we have accepted the haste that has accompanied the Bill's progress. However, the Minister has failed to satisfy us on a number of issues. In Committee Conservative Members treated us to a display of mental gymnastics as they sought to decide among themselves whether the airline industry had too little or too much competition. Whether too little or too much, they then argued whether that was good, bad, inconvenient or contradictory or otherwise to their political aims.

When the discarded or disillusioned free enterprise economic advisers to the Government finally returned to their academic offices to play with their models and theories instead of inflicting them upon us, they could do much worse than turning up the speech of the hon. Member for Brentwood and Ongar in Committee. He mused on whether competition between airlines is always a good thing for all, for some, sometimes for some or for all. His advice to the Minister was as follows: Either we"— that is the Government— build up British Airways ready for the sale that surely is preeminent in Government policy or we encourage maximum competition from independent airlines. The Minister must turn his attention again to whether we can continue with both sides simultaneously in the way that we have been trying to do since the passage of the Civil Aviation Act 1980. Worse was still to come, because after pointing out in his view that none of the three major British associated carriers on the Hong Kong route is making much, if any, profit, the hon. Gentleman uttered what sounded like a text from a Yorkshire manufacturer's business philosophy or part of a first-year university examination paper in economics. He said: Competition is grand, but we must be realistic about it"— [Official Report, Standing Committee A; 10 December 1981, c. 77–8.] That sums up the view of many Conservative Members about the problems that are facing the airline industry. The truth is that the Government do not know what they want. In any event, they do not know how to reconcile conflicting policies. The result is a real danger that British Airways may be made further to suffer in their own business and profitability as a result of the Government's pursuit of unfettered competition and conflicting aims.

Of course, we want low fares across the Atlantic, to the Far East, within Europe and within the United Kingdom, but in an industry in which overhead costs and lead times on investment decisions are high and long care is required to develop policies that can be sustained to the lasting benefit of consumers and to the country.

Many would say that too many risks have been taken in using British Airways as something of a moveable giant pawn as the Government have fumbled their way through an aviation policy. We could reasonably ask the Minister tonight for a firm assurance that he will condone no further significant change of routes that would adversely affect British Airways. This is a crucial period of recovery from the recession facing the world airline industry.

In Committee we touched upon the International Air Transport Association conference in Geneva dealing with the question of North Atlantic air fares. Now that the conference has apparently made some progress in the matter, could the Minister give the House his assessment of the position reached so far and its effects upon the finances of British Airways and other major British carriers? If he cannot go into detail tonight—the House will understand if he cannot—will he give an assurance that he will publish his views on this important matter when he has had time to appraise the position?

I come to the question of the pensions of British Airways employees. When this matter was raised in Committee the Under-Secretary said that the matter was currently under discussion—that is, between British Airways and the employees—but that it had nothing to do with the Government. I think that that strikes strangely against the kind of assurances given at the time of the Civil Aviation Bill Committee stage in 1980. At that time my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) put it this way to the present Secretary of State for Employment who was then the Minister taking the Bill through Committee: can the Government assure the employees of British Airways that as a result of this operation their pensions will not be adversely affected? The present Secretary of State for Employment replied then that possibly what would be most likely to damage industrial relations and the prospects of profitable operations of the company would be to interfere in some arbitrary manner to worsen the conditions of the pension fund."—[Official Report, Standing Committee B; 31 January 1980, c. 259–260.] We have come a long way in just a few months. When further pressed at that time in Committee by myself and by my right hon. Friend the then Minister concerned gave repeated assurances that this was not under threat. He went so far as to say that the fund was in sound condition and he could see no reason why there should be any change in the pension scheme.

I raise this matter because the financial limits and the financing of British Airways are one reason why, apparently, British Airways have seen fit now to seek to change drastically the conditions of the pension scheme of their employees. It is no part of our policy, I well recognise, to get involved in details of negotiations between employer and employee, but equally it is our duty to bring matters to the attention of the House when assurances are given to Committees of the House that turn out not to be worth the paper on which they are written. When employees are given to believe that their pension rights are not under threat but in due course they turn out to be under threat, the Minister owes the House an explanation of what has changed in the meantime.

I ask again that the Minister give an assurance that there is no connection between the Government's wish to privatise British Airways and the moves of British Airways adversely to affect the working conditions of their employees.

Similar dissatisfaction was aired in Committee with the explanation given by the Minister on the financing of the redundancy and severance pay scheme, which is currently being implemented by British Airways. I pay credit, as I am sure will hon. Members on both sides of the House, to the way in which the trade unions have responded to the grave difficulties facing their members in the massive rundown of the work force at British Airways in recent months and which will face them in the coming months. About 15,000 jobs will have gone in well under three years.

We must ask tonight, however, as we did in Committee, what this scheme will cost and how it is to be financed. Is it £70 million or £100 million? Surely the Minister has asked about figures of this magnitude and will know the answer. How is the scheme to be financed? Will some part of the financial loan limit that we are being asked to approve go towards paying for this severance and redundancy pay scheme?

I come finally to the financial position of British Airways. During the passage of the Civil Aviation Act last year, we warned that the Government's wish to privatise British Airways was doomed to failure in the light of the severe problems facing the airline industry. Nevertheless, despite the fact that the Government had no mandate and it was no part of their election manifesto, they pressed ahead in a foolhardy fashion, trying to put British Airways into a postion where they could be denationalised.

Does the Minister agree with Sir John King, the chairman of British Airways, that he still expects British Airways to be making a profit at the end of the financial year 1982–83? If the answer is "Yes", can he tell us what is meant by "profit"? Is it an operating profit, or profit after offsetting interest payments and the like?

British Airways have a very substantial amount of external debt. At the moment they are seeking, along with many other airlines, to recover from a truly deep recession in the airline business. Is it credible that British Airways can or should be forced into a position of being sold off at what can only be a dangerously low price before the next general election?

In the journal Aviation Week and Space Technology of 19 October, Sir John King made clear that the Government have had—as one of their primary goals—turning British Airways into a private enterprise company before the next general election. Is it still the Government's intention to do that and, if so, how do they intend to overcome the financial problems of British Airways? What do the Government intend to do as regards the profit track record that would be required for going to the market? What do the Government intend to do, if anything, about the capital reconstruction of British Airways? If we are being asked to approve new high borrowing limits only to find in a few months' time that, in order to sell off British Airways cheaply, the Government come to the House yet again to seek a capital reconstruction programme, that would, in effect, give public money to private individuals, this House would have every right to be gravely concerned.

Mr. Michael Colvin (Bristol, North-West)

I detect an inconsistency between what the hon. Member is saying now and what he said in Committee. I was not a member of the Committee, but I have read the Official Report. In Committee the hon. Member said that he was in large measure in agreement with what was proposed in the Bill. He has already said that obviously part of what is proposed is to get British Airways over a very severe hump and bring it into a fit state to privatise. Would it not be appropriate for the hon. Member to state the Opposition's policy towards privatisation and say whether they would, if perchance they became a future Government of Britain, do what they have said they would do with regard to British Aerospace, which is to return it to the public sector without any fair compensation to the shareholders?

Mr. Deputy Speaker

Order. Interventions should be short and relevant, and confined to the contents of the Bill.

Mr. Woolmer

Thank you, Mr. Deputy Speaker. I am happy to respond to that part of the intervention which was relevant to the contents of the Bill, which seeks to increase the borrowing of British Airways by about £600 million. The Labour Party believes that if such large sums are to be put into a nationalised industry by the taxpayer, the taxpayer has every right to see the benefit and return on that investment in due course. We object to hundreds of millions of pounds of public money being put into industries, only to see them flogged off at cut-price terms because of political ideology rather than in the true interests of the nation or the taxpayer.

Although the official Opposition do not oppose the Bill, we regard the Government's policies in relation to the British Airports Authority and British Airways as an increasing shambles. The Government are trying to point in several directions at once, and in the end they face the grave danger of satisfying no one.

If the Government attempt to privatise British Airways—although I do not expect that to happen—they will face opposition. Tonight, I do not ask my hon. Friends to oppose the Bill, but the Labour Party will oppose the Government vigorously if they try to sell off a national asset—British Airways.

7.32 pm
Mr. John Wilkinson (Ruislip-Northwood)

I congratulate my hon. Friend the Under-Secretary of State on an exemplary first solo. He has piloted the Bill with great skill through to Third Reading, and he showed sympathy and understanding in dealing with the points raised in Committee and on the Floor of the House. I hope that it is the last Civil Aviation (Amendment) Bill that we shall have to debate in this Parliament. If we have to debate another Bill, I hope that it will be to enact the denationalisation of the British Airports Authority.

I say "denationalisation" advisedly, because the hon. Member for Batley and Morely (Mr. Woolmer) suggested that the Conservative Party had advocated the privatisation of the British Airports Authority. I did not do so, either in Committee or the Second Reading of the Bill. I have always advocated the break-up of the British Airports Authority into constituent profit centres. That would be attractive to investors and prove the best means of bringing landing charges down and improving the service to customers and airlines.

The borrowing of the British Airports Authority will constitute about 30 per cent. of its finances for development, whereas 70 per cent. will come from charges, and that worries us. I know that we cannot go into the matter raised by the Transworld Airlines legal action. Nevertheless, we have learnt enough from this measure to realise that it is wrong for a nationalised industry such as the British Airports Authority to have to come to the House to increase its borrowing powers to fund its capital development programme. That is particularly so if the industry is one that could be denationalised and raise its capital on the market.

Mr. Foulkes

Does the hon. Gentleman agree that, while his proposal could fairly be described as denationalisation, there was an alternative suggestion from Conservative Members in Committee that could more properly be described as privatisation?

Mr. Wilkinson

The hon. Member is right, but, as was mentioned earlier, it would be a matter of substituting one kind of monopoly—albeit a monopoly with private equity participation—for what is at present a pure State monopoly. That would not necessarily be a great improvement for the travelling public or the airline.

With regard to the proposed increase in the borrowing powers of British Airways, I have advocated that if Her Majesty's Government are in doubt, as they must inevitably be, about the timing of the flotation of the stock of British Airways on the market in order to achieve privatisation, they should float earlier rather than later, because the political considerations and the benefits to the corporation inherent in an earlier flotation outweigh the possibility—it must be a judgment—of raising more money by postponing the sale of the equity.

I am aware of the great sacrifices that have been made by the employees of British Airways in their valiant attempt to turn the corporation round to profitability—not least in my own constituency, where three major office complexes are to close. The hon. Member for Batley and Morley referred to the loss of jobs. It is interesting to note that a high proportion of the people who opted for voluntary redundancy under the scheme proposed by British Airways have been able to find other gainful employment.

Nevertheless, unless British Airways are able to restructure themselves and get their debt—equity ratio better balanced, they will require more capital, and it would be wrong, in the current economic climate, for there to be more public dividend capital. There should be flotation and the raising of capital through the market.

This is a useful Bill. It has enabled us to air one or two important civil aviation and air transport issues, and I shall support it. I particularly congratulate my hon. Friend the Under-Secretary of State on his part in it.

7.38 pm
Mr. Ken Eastham (Manchester, Blackley)

I thought the Minister was rather casual in his opening remarks when he said that it would be a brief and straightforward debate. Labour Members do not feel that the Bill is as straightforward as the Minister seems to be suggesting to the House. On Second Reading and in Committee, we said that we would not oppose the Bill, but that does not mean that we have no reservations about it. We are not entirely confident about the Government's intentions.

The Minister will agree that on numerous occasions reference has been made to selling off. That is a very strange way in which to administer taxpayers' funds. There have been big handouts to make the operations profitable, but then the Government seem to be hell-bent on giving away the assets to the private sector. I cannot imagine any private business in which the owners of the shares and those enjoying the profit would suddenly decide to give everything away to strangers.

I have a great deal of sympathy with the British Airports Authority, because it is constantly being harassed to make more profits. The emphasis seems always to be on more profits rather than a better service. Pressure is constantly being exerted to reduce the labour force, but if, one day, there were to be a huge mishap, suddenly everyone would be running for cover and saying that he was not to blame because it was an act of God. There may be all kinds of consequences when there is extensive demanning.

The hon. Member for Preston, North (Mr. Atkins) said on Second Reading that if the London airports did not expand the business would go to Europe. I take issue with him on that. I realise that hundreds of millions of pounds are being pumped into the southern airports and that an inquiry is taking place. I feel compelled to draw special attention in this context to Manchester international airport, which has great potential and is indeed a money-spinner for the nation. I wish to add some flesh to the bones of this matter, as the Minister seems to believe that hundreds of millions still have to be spent down south.

In a letter to me the chief executive of Manchester airport, Mr. Gil Thompson, stated in relation to profits at Manchester airport: you will note that in every year except one since 1959, a surplus has been achieved. In the early years the Airport was supported by rate contributions, but in recent years there has been substantial contributions to the City and County rates. In relation to the capital programme, Mr. Thompson says: In the current financial year £8.472 million will be financed from loan. Borrowing powers are available for this amount because it was the main part of the expenditure required for three major schemes which were designated by the Government as being of National/Regional importance. However, in 1982–83, the borrowing powers granted are only £4.7 million (at outturn prices) for the same three schemes, as no new schemes have been approved. This is only a small part of the total capital programme of £12.5 million and most of the remainder of the programme will have to be financed directly from revenue resources. This puts a severe strain on the revenue budget and pushes up charges to the airlines more than would otherwise be necessary. In relation to Manchester international airport, I also briefly draw the Minister's attention to a document published in November this year on behalf of the North-West Development Association, referring to the economic problems of the North-West of England, in the form of a memorandum to the Prime Minister. With regard to airports and investment, the following statement is highly significant: Moreover, the British Airports Authority's proposals to expand Stansted as London's third international airport would, if implemented, add substantially to the imbalance of investment already evident between the South East and North West England and pose a substantial threat to the future of Manchester International Airport, one of the key growth points of the North West economy, yet still awaiting a direct rail link. The Minister will recall that I said in Committee that we should be most grateful if he would consider sympathetically this very small link to the main line railway system, which would bring greater profitability not just to Manchester but to the whole North-West region extending as far as the Scottish coast.

I sincerely hope that the Government have no sinister intentions with regard to Manchester international airport. I give notice at once, so that the Minister understands clearly, that we say "Hands off Manchester airport". What the ratepayers have paid for, the ratepayers intend to keep. I assure the Minister that I should certainly find support among his Back Benchers if the Government had any ideas about capitalising upon something that has been so dearly paid for and nurtured over the years.

The Government are trying to give a respectable face to privatisation, but it seems to us to mean that taxpayers can keep the loss while private investors join in the looting.

Mr. Robert Atkins

What about the employees?

Mr. Eastham

I trust and hope that the employees will receive security and a decent wage, as in other industries. I do not necessarily believe that the employees of the British Airports Authority or British Airways are different from those of any other company such as ICI or GEC. One trusts that they are entitled to the best conditions, wages and prospects, but I do not believe that we need some kind of gimmick to keep them sweet by offering them assets being taken from taxpayers. Not all taxpayers can work for the British Airports Authority or British Airways, so that must be taken into account when considering the justice or injustice of the idea. The hon. Member for Preston, North constantly puts that forward as a solution, but I understand that the trade unions are very uneasy about the position. Nowadays there is less concern about buying interest in companies and more interest in keeping jobs.

The Government would gain greater credibility if they applied themselves to the task of keeping workers rather than killing them off in their thousands. They are managing the entire industry in a brutal and unwise fashion, and it will be no better for their interference. The Opposition are suspicious—and I believe that in due course we shall be proved right—that that is not in the interests of the industry or the airports, but only in the interests of Conservative Members' friends who hope to make some quick profits that they have not necessarily paid for. We believe that the taxpayers should reap the benefits of their investments, just as the ratepayers of the Greater Manchester area should reap the benefits of their investment. That is why we give notice that the Government should not get any sinister ideas about taking over Manchester international airport. If they do, there will be a real showdown in the House.

7.49 pm
Mr. Robert Atkins (Preston, North)

I do not wish to delay the House, because I know that that would not be popular. I join by hon. Friend for Ruislip-Northwood (Mr. Wilkinson) in congratulating the Minister, who, to use a phrase close to both our hearts, opened the batting extremely well. At the other wicket the hon. Member for Batley and Morley (Mr. Woolmer) made his maiden appearance in Committee as spokesman on these matters. Those of us who are interested in aviation matters were thus able to discuss this subject in a way that we had not done for some time and to have an informed debate that was unique in my experience of these matters.

It also brought out some differences in attitude to the matter referred to by the hon. Member for Manchester, Blackley (Mr. Eastham) and by my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle), which is how we should continue to fund the British Airports Authority, and also British Airways. Hon. Members were united in their concern about the charges levied by the BAA, not necessarily in a critical or hostile fashion, but rather because the airlines, including British Airways, were experiencing great difficulties in a recession. It was felt that increased charges would not help.

As a result of that concern, two responses were made. Conservative Members expressed an interest in the provision of some sort of altered position for the BAA, based on our experience of British Aerospace—in other words, 54,000 people subscribing to the gimmick referred to earlier. The same can be said of other companies, such as British Telecom and the National Freight Company. There are examples of how we can provide an alternative financial structure for the BAA.

I strongly believe in the excellence of the people working within the BAA, from the chairman downwards, and am confident that they are well suited to meet this challenge. Such a challenge would create a new area of activity, and I am satisfied—

Mr. Eastham

We heard the same arguments when parts of ICL were sold off, and we now know what a disaster that was. Will the hon. Gentleman reflect on some of the sentiments now being expressed by thousands of ICL workers who suddenly find themselves with no jobs?

Mr. Atkins

I suspect that I should be ruled out of order if I were to take up that challenge. Perhaps we can discuss this matter outside the Chamber at some other time. Much as I should like to accept the challenge, I am sure that the Chair would rule me out of order.

There have been some misunderstandings about what Conservative Members have suggested, and the debate has provided an opportunity to spell out our interests. I hope that the Minister will consider the representations from Conservative Members about the privatisation of the BAA. As I said earlier this afternoon, I believe that the BAA is well run, and I am sure that the challenge laid down by Conservative Members will be met.

Finally, I believe that the difficulties experienced by British Airways as a result of the recession and overmanning have come about because of the pressure imposed on them by Conservative Members, who have invited them to submit a prospectus to the general public to buy shares, both within and without the company. To that extent I congratulate the management of British Airways on what it is doing and on the skilled and compassionate way in which it has appreciated the problems of its staff, not to mention the way in which it has got to grips with the managerial problems experienced by the airline.

In conclusion, although I referred to Schiphol and the loss to Europe if British airports were not expanded, like the hon. Member for Blackley I support the development of Manchester international airport. It has great potential and ought to be expanded in whatever way possible. I should not like the hon. Gentleman to be under any misapprehension in that regard.

Finally, I support the Bill, but, as my hon. Friend the Member for Ruislip-Northwood said, our wish is that it was not needed. Having said that, it has enabled us to discuss these matters, which we do all too rarely. I congratulate the Minister on the manner in which he has piloted the Bill through Committee and the House, and I ask him to consider urgently the suggestions made by my hon. Friends about privatisation. With those remarks, I wish the Bill a fair passage.

7.54 pm
Mr. David Ginsburg (Dewsbury)

Like the hon. Member for Preston, North (Mr. Atkins), I do not propose to detain the House for too long. The Bill is necessary because the Government are both the banker and owner of British Airways and the BAA. We are dealing with large sums of money—£175 million in the case of the BAA and £600 million in the case of British Airways.

As has already been said, British Airways face major financial, economic and social problems, but if we are to have an adequate presence in the North of England, the financial infrastructure must be satisfactory. Nevertheless, when looking at nationalised industries as a whole, one must conclude that some of the arrangements for parliamentary accountability are far from satisfactory.

Much of our legislation, although not necessarily this Bill, goes into too much managerial detail and does not give enough thought to financial priorities. Therefore, while I support the Bill because it is financially necessary, I hope that the Government will think about interposing a State holding company into which many of the nationalised industries could be absorbed so that our debates can concentrate on the major priorities.

I think in particular of financial matters. We should view this in the round, not merely in terms of the financial involvement of British Airways or the BAA, but the financial problems of the other industries as well. As it is, our piecemeal debates often interfere with the managerial discretion of the industries concerned. Having said that, I have no doubt that British Airways in particular now face a major financial crisis. It would, therefore, be wrong and churlish of the House to deny the Bill its passage.

7.58 pm
Mr. George Foulkes (South Ayrshire)

I underline what my hon. Friend the Member for Batley and Morley (Mr. Woolmer) said about the Government rushing the Bill through the House. We did not have much time to deal with many of the important issues in Committee. The third sitting was truncated, and my hon. Friend did not have an opportunity to make many of his points in criticism of the Government's policies. It is a pity that we have not had a greater opportunity to do so this evening.

It has been a pleasure to listen to a brief intervention from one of these new-fangled Social Democrat chappies. They seem just about able to creep in and interpose a few thoughtful words at this stage of a Bill. However, they do not seem all that enthusiastic about undertaking the hard grind in Committee. I understand from my hon. Friends that the SDP was recently offered places on several Committees but refused to accept them. It ought to be made clear that the SDP is not that enthusiastic about undertaking the day-to-day work carried out by other hon. Members.

Mr. John Roper (Farnworth)

The hon. Gentleman has made some rather general accusations. It would be more helpful if he would make particular ones.

Mr. Foulkes

I understand that they were offered—

Mr. Deputy Speaker

Order. The hon. Gentleman must confine himself to the Bill rather than comment on interventions that go wider than its Third Reading.

Mr. Foulkes

Thank you, Mr. Deputy Speaker. I assure the hon. Gentleman that later outside the Chamber I shall give him a specific example.

One of the matters discussed in Committee—my hon. Friend the Member for Manchester, Blackley (Mr. Eastham) touched upon it today—was the question of the imbalance of British Airports Authority expenditure. There is an amazing amount of expenditure in the South-East of England but only a relatively small amount in Scotland. Reference to Manchester and other provincial airports, in terms of general Government spending, is valid but those airports are not directly affected by British Airports Authority expenditure because they are not controlled by the authority. It is the case, however, that the authority owns and controls four Scottish airports.

Over the next five years, the authority plans to spend only £11 million in Scotland, compared to £600 million in the South-East of England. It is not as though projects and plans for Scottish airports did not exist. I put a number of specific suggestions to the Minister in Committee. To his credit, the Under-Secretary of State took them on board and asked the British Airports Authority to investigate. I suggested a major link between Prestwick airport and Prestwick town station to enable passengers and their baggage to move easily from one to the other. It will be found, however, that money is not available to spend on Prestwick airport because so much has been allocated to the South-East of England.

I should also like to mention the imbalance that exists between the South-East of England and Scotland in relation to landing charges. I asked the Minister if he would give a positive boost to Prestwick airport. Such a boost could be provided if the British Airports Authority gave priority to lower charges at Prestwick to encourage flights to switch to Prestwick from the South-East of England. I had not realised the extent of the imbalance. I had the opportunity on Friday to visit Prestwick and to talk to Mr. Gilbert Gray, manager of the airport, and Mr. Graham Wylie, chairman of the airport consultative committee. I ask the Minister to investigate the information they gave me that landing charges at Prestwick airport are five times as great as the charges for an equivalent aircraft at Gatwick. This is quite the opposite to a policy of giving positive discrimination in favour of Prestwick. It discriminates against Prestwick and encourages more airlines to use Gatwick.

I was chided by the Minister and warned against being unrealistic about the possibilities for Prestwick airport. I agree that suggestions should not be unrealistic. I hope, however, that the Minister will be able to enter into discussions with the airlines and British Airports Authority to break the dangerous downward spiral in which landing charges lead to decreased use of the airport only to be followed by a further increase in charges and a still greater decrease in use of the airport. This vicious downward spiral needs to be broken.

As fewer airlines use the airport and the airlines that are using it do so to a lesser extent, the effect, combined with the break-even policy imposed on individual airports by the Government and the British Airports Authority is that charges can only go up. The spiral might be broken if the Government were able to reach some agreement with the airlines and the British Airports Authority leading to a commitment by airlines to use the airport for a new series of flights in return for reduced charges. I hope that the Minister will consider this a positive suggestion.

I should like to turn now to the issue of denationalisation or privatisation. This began to sound in Committee like an orchestrated chorus from the Conservative Benches. Time and again, there was the clarion cry from Conservative Members about privatisation or denationalisation. This causes great difficulties in relation to morale. Indeed, it leads to lowering of morale in all nationalised industries. The industries feel that they cannot win. If they make a loss, they are criticised by Conservative Members for being inefficient. Hon. Members throw back their arms and say that nationalised industries cannot make a profit.

When the screws are applied or, perhaps more importantly, when nationalised industries themselves see ways to improve efficiency, whether through demanning or other means, and make a profit in one sector or another, then the greedy eyes of Conservative Members and their friends are cast upon the nationalised industry concerned or a sector of it. The industry is immediately seen as ripe for plucking. It is suggested that it should be hived off, privatised or denationalised so that some person—some friend, in general terms, of Conservative Members—will make a profit out of it instead of that profit going to the taxpayer, who made the investment.

The Under-Secretary of State is an author of some repute. That brought a chorus of "Hear, hear" from the Government Front Bench that I would like put on record. The hon. Gentleman should go into the field of writing television thrillers like "Dallas" where, at the end of one episode, Sue Ellen is left with her lips quivering or J.R. is left in a state of absolute shock about what is to happen to him and his assets in the next episode. The same situation was seen in the Civil Aviation (Amendment) Bill Standing Committee. Believe it or not, drama does take place in Committees of the House of Commons. At the end of the first sitting, the Under-Secretary of State said: I shall leave the Committee on a cliffhanger. When we return to our deliberations on Tuesday, I shall reveal the Government's attitude to the very important question of the privatisation of the British Airports Authority".—[Official Report, Standing Committee A, 3 December 1981; c. 36.] The hon. Gentleman built up this amazing tension. Until the next Tuesday morning, I could hardly bear the excitement. I am afraid that, like many cliffhangers, it turned out to be a disappointment. Whether, like the new Under-Secretary of State for Scotland responsible for health matters, whom I see on the Government Front Bench, officials told him that he should not say what he had intended to say or what he had said he should not have said, I am not sure. When hon. Members returned on Tuesday the Under-Secretary of State said: I am strictly constrained in what I can say". The hon. Gentleman then referred to what his right hon. Friend had said on Second Reading, which, by that time, was old news. The only new development was the hon. Gentleman's remark: I shall study with the greatest attention the novel, important and constructive proposals put forward in Committee by my hon. Friends on that subject".—[Official Report, Standing Committee A, 8 December 1981; c. 37.] When my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) used to say that to me in my local government days, I knew that I had had it. That was it—finished. I hope that that is what it means to the Under-Secretary of State. I make light of the matter but it is important.

The suggestion, which has been made again today by Government Members, is that each airport should be packaged, wrapped and sold to private enterprise. The hon. Member for Ruislip-Northwood (Mr. Wilkinson) made that suggestion today. He was talking about Heathrow Ltd. competing against Gatwick Ltd. and perhaps Stansted Ltd. I reject the concept of privatisation, but in the context of the South-East of England, and bearing in mind the philosophy of Government Members, that suggestion has some logic. For Scotland privatisation would be disaster. It is inconceivable that Aberdeen competes with any other airport. Stornoway cannot compete with Sumburgh. There is no alternative to Sumburgh if one wants to fly to the Shetlands.

In Committee it was said that Prestwick would compete with Glasgow. That is the danger. The Under-Secretary of State was equivocal in the extreme in Committee. I ask him to give an unequivocal statement today. If he does not, the Secretary of State, who should have a greater interest in Prestwick than I have—although sometimes I doubt whether he has—will be worried about the implications. I hope that we shall have an unequivocal declaration from the Under-Secretary, if not today, soon.

I hesitate to say this, but the example used by Government Members in favour of privatisation was the John F. Kennedy airport in the United States. Government Members have suggested that airlines should be able to run their own terminals, as they do at John F. Kennedy airport. I recently arrived at the British Airways terminal there and had to transfer to Eastern Airlines. The Eastern Airlines terminal was next to the British Airways terminal, but in an anti-clockwise direction. Unfortunately the buses operated in a clockwise direction so I had to go to Trans World Airlines, Pan-Am and Western Airlines terminals. It took an hour. When I returned to Heathrow I experienced a new-found appreciation, sympathy and feeling of commendation for Heathrow.

It is appalling and sometimes sinister when hon. Members praise the British Airports Authority and its management and then say "Although it might be doing a good job we, for our doctrine and dogma, will sell it off and let someone make a private profit out of it".

A recent incident at Prestwick causes the grave concern and I urge the Under-Secretary to look into it. Many of us have, for a number of reasons, expressed doubts about British Airways' borrowing consent. For some time we have been concerned about the negative attitude that British Airways adopts towards Scotland, and, in particular, towards Prestwick airport. Last night a British Airways jumbo jet from North America was diverted because it could not land in the South-East of England. It was due to land at Prestwick after permission had been requested for that. The British Airports Authority and air traffic controllers said that it was possible and, indeed, desirable for it to land at Prestwick. It did nor land at Prestwick but was diverted to Glasgow airport, causing annoyance to people in Glasgow. It was diverted to an airport—one which is unsuitable for jumbo jets—away from Prestwick which could have handled it properly. The reason was that British Airways staff were having an office party. The Under-Secretary draws a sharp intake of breath. For those of us who day in and day out, night in and night out are pushing for Prestwick and trying to provide a positive incentive for people to use the airport to be undermined by British Airways and its staff is a galling experience. The Under-Secretary has been very good. I have said that before and I have to swallow hard when I say it, but he has always taken up our points in Committee and I hope that he will take that up.

Finally—and I shall say that only once, unlike the hon. Member for Preston, North (Mr. Atkins) who said it on three occasions—I underline what my hon. Friend the Member for Batley and Morley said about the Government's aviation policy. I mean no disrespect to the Under-Secretary who took over only recently. I hope that he is able to sort out what ray hon. Friend described as a shambles. We do not know what is happening to British Airways and it does not know. In spite of requests by hon. Members, there is no information about the intended date of privatisation, what form it will take or about any other aspect. That we are considering this Bill shows that the Government have no immediate plans. Whatever hopes we had, I am sure that there will be another Civil Aviation (Amendment) Bill because British Airways is not ready for privatisation and will stumble through another year of uncertainty.

The Government are in a muddle over their airports policy. Two nationalised bodies, British Airways and the British Airports Authority, are locked in mortal combat about whether there should be a new airport at Stansted or a fifth terminal. That will cost thousands of pounds of taxpayers' money in addition to the cost of the inquiry. The Government have no clear policy.

The Government have a policy of laissez-faire, of free enterprise and of allowing the airlines to do exactly what they want, instead of the policy suggested by my hon. Friends the Members for Blackley, Central Ayshire (Mr. Lambie)—in Committee—and others of encouraging the maximum use of existing airports, some of which are underused. The Government prefer to spend millions of pounds on building in the South-East of England an extra airport which is unnecessary. When airports in the provinces and Scotland are underused the Government should positively encourage their use.

The Government's airports policy is in a shambles. I hope that we shall have the opportunity in the near future to return a Government with a more sensible, direct, positive and planned policy. In case there is any doubt, I refer to a Labour Government.

8.18 pm
Mr. Sproat

I congratulate the hon. Member for Batley and Morley (Mr. Woolmer) on his first appearance at the Dispatch Box. He and I have faced each other in Committee for a number of weeks. I said that I was astounded at how quickly he had grasped the intricate details of this business. I am now astounded at the apparent confidence with which he delivers himself. On this occasion I wish that I could feel that confidence, or at least masquerade in it.

We are grateful to the hon. Gentleman for the manner and the speed with which he dealt with the Bill in Committee. As he said, the matter is urgent, at least for British Airways. It is vital to get the Bill through because otherwise British Airways would be in breach of the law by exceeding their statutory borrowing limits. We are under no misapprehensions about the fact that there are parts of our policies of which the Opposition do not approve. Nevertheless, we are extremely grateful for the general attitude and manner that the Opposition have displayed.

The hon. Member for Batley and Morley raised the vexed question—it should not be a vexed question—of the 6 per cent. CCA return. It has not been imposed on the British Airports Authority; the British Airports Authority has agreed to it. For some reason, hon. Members on the Opposition Benches seem to object to the whole concept of the British Airports Authority making a proper return. What is so extraordinary is that they enunciated it first. The 1978 Labour White Paper referred to: the principle that air transport facilities should not in general be subsidised by the taxpayer or ratepayer. The official Opposition having enunciated the principle, the Government have gone a little further by putting flesh on the bones and saying that the taxpayer should not subsidise the ordinary airline or air traveller. We have said that a 6 per cent. CCA rate of return is the proper way to go about it. I would go further and defend that step in gross and in detail, but, unfortunately, as the House knows, I am constrained because the matter is currently before the courts. Otherwise, I assure the Opposition that we would explain in the tiniest of detail exactly why the policy is necessary and why it conforms exactly with the principles enunciated in the 1978 Labour White Paper.

My hon. Friend the Member for Hertfordshire, South-West (Mr. Page) and I heard time and again in Committee complaints from the Opposition about the BAA not being allowed to borrow more. We became weary of listening to them. However, the only Government ever to put a zero cash limit on the BAA's borrowing were the previous Government, when in 1979 the right hon. Member for Lanarkshire, North (Mr. Smith), who is now the Shadow Secretary of State for Trade, refused to allow it to borrow a single penny. It comes ill from the Opposition to say that we should be criticised because we have an EFL of only £14 million. That matter should be placed on the record.

The hon. Member for Batley and Morley has a good point about the performance criteria, and we agree 100 per cent. It is not necessary merely to give a nationalized industry a rate of return to achieve. It is necessary to have other performance criteria. We have imposed certain performance criteria that have been agreed by the British Airports Authority—for example, the ratio of employees to passengers and the ratio of operating costs to passengers. There are various other standards, which I explained in Committee. The question of the speed at which baggage is reclaimed and the volume of customer complaints are closely monitored by the BAA.

The hon. Gentleman switched his attention from the British Airports Authority to British Airways. Having lavished compliments on him earlier, I cannot continue in that happy vein. The first thing that he said was that the Government did not know what they were doing about competition policy. If there is one direction that the Government know 100 per cent. where they are going it is on competition policy. We are in favour of it. We removed specific guidelines currently imposed on the CAA. We are doing everything that we can to see that fair and free competition for our airlines is the order of the day.

The hon. Gentleman chose an unfortunate example in Hong Kong. In Committee I believed that I had made it clear that, although we had introduced competition on the Hong Kong route, the two airlines—Cathay Pacific and British Caledonian—are making profits on the route. Not only does the customer benefit by lower fares and an increased number of flights, but airlines benefit in their profits.

The hon. Gentleman asked for an assurance that we would not allow more competition that might adversely affect British Airways, but I can give him no such assurance. If necessary, through the good offices of the CAA, the Government are certainly prepared to grant further competitive routes.

The hon. Gentleman fairly made the point about pensions. It is not a matter for the House but for the management of British Airways. I give him the specific assurance for which he asks. Any changes that may be made in the pensions plan have absolutely nothing to do with our plans for the privatisation of British Airways.

Mr. Woolmer

In Committee on 31 January 1980 the then Minister stated: The investments have been well made and wisely placed, and if the Board had thought that there was any inadequacy in the fund I am sure that it would have brought it to the attention of Ministers."—[Official Report, Standing Committee B, 31 January 1980; c. 267.] Was that done before British Airways started to reduce the scheme for its employees?

Mr. Sproat

The management told the Government exactly what it was fitting for the Government to know about the detail of the plan. It said that it was going to retrench, and retrench it certainly has. It is only fair to compliment Sir John King and Mr. Roy Watts on their successful retrenchment.

My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) made another powerful speech in favour of privatisation and/or denationalisation. He courteously told me that he would not be able to stay for the debate but I pay tribute to the part that he played in Committee. I shall take careful note of the arguments that he and my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) put forward, although there might be a slight nuance of difference in the speed at which our privatisation goes ahead. [Interruption.] The hon. Member for Glasgow, Garscadden (Mr. Dewar) need not laugh. He will be laughing on the other side of his face when we begin to privatise British Airways. I hope that he will find it as amusing then as we shall.

Mr. Woolmer

Bearing in mind that the hon. Gentleman pressed not for privatisation but for denationalisation, will the Minister assure us that if he proceeds with the folly it will be to sell off only a minority of the shareholding and not 100 per cent.?

Mr. Sproat

I am not sure whether the hon. Gentleman is talking about British Airways, but my mind is entirely open. I certainly do not rule out the chance of selling off more than a minority shareholding. As my hon. Friend said on 16 November 1981 at column 42, we are entirely open-minded about the British Airports Authority. That open-mindedness extends over all Conservative policy. We are extremely open-minded over all these matters.

The hon. Member for Manchester, Blackley (Mr. Eastham) made a valuable contribution in Committee, but I wish to take him up on a little semantic slip this evening. He said that he could not be confident of the Government. He can be absolutely confident that we shall privatise and/ or denationalise British Airways. There is no question about it. He can rest his confidence on us in that matter.

I go along with the hon. Gentleman in saying that Manchester is an excellent airport. Unfortunately, it is not a BAA airport, so I feel constrained from saying other than that I have taken note of what he says. As I said in Committee, I shall do all that I can to allow Manchester to develop as an extremely important and valuable international gateway for this country.

The hon. Member for Dewsbury (Mr. Ginsburg) welcomed the Bill on behalf of the Social Democratic Party—with the party's usual broad brush as opposed to a pointillist technique. The hon. Gentleman has now left the Chamber but I suppose that we should be grateful for the broad brush approval that the Social Democrats give to the Bill. Finally—

Mr. Donald Dewar (Glasgow, Garscadden)


Mr. Sproat

For the hon. Gentleman to say "Finally" like that is like being accused of lying by the former United States President, Richard Nixon. The hon. Gentleman probably speaks longer on almost every subject than any hon. Member.

The hon. Member for South Ayrshire (Mr. Foulkes) spoke a little unfairly about the imbalance of the British Airports Authority's spending between Prestwick and the London airports. He knows that I am anxious to do everything that is reasonably possible to promote the prosperity of Prestwick airport, but it is no use burldng the fact that Prestwick has about 360,000 passengers a year whereas the London airports have 36 million passengers a year. To ignore the sheer weight of passenger traffic and to say that the expenditure should not be related to it is to do little service to Prestwick. However, we have been over that ground fairly frequently in the past and I hope that the hon. Gentleman will accept that I am determined to do everything that can reasonably be done for Prestwick.

I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed.