Source: https://api.parliament.uk/historic-hansard/lords/1986/may/15/airports-bill
Timestamp: 2019-04-24 16:48:07+00:00

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§ The noble Lord said: I think it may be for the convenience of the Committee if I speak not only to Amendment No. 1 but also to Amendment No. 3 at the same time. With the leave of the Committee I 1280 should like to make one or two introductory remarks, but I shall not make a Second Reading speech.
§ From these Benches we are still opposed to the whole principle of privatisation and to the whole principle in Part II regarding local authorities, but our purpose in all our amendments will be to make the Bill a better and more workable Bill. It is important that it is recognised that we are the first country to enter the new ground of private ownership of airports, and it is therefore very important that consideration be given to all the new clauses and all the amendments that are put forward.
§ The Government have recognised this by the large number of amendments that they have already tabled for the Committee stage. We are grateful to the noble Earl for having given us some Notes on Clauses for at least some of the new clauses, and we hope that the balance will be coming along. That indicates that the Government have had to have second thoughts on a number of matters since the Bill came from the other place.
§ As I said, we adhere to our general desire to retain public ownership of British airports. The amendments that we are proposing have certainly not been tabled with any aim of separate privatisation for Stansted. Members of the Committee will recall that when the inspector's report was debated we were prepared to support limited development of Stansted, in that developments outside Stansted or at Stansted itself might relieve pressure on other areas of the South-East. But if Stansted is now to develop, it should operate fairly in relation to other airports, particularly the airports outside the South-East. No one can deny that hitherto Stansted has not been a free-standing airport. It has been generally agreed that the existing charges at Stansted are very much lower than those at, say, Manchester, Birmingham or Luton. In fact, when one looks at the figures given by Grieveson Grant—and the Committee will recall that I have already quoted the leading stockbrokers Grieveson Grant—in their investment research aimed at encouraging people to purchase BAA shares whenever it should be privatised, on page 25 one finds the following figures: in 1981–82, the total income was £2.4 million but the loss at Stansted was £4.3 million; in 1982–83, the income was £2.3 million but the loss was £4.5 million; in 1983–84, income was £2.9 million and loss was £3.9 million; and in the last year, 1984–85, income was £3.7 million with an operating loss of £3.1 million.
§ Therefore, it can be appreciated that we are concerned that Stansted would not be operating fairly if that sort of thing continued under the provisions of the Bill as they are now before us. Let me make it absolutely clear that on these Benches we are not opposed to financial help when it is essential for economic and social purposes, but that certainly cannot be said to apply in the case of Stansted. We must ensure that all finances are transparent and that any finances in the form of loans must be obtained on the open market.
§ The Secretary of State has said that arrangements would be made to eliminate any possibility of subsidy and that the market would determine the pace of development at Stansted. That is one purpose of these 1281 amendments, but it should be written into the Bill and not be the subject of a statement from the Secretary of State. Political developments are such that the present Secretary of State may not be there to implement these aspects of the Bill. Therefore, one must ensure that this provision is actually written into the Bill.
§ It may be argued that the Civil Aviation Authority will have power to prevent predatory pricing but that—in those words—is also absent from the Bill. The subsidy could be justified if it assisted in planning to form part of a general coherent policy and would not cause any detrimental effects to the rest of the system. I refer to the whole system of the aviation industry throughout the United Kingdom. It cannot be denied that if Stansted were given a special pricing position or given special subsidies it would have an effect on the aviation industry in other parts of the United Kingdom. The subsidy to Stansted would not meet the criteria which I have suggested should be part of a coherent policy which does not cause detrimental effects elsewhere.
§ The regional airports have to operate on a free-standing basis. When I looked to see the view which was expressed on behalf of the Government, I found that the Under-Secretary of State, Mr. Michael Spicer, speaking in the other place on the 20th February, said: It is totally accepted by the Government that none of the three London airports should be able to develop or trade unfairly against other United Kingdom airports. That is why we will insist that the London airports will be run as separate companies with transparent accounts. They would only be able to borrow at market rates of interest and unfair cross-subsidisation would not be allowed between, for instance, Heathrow and Stansted airports".
§ With that quite definite statement one would hope that the Government would therefore give wholehearted support to these amendments. That is the purpose of them, and we want that statement written into the Bill in the form of the amendment which I now propose to move. I beg to move.
Before the noble Lord sits down, would he be good enough to enlighten the Committee as to the term "free-standing company"? What is its legislative status and provenance? Is it a term of art? I do not think I can be the only member of the Committee to be ignorant of this phrase. From informal inquiries that I have made it seems there is a widespread, if possibly regrettable, ignorance as to its exact significance. I notice the noble Lord turns to his neighbour. I hope that he does not share our ignorance on this matter.
I am certain that the noble Lord, Lord Broxbourne, understands full well what is meant.
I am certain the noble Lord knows what is meant, and if there is any doubt on the issue then let the Government accept these amendments and in an interpretation clause declare exactly what it should mean. That is a way out of the issue. Our interpretation of an independent free-standing company is that it will stand on its own feet within the privatised BAA. It will not receive cash subsidies from the successor company. It will not be given special predatory charging arrangements. That is our 1282 interpretation. If that does not satisfy the Government, I shall be happy if they accept the principle with the undertaking that they will put forward an amendment to have it stated in the Bill exactly how an independent, free-standing company should be interpreted. I beg to move.
It is not necessary for me to tell the Committee that I am worried and have grave misgivings about Stansted. As I said on Second Reading, I am not against the development of Stansted but I am against the size of the development now projected, and I emphasise the word "now". Fundamentally, I believe that the Government will subsidise Stansted to any amount that they consider is essential to push through this too hasty amount of development. Furthermore, I believe that if that financially damages regional airports, it will be just too bad; the development will still go ahead.
On many occasions I have protested about Stansted being supported from the profits made at Heathrow and Gatwick, and I remember explaining how Luton had suffered as a result. In future, if the Bill goes through unamended not only Luton but regional airports as a whole will suffer. I suggest that that will be unavoidable because of the scale of subsidy necessary for that too large amount of development at the present time.
In another place right through the Bill, both in Committee and on the Floor of the House, it was stressed again and again that the main concern of Members was to ensure that Stansted is not unfairly subsidised. Behind that fear was the concern that as things stand it is possible for the British Airports Authority to offer to the Secretary of State a structure that will give it generous scope to hide a lot of the management costs of Stansted within the holding company or in some other way.
I take the date of 11th February, which was the date that I believe the noble Lord, Lord Underhill, took. On that date at column 39 in Standing Committee, Mr. Spicer contended that under the provisions of Clause 37(2) any subsidy from one BAA company to another must be transparent; and also that Clause 38(2)(b) provides that the Civil Aviation Authority may impose conditions when such a subsidy results in a BAA company imposing charges which are below the rate justified by cost and are therefore predatory. Transparency is all very well, but can we be sure that action will be taken on that?
I have no doubt that if the Government and the BAA get their way there will be substantial investment in the infrastructure of Stansted Airport. What many critics say is that they would like to see the Government make the same commitment to investment in the other airports. Let us take the affair of the British Railways (Stansted) Bill. The noble Earl has written to me on the matter and I shall come back to his letter in a few minutes.
That Bill had its attempted Second Reading in another place on 24th February. I say its attempted Second Reading because the House would have none of it and the matter was talked out. Since then that Bill has appeared on the Order Paper weekly and discussion on it has been deferred weekly: from 6th March to, successively, 13th, 20th and 27th March, to 1283 10th, 17th and 24th April and to 1st, 8th and 15th May, which is today. I have it written down here to ask the Minister whether he can tell the Committee whether there will be further deferment tonight. But I have just had a note passed to me to say that the Second Reading debate will be resumed in another place tonight and that there will be an amendment proposing, That the Bill be now read a second time upon this day six months". We shall have to wait to see what transpires.
What has gone wrong? If the Government want the Bill, which presumably they do, and British Rail wishes to build the rail link, why is there the delay? I can give one reason and it is linked with what I am trying to say today and what I believe is behind the amendments that we support. Those Members in another place who wish to see more regional development are furious that Mr. Ridley has shown no sign of approving the detailed plans of British Rail for a line to serve Manchester Airport, despite, as many of them believe, earlier hints that Manchester would get its rail link before Stansted; and nobody believes that Stansted can be viable without a rail link.
The noble Earl, Lord Caithness, kindly sent me a letter that he hoped would clarify the issue. I am grateful to him for the letter. The issue did not really need clarifying. I have lived with this matter so long that I feel that I know what is going on. He did not put in his letter something which I am sure he knows but which he could not be expected to have put into it: while the taking of a Private Bill in another place is not directly the responsibility of the Government, it is their actions over this whole affair that have produced the reactions in another place to the Bill which have delayed it since 24th February until today.
Let us be realistic. Stansted loses money and as it stands at the moment it is not a viable proposition. It has not been a viable proposition even with the subsidy received from the profits of Heathrow and Gatwick. Putting up charges is not likely to attract more custom, and more custom is needed to make it viable. In view of the Government's commitment, I believe that they will cover the increased charges by subsidisation and that we shall see traffic directed to Stansted Airport.
As I think is obvious, I consider that the whole affair of Stansted has been mishandled and mishandled badly. The Government have allowed themselves to be pushed by the BAA into this large-scale development and they have found themselves from the beginning having to push through a project with which instinctively the House felt too much was wrong: and the word "instinctively" is important. There has been far too much undercover work in all this. That goes right back to the equally ill-fated Civil Aviation Bill, which was abandoned by the Government in May 1985 in view of the almost total condemnation in another place, from all sides, of the manner in which they felt that they were being pressurised over the development of Stansted. I join with those critics. As the undertones become more and more evident, I have reached the stage, where Stansted is concerned, that I just do not trust the Government at all.
1284 These amendments are not against subsidy as such but against unfair subsidy. Those of us who speak to these amendments believe that, unamended, this Bill makes for unfair competition between Stansted and the regional airports. I hope that we shall ensure support from the Committee in making the necessary changes and that our amendments will prove acceptable.
This is a very odd amendment and it has been supported by even odder arguments. I am bound to say that I was a little amused when the noble Baroness referred to the over-hasty development of Stansted. It was decided in 1964 that Stansted should be developed as the third London airport. Even with our own stately procedures and an interminable series of interminable public inquiries, while a period of 22 years for gestation of the project might well be criticised, it can hardly be criticised on the grounds that it is over-hasty.
It is evident from the speech of the noble Baroness that she is basically against Stansted and so, I suspect, is the noble Lord on the Front Bench. I hope that they will both accept that after prolonged processes the Government have, in my view rightly, at long last and belatedly decided to go ahead with Stansted. The reason is clear. With the big surge in civil aviation development which many of us think is close upon us, assisted as it is, of course, by the fall in oil prices, it is obvious that London will shortly be under-provided with airports.
Heathrow is already near to physical capacity with regard to runways although the fourth terminal has relieved the pressure on the terminals. The foolish decision—here I know that I carry the noble Baroness with me—not to put in the second runway at Gatwick, accentuates the problem. It is clear that if Stansted is not developed quickly and urgently, this country will lose air traffic because of the lack of airport capacity in the London region. That would have serious effects on our tourist trade and our civil aviation industry.
This is a belated interruption because I was chasing through my notes. The noble Lord said that I spoke about the too hasty development of Stansted. That was not a happy choice of words. I have just been looking at my notes. Is the noble Lord aware that I spoke of the too big development of Stansted and that capital expenditure of £290 million at present is far too much for Stansted?
I am glad that the noble Baroness has withdrawn the suggestion of over-hastiness. I agree with her about the capital costs of development. If Stansted had gone ahead in the middle 1960s, as it should have, it would have been built up at an infinitely lower cost than it now has to be. Equally, if those who even now seek to hamper the development of Stansted are successful and they delay it further, that will increase the cost. I am glad that I carry the noble Baroness with me on that point.
The feeling about Stansted arises not so much because some people feel that there will be excessive provision for the London area—no one can really study the matter and believe that seriously—but because it is thought that the development of a third 1285 London airport is in some way unfair to regional or provincial airports.
I believe that to be a complete fallacy. People come to or interline through London because that is the way they want to come. If we do not provide the facilities in London, they will not go to Birmingham, Coventry, Manchester or Glasgow; they will go to Schiphol, Charles de Gaulle or Frankfurt. That is the fact of the matter.
Those who speak for the provincial airports—I have great admiration for many of them and for the way in which they have been most bravely developed, notably Manchester, where the Manchester Corporation did an extremely good job in developing the airport—make the most frightful mistake if they think that by hampering the provision of adequate airports for London they will therefore help the provincial airports. I believe that the effect will be the reverse. It will diminish the flow of traffic into this country and therefore diminish rather than increase the potential flow of traffic into those airports.
The only other point that I wish to make follows the effective intervention in the speech of the noble Lord, Lord Underhill, by my noble friend Lord Broxbourne. What on earth is an "independent free-standing company"? The noble Lord admitted that he did not know. He said that he would like to put it in the Bill and then have the Government put in an interpretation clause to interpret the uninterpretable. With respect, that is not the way to legislate. An amendment to a Bill is an attempt to alter the law of the land, and to put into the law of the land a phrase which it is apparently agreed no court would know how to interpret and to which there can be no definable legal meaning is, if I may say so with respect to the noble Lord, wasting the time of the Committee. For that reason and the general merits of the matter upon which I have said a word or two, I hope your Lordships will reject the amendment.
As my noble friend Lord Boyd-Carpenter says, nor does the noble Lord the Minister. We are in consimili casu or even in pari delictu.
I do not understand what that means either.
I shall supplement the noble Lord's knowledge. I will do so gladly. It may not be the only matter upon which his knowledge requires supplementing by the Committee, in which case I am sure that there are many other noble Lords more fitted to fill the inexhaustible voids in his knowledge than I. In consimili casu means "in the same case" and in pari delictu means "in equal dereliction".
I was not proposing to return to the question of the nomenclature, which has been so admirably dealt with by my noble friend Lord Boyd-Carpenter. No doubt those mysteries will be unravelled in the course of time by my noble friend the Minister. The only reason I rise 1286 is to say the briefest of words on behalf of the sensibilities and apprehensions of my former constituents. Stansted was not part of my constituency but a large area within the operation of the Stansted airport was. Not unnaturally, I have received representations from my former constituents about their anxieties with regard to the future of Stansted and its possible expansion.
My noble friend Lord Boyd-Carpenter, with his unrivalled authority and experience, has dealt with the generality of the matter from the point of view of the national need for the expansion of facilities and, of course, of that I take full account. I venture to put in a small plea on behalf of my former constituents that the implementation of the generally excellent principle of privatisation will not bring as an unwelcome by-product, an injurious effect on the environmental amenities of that agreeable countryside and the small towns in the neighbourhood. I put in that respectful plea, and I hope that my noble friend will have regard to it.
I no longer depend upon the suffrage of my former constituents but I still cherish any small place I may have in their affections and therefore wish to put in that plea on their behalf. I hope that I do not appeal in vain to my noble friend to say a reassuring word as to their apprehensions in that regard.
If the Committee will permit me a preamble, as it did the noble Lord, Lord Underhill, I should like to thank the noble Lord for his kindness and his constructive attitude. I remember from my days on the Cross-Benches, before joining this party, that I sometimes found it frustrating when the Government did not accept amendments that I had tabled. Afterwards, when the dust had settled, I realised that I was trying to put into reverse the vehicle that the Government were moving in a particular direction. It was therefore not surprising that they would not accept the amendments. However, I shall listen carefully. Any constructive amendment that takes us forward will, of course, be considered with the utmost care.
There has been a noticeable change in the Opposition's attitude towards Stansted. I am grateful to the noble Lord, Lord Underhill, for clarifying the position and for reiterating that it is the Labour Party's intention that Stansted should not pose a problem to regional airports on an unfair basis and cause unfair competition. That is, indeed, the Government's aim. I do not believe that this is likely in any event. Stansted's prices have been much lower than Manchester's throughout the last six years. But one soon sees that Manchester's traffic has grown from 3.5 million passengers to over 6 million passengers a year, whereas Stansted is handling only half a million. I do not believe that these airports are in direct competition. My noble friend Lord Boyd-Carpenter, in an excellent speech, pointed out where the competition comes from. It comes from our friends in Europe.
In so far as there is competition between the airports, we share the noble Lord's aim that such competition should be fair. I should therefore like to reiterate the steps that we have taken to ensure that 1287 there is no unfair competition. These were put into the Bill purposely. We were aware that my right honourable friend the present Secretary of State would not be around for ever to protect the position, so we have written things on to the face of the Bill. We have proposed reorganisation of the BAA so that each airport is operated by a separate subsidiary of the successor company. This will be achieved by my right honourable friend using his powers under Clause 1. Secondly, we have provided in Clause 38 that each airport must publish separate accounts regardless of the structure of ownership, and that these accounts must reveal any subsidy from whatever source.
Thirdly, and most importantly—this relates to a point mentioned by the noble Baroness, Lady Burton—we have made specific provision in the Bill to ensure that Stansted cannot engage in predatory pricing. Clause 39 ensures that the CAA can prevent an airport charging prices that are below costs or are artificially low, for instance because of cross-subsidy, which harm or are intended to harm another airport's business. This provision has been considerably strengthened during the passage of the Bill. Clause 39(5) makes clear that for the purposes of assessing predatory pricing the CAA will regard an airport as a free-standing company, disregarding its membership of a group. I can therefore assure the noble Lord, Lord Underhill, and the noble Baroness, that no unfair cross-subsidy to Stansted will be permitted that would enable it to compete unfairly with regional airports' business. I do not believe, therefore, that the amendment is a necessary addition to the Bill.
The noble Baroness said that the Government will continue to subsidise Stansted to any degree that they feel necessary. She went on to say that she does not trust the Government over Stansted. In that case, the answer is for her to support us in privatising Stansted as part of the BAA, where it will not be in Government hands. She will not then be able to accuse us of subsidising it to any degree that we feel fit.
Is the Minister not aware that some of us are very alarmed at more power still being given to the BAA?
There is also the argument that some people are very alarmed that the Government still retain too much power. The noble Baroness went on to say that the Government should subsidise any other airport as well. It is pleasing to see the noble Baroness, Lady Fisher of Rednal, here. She will know better than I of the recent developments at Birmingham, where the Government paid some £24 million in subsidy. I hope that this answers the point made by the noble Baroness. She went on to refer to that lovely example of hers, the BR Stansted Bill. She gave the reply that I was going to give. It is a private Bill. It is therefore not for the Government to say when it is debated. The noble Baroness will know from her experience that the normal procedure in another place—far be it from me to comment on the procedure in another place—is that it goes down weekly.
The noble Baroness also mentioned a Manchester rail link. I can tell her that there was a meeting yesterday between my right honourable friend the 1288 Secretary of State and my honourable friend the Minister for Aviation and representatives from British Rail and Manchester local authorities. They have gone away to consider the matter further with all the parties involved.
I apologise for getting up and down. I have now tracked down the phrase that the noble Lord, Lord Boyd-Carpenter, heard. An important part was left out. I referred to too hasty an amount of development at Stansted now. The "amount of development" was left out.
Yes; and what the noble Baroness says takes me on to the point made by my noble friend Lord Broxbourne. It was because of this potential over-development at Stansted that my right honourable friend the Secretary of State set out in the White Paper agreed by Parliament that the development of Stansted cannot go above eight million, although it has the potential to go up to 15 million, without further parliamentary consent. It has to come back to another place and to this House if larger development is to be permitted.
The provisions that I mentioned earlier achieve what the noble Lord, Lord Underhill, seeks in the amendment—namely, a unified approach to the management of the London system combined with a guarantee that common ownership cannot be abused in order to harm other airports. I hope that this explanation will be sufficient to cause the noble Lord to reconsider the thought behind the amendment. I must remind him, too, that it is slightly imprecisely worded. I find it difficult to understand. But it also leaves open the possibility that Stansted can be privatised separately in its own right. Having heard the noble Lord again today, I do not think that that is what he wants. But it can be interpreted that way, I am assured by lawyers. In order, therefore, to stop those people who would like to see Stansted privatised separately from the rest of the BAA, I hope that the noble Lord will withdraw the amendment.
I hope that your Lordships will not accept the amendment. On first reading it, I asked myself what an "independent free-standing company" is. I have no idea. If the matter came before a judge, I am sure that he would say, "What is an independent free-standing company?" And counsel would say, "My Lord, I have no idea." As a result, the judge would say, "I am going to ignore this clause because it is meaningless". I hope that your Lordships will reject it accordingly.
I am sorry that I was not here for the early part of the debate on this amendment, but I was engaged somewhere else. I would not have thought that laymen would find the words confusing. The phrase means, surely, something that is indepen- 1289 dently managed and responsible for its own financing. I do not believe that it requires the wisdom of the noble and learned Lord, Lord Denning, to explain that. I do not find it confusing at all. It means that it has to stand on its own feet in every respect, including financially.
I heard the last few minutes of the speech of the noble Lord, Lord Boyd-Carpenter. It would be no comfort to people in the North-West who are relying heavily on the development of Manchester airport if its future was to be damaged by Stansted or the French airports. I am sure that they would not accept either of the two evils. All that we are asking is that Stansted be made to stand on its own feet financially and to be individually managed. I do not think that is a lot to ask at this stage.
It may be felt in view of the opposition from the noble Lords, Lord Broxbourne, and Lord Boyd-Carpenter, because they are two very formidable debaters, that these amendments should be resisted. But that is what they are: formidable debaters.
It is suggested that no court can interpret the words used here. The noble Lord, Lord Boyd-Carpenter, suggested that if I felt it was desirable that the Government should make an interpretation it is wasting the Committee's time. That is very strange. I have been in this Chamber for only seven years, but time and again we have had arguments between learned counsel on the Cross-Benches as to what is the meaning of certain matters in a Government Bill. It has eventually been agreed that there should be an interpretation given in the Bill. Therefore do not be deluded by the suggestion that I am wasting the Committee's time. We can overcome this problem if we wish.
The noble Earl has made the best of a difficult case in justifying why these amendments should not be carried. Noble Lords will have noticed that he said the Government's aim is the same as the objectives which I stated in my opening remarks. If that is so, then let us write something clearly into the Bill. I do not want to be drawn into the arguments of rail developments to Stansted or Manchester. They are irrelevant to this issue. We are dealing with the position of the Stansted Airport company under the successor company when that is formed and we eventually have privatisation.
It is true that I was critical of the original development at Stansted. However, I have accepted that the position set out in the White Paper has now been generally approved. As the noble Earl says, with an initial development for up to 8 million passengers and, if necessary permission to go up to 15 million passengers, there will be ultimate provision, if desired, for up to 25 million. We want to ensure that the Government's own desires will be carried through: that is, that market forces will determine the progress of Stansted, not any hidden subsidies.
I am informed that we have many examples of subsidiary companies which are prohibited through their articles of association from obtaining inter-company loans. They are forced to survive either through their own earnings or through loans obtained 1290 themselves directly in the market. Those are the kind of principles which are involved in this criticised phrase "independent free-standing company".
I am very grateful for the support of the noble Baroness in this matter. I do not think that the criticisms have been set on one side. The noble Earl has made it absolutely clear that what we wish to achieve in this amendment is the aim of the Government; but for some reason they do not want to write it into the Bill. I think noble Lords should decide that this is what we want in the Bill. If there is to be proper competition, it will be competition on a freestanding basis. That is what is meant by the amendment and there should be no attempt to provide, under any circumstances, for hidden subsidies outside what might be the market demand created for Stansted.
I therefore ask the Committee to divide and support this amendment.
§ Their Lordships divided: Contents, 85; Not-Contents 105.
Airedale, L. Kings Norton, L.
Blease, L. Mackie of Benshie, L.
Boston of Faversham, L. McNair, L.
Carmichael of Kelvingrove, L. Molloy, L.
Crawshaw of Aintree, L. Oram, L.
David, B. [Teller.] Plowden, L.
Ezra, L. Ritchie of Dundee, L.
Fisher of Rednal, B. Scanlon, L.
Gallacher, L. Sefton of Garston, L.
Galpern, L. Silkin of Dulwich, L.
Graham of Edmonton, L. Stewart of Fulham, L.
Houghton of Sowerby, L. Vernon, L.
Irving of Dartford, L. Wells-Pestell, L.
Jenkins of Putney, L. Winstanley, L.
Alexander of Tunis, E. Lauderdale, E.
Bauer, L. McAlpine of Moffat, L.
Belhaven and Stenton, L. McFadzean, L.
Beloff, L. Macleod of Borve, B.
Brougham and Vaux, L. Milverton, L.
Broxbourne, L. Monckton of Brenchley, V.
Butterworth, L. Monk Bretton, L.
Coleraine, L. Mowbray and Stourton, L.
Cork and Orrery, E. Murton of Lindisfarne, L.
De La Warr, E. Rankeillour, L.
Duncan-Sandys, L. St. Davids, V.
Fanshawe of Richmond, L. Shannon, E.
Gardner of Parkes, B. Swansea, L.
Gray of Contin, L. Terrington, L.
Hailsham of Saint Marylebone, L. Thurlow, L.
Hardinge of Penshurst, L. Trumpington, B.
Holderness, L. Ward of Witley, V.
Lane-Fox, B. Zouche of Haryngworth, L.
§ Page 2, line 5, after ("association") insert ("including proposals for the representation of employees of the Board").
§ The noble Lord said: In moving Amendment No. 2 it may be convenient if I also deal with Amendment No. 6 which concerns the same principle. We see from Section 1(4) of the Airports Authority Act 1975 that it was clearly intended that the board members of the authority should have a very wide range of interests. It says: persons who appear to the Secretary of State to have had wide experience of and to have shown capacity in air transport, other forms of transport, industry, commercial and financial matters, administration, the organsiation of workers or the representation of the interests of consumers". No such requirements, no such criteria, are laid down in the present Bill. Surely the same type of criteria are needed.
§ As I mentioned in my opening remarks on the previous amendment, we are still opposed to privatisation. However, if the Government are to have their way on this Bill we must ensure that the Bill is improved. Amendment No. 2, in particular, is directed to that end. Ministers have repeatedly said that they want workers to invest in their own company, and the Secretary of State for Employment has repeatedly stressed the need for a better understanding between management and workers. This amendment is one way in which to work towards that end. The Government have said elsewhere that this is a matter for shareholders to determine. Surely, while we are laying down many other features of the successor company and the eventual companies, Parliament can decide that this is one matter that should be included in the Bill.
§ Amendment No. 6, as well as seeking representation of employees on the board also suggests that there should be earmarked for employees a certain shareholding—8 per cent. of the investment. As we all know, the employees of the BAA number about 7,000. When a somewhat similar amendment was proposed in Committee in the other place there was considerable discussion on the experience of other privatisations. I shall not go into all the figures, but we have them and they were all mentioned in Committtee in the other place. I am sure that all noble Lords will have read them and will have seen the holdings of individuals, what they were at flotation and what they were a year afterwards. The Minister will have read the report, and therefore I shall not repeat the figures. In any case, it is not relevant to this particular amendment.
§ What we are saying in the amendment is that if we really want to achieve a proper understanding between management and workers, particularly in the light of certain ideas which have been floated recently by the Chancellor, then we ought to ensure that there is provision for representation of employees on the board. That is what Amendment No. 2 seeks to do. Amendment No. 6 asks for the same thing, and in addition that there should be a minimum of 8 per cent. of the shares allocated to the employees. I beg to move.
The difficulty about employee representation on the board has often been discussed because, for the good purpose to which the noble Lord, Lord Underhill, has referred of securing better relations between the management and employees of a company, it has often been suggested in the private sector. However, it has always seemed to me that there is one inherent difficulty in having a category or class of director representing only a category or class of shareholder. The difficulty is this. Under the Companies Acts every director is subject to very considerable constraints and carries considerable general responsibilities. Your Lordships' House, in the not so distant past, tightened that up quite a bit, and in my view quite rightly.
However, what is the situation of a director on a board representing employees if, as could well be the case, an issue arises where there is a clash of interest between the general interests of the company and those of the employees? The simplest and most obvious example is the case where a company is in 1293 difficulty and is yet faced with a substantial wage claim which, if accepted, may well seriously damage the company. Under the ordinary law the responsibility of a director is therefore perfectly clear: he must vote against accepting that claim. However, if he is an employee representative, and if he is asked by those whom he represents to support that claim, what is he to do? That is the fundamental difficulty of having employee representatives on the board.
I know—and I shall refer to it because otherwise other noble Lords will do so—that in Europe where they have the two-tier system of boards there are some employee representatives on one tier, and one tier only, of the board. The net result generally is that all important decisions are taken by the other tier, but that is by the way. Under our law there is no division of that type. If you are a director you carry the full responsibilities of a director to the company as a whole and to the wellbeing of the company as a whole, and not to one section, however important, of those interested in it. That seems to me to be the fatal flaw of Amendment No. 2.
The same point arises as regards Amendment No. 6 except that it is suggested that there should be one employee representative director. However, there is another quite unworkable proposal and that is that at least 8 per cent. of all shares are maintained in the ownership of the employees of the company. Let us suppose that the employees of the company prefer to dispose of those shares. They may well do so, and they may well have perfectly good reason to do so. If they know a good deal of what is going on in the company and if it is doing badly, they may sensibly wish to realise their shares.
What is to happen if you get down to 8 per cent.? Is it contemplated as the effect of this that you would say to an employee, "You are a shareholder, and you have these shares. Whatever the circumstances, you are forbidden to sell them because you will take it below the statutory 8 per cent."? This really is an impractical proposal, and I hope that my noble friend Lord Caithness, in the polite and courteous way he always does, will say so.
It will not come as a surprise to your Lordships that in principle I give my support to Amendment No. 2, but it will be observed that I have not put my name to Amendment No. 6, and largely for the reasons that the noble Lord, Lord Boyd-Carpenter, has set out. The mechanics of it are extremely doubtful, although I understand the principle that lies behind it. With Amendment No. 2 it says: … articles of association including proposals for the representation of employees of the Board". It does not spell out the mechanics of that in Amendment No. 2.
The noble Lord, Lord Boyd-Carpenter, may believe that it is impossible under any circumstances. I do not believe it is, but in some ways this is hardly the time to go into a long and complex argument about employee representation at the top level of company boards. I disagree with the noble Lord in what he said about the situation in Germany, that only the important 1294 decisions are taken at the lower tier, where employees are not represented. Some of the most important and strategic decisions are still retained at the higher level, and that is as it should be.
I do not think that the mechanics of this are important at the moment. I believe it is to seek from the Government some assurance that there will be clearly spelled out in the articles of association some mechanism for the representation of employees at the highest level of the company, with the intention of ensuring that they are committed to the company and they use their good offices to secure the success of the company. There is no doubt that in the case of German industries this has been shown to be the case.
While I say that it is not necessary the mechanics should be spelled out at this stage, I would press for such representation to be multi-chanelled. I should not like to see the appointment of only trade union officials to the boards of companies as the right and proper route for employee representation at that level. With that caveat, I support Amendment No. 2.
I approach this as one who has never been a member of a trade unon, but like most of your Lordships I have done a certain amount of flying. The pilots, members of BALPA, particularly, have enormous responsibilities. I should like to see in this amendment, if one might be semantic, at least provisions for representation—not necessarily mandatory—and there may well be in other parts of this rather long Bill something on these lines. There are certain persons working within the ambit of this Bill, such as the airline pilots, who will carry enormous responsibilities, and I should have thought that at least provision for them to be represented could be written into the Bill.
May I answer the two points raised by the noble Lord, Lord Boyd-Carpenter, and in so doing answer one point raised by the noble Lord, Lord Tordoff? There is no attempt at all to rewrite the Companies Act in this amendment. As the noble Lord, Lord Boyd-Carpenter, pointed out, directors have responsibilities under that legislation, and clearly this is not the place to reconsider that legislation. Any director who may represent employees is bound by the companies legislation and will continue to be bound by the companies legislation, and this amendment is not designed to change that. Nevertheless, there is a case in the context of that companies legislation for having, as the noble Lord, Lord Auckland, said, somebody on the board, or some people on the board, who may represent the interests of the employees. I think that the noble Lord, Lord Tordoff, would agree with that.
The second point on which the noble Lord, Lord Tordoff, and I have a difference—and certainly I have a difference with the noble Lord, Lord Boyd-Carpenter—is on Amendment No. 6, where the proposal is that there should be: plans for ensuring that a minimum of 8 per cent. of all shares are maintained in the ownership of the employees of the company". Clearly if these are individual shareholdings the point made by the noble Lord, Lord Boyd-Carpenter, is valid. However, we are now quite used to trusts in this country. We are quite used, if I may say so to the noble 1295 Lord, Lord Tordoff, to the profit-sharing scheme introduced by the Labour Government with the help of the Liberal Party.
There would be no great difficulty in creating a trust which was for the benefit, or the beneficiaries, of the employees, but which itself maintained a market. If the employees wished to dispose of their shares they would go back into the trust and the trust would be, if I may use the expression without offence to your Lordships, free standing, and would make a market itself in the shares and would sell them on to employees as new employees came in.
I do not think that the technical objections, if I may describe them as such, of the noble Lords, Lord Boyd-Carpenter and Lord Tordoff, stand up. I think that the noble Earl would do well to recognise that when he replies to the amendment.
Perhaps I may state at the beginning that the Government, as has been said so often from this Dispatch Box, welcome the development of employee involvement in the industries in which they work. But, as my noble friend Lord Auckland will be aware, we believe that this should be voluntary, and thus we are opposed to prescriptive legislation in this area because this would be detrimental to the spirit of harmony and cooperation necessary for employee involvement to be truly effective, as was clearly pointed out by my noble friend Lord Boyd-Carpenter.
I do not therefore believe that it would be right to bind either the subsidiary airport companies, or the BAA holding company in which shares will be sold, to creating employee directors. These companies are to form part of the private sector. The whole purpose of the Bill is to reduce the restrictions which the state imposes on the airport industry. Therefore, we consider that the shareholders of companies must have the freedom to choose directors as they wish. My noble friend Lord Auckland pointed out one group in particular, BALPA, whom he felt ought to be represented because of their important role in the aviation world. There are many important roles in the aviation world, but in view of our proposed encouragement for employees to buy shares they will be in a position to put up those they consider suitable, or to recommend those they consider suitable, for directorships.
The second amendment also requires at least 8 per cent. of the shares in these companies to be owned by employees. We anticipate that the shares in the subsidiary airport companies will be 100 per cent. owned by the BAA holding company—it is the shares in this holding company which will be offered for sale, we shall be encouraging BAA's employees to take a financial stake in their company's future, offering them special incentives to purchase shares at the time of the offer for sale. In the Government's privatisation programme as a whole, over 80 per cent. of employees have taken up shares in their own companies, in the recent example of the BT sale, 96 per cent of the workforce participated, taking up some £147 million worth of shares.
The details of the BAA employee share scheme have not yet been finalised, but it is likely that we should 1296 like to offer benefits on a similar scale of generosity to the BT scheme (which offered £70-worth of free shares; two free shares for every one purchased up to a maximum of a further £200-worth of free shares, and a 10 per cent. discount on the purchase of up to a further £2,000-worth of shares)—in addition to ongoing schemes such as profit-sharing and Save As You Earn to be introduced by the company.
Is the noble Earl saying that the British Telecom arrangements will be duplicated, and that employees will be subsidised to take up shareholdings?
With respect to the noble Earl, if I may interrupt him, I do not think he was really listening to what the noble Lord, Lord Williams, said earlier which I think answered the point he is just making.
As the noble Lord interrupted me I was saying that it was in regard to trusts. I do not think it makes that amount of difference because the trustees themselves have certain duties. If they feel that the shares ought to be sold for the benefit of those participants of the trust and they are under a bar not to sell them, they have certain difficulties, as I envisage it, in trying to achieve the best for their members.
We believe that the incentives for efficiency and profitability in the privatised BA would be much more effective if employees have invested their own money spurred on by the benefits of the employee share scheme which will be offered rather than being guaranteed a particular level of shareholding. I hope that my noble friends will support me if this is pressed to a Division because we believe that the right way to go forward is on a voluntary basis.
May I ask the noble Earl whether he will consider the possibility of having an employees' trust, the beneficiaries of which are the employees, because I do not think his remarks exactly responded to the point I was making?
Of course I will. I think it would be helpful if the noble Lord would like to enlarge on his remarks, perhaps not now but by 1297 writing to me, because I should certainly like to take this forward.
The noble Earl has said that any arrangement for an employee to be on the board should be voluntary, it should not be prescriptive. I was pleased to note that he did not say that it was a wrong principle to have an employee representative on the board; neither did he say that it was unworkable. He just thought it was something that should not be mandatory in the Bill. In that respect I believe he disagreed with his noble friend Lord Boyd-Carpenter.
My noble friend does not disagree with me at all on that. I welcome employees being appointed to the board—but appointed in the usual way together with other directors and not imposed by statute as a special minority with special responsibilities.
I ought to learn never to mention the noble Lord by name. At least we know that we always get a reply and so have some better understanding of where we are. The noble Earl referred to the high percentage of workers of British Telecom who took shares, but that is not the position. I said I would not refer to the figures that were given at the Committee stage in the other place because I thought everybody would have read them. However, perhaps I had better repeat them. Of the share value of British Telecom 1.9 per cent. are held by the employees; in Jaguar it is 1.3 per cent.; in British Associated Ports 4.3 per cent.; in Britoil 0.1 per cent.; in Amersham International 3.7 per cent.; and in Cable and Wireless 1.4 per cent. It may be accepted that they should stand in the same way as other shareholders to get their representation on the board, but on those figures they will have to do a lot of effective lobbying to get an employee representative on the board.
The principle behind our amendment is to encourage better understanding between management and workers. I am glad that the noble Earl has said he will look carefully at it and I am certain that my noble friend Lord Williams will take up his suggestion and let him have a note on it. Therefore, we may encourage a further useful amendment at the Report stage, arising from the exchange of correspondence. When we see Hansard it might be useful to study not only what my noble friend has said but also what else has been said in the debate. I beg leave to withdraw the amendment.
§ Page 2, line 17, at end insert— ("( ) The Secretary of State shall require that before he approves proposals under subsection (3) the memorandum and articles of association of any nominated company to which the proposals relate contain such restrictions on the allotment and transfer of shares that the holding or holdings of any one or more shareholders (whether individual or corporate) who own or have a controlling interest in any airline cannot exceed in aggregate ten per cent. of the issued capital of the company.").
§ The noble Lord said: This amendment or the same idea, has been drifting about in the other place and in this place since Second Reading and right through Committee in the other place. It was also raised on Second Reading in this Chamber when the Minister promised that he would consider the idea.
I am sorry to interrupt the noble Lord, and at this stage I welcome his taking up the batting for the Opposition. Is he also speaking to Amendments Nos. 5, 8, 10, 11, 18 and 19?
Yes, I apologise. I should have said that I hoped it would be for the convenience of the Committee if we also discuss with this amendment, Amendments Nos. 5, 8, 10, 11, 18 and 19.
The purpose of Amendment No. 4 is to try to give some security to the British Airports Authority, in whatever new form it may be, from predation by any airline, but particularly foreign airlines. Since we started discussing airports we have all been aware of the competition that exists from Schiphol, Charles de Gaulle and Frankfurt. As the noble Lord, Lord Boyd-Carpenter, said, London will shortly be under-provided with airports and the competition will get even tougher as time goes on.
When the Minister spoke on Second Reading on 21st April he said that he would have a good look at the question of a golden share. It was also said in another place by the honourable Member Mr. Ancram, that he would consider the possibility of having some sort of mechanism by which control of British airports would be in the hands and would be controlled by the people of this country, and that would reduce the possibility of people using it for their own ends.
I said last time that I am not sure how a golden share operates. I hope the Minister will have taken note of that and will be able to explain it fully to us. One of the worrying things is that an airline could gain control of an important airport, such as Heathrow, Gatwick, Stansted or any other airport that was to be privatised, by buying sufficent shares in it. It could have a bigger interest outside that particular airport and although the responsibility of the directors should be to the immediate shareholders, the airline may feel that it has a responsibility towards other shareholders in the much larger company. Therefore it might act in the best interests of the larger company and not in the best interests of the particular airline. For example, the airline could control the landing slots and many other facets of the airport which would give that airline preference over another airline.
The more important point is that if a group of people decided that they would prefer to orient the traffic towards a particular airport in Europe rather than to Heathrow, Gatwick or elsewhere, because of their power in the boardroom they could force a delay or the advancement of certain necessary changes in the domestic airports in this country so that a foreign airline could take advantage of the lack of facilities at a particular airport. I am thinking in terms of, for instance, large investment in modern landing equipment or landing equipment that may still be to come, and there could be a deliberate holding back on a British airport in order that a foreign airport should take most of the traffic.
1299 These may seem far-fetched ideas, but I think that they have happened historically, not perhaps in the airline industry but in other industries. I know that there are problems here; I am aware of the difficulties that are imposed by the Treaty of Rome—I think in Article 221, where the treatment of member state nationals must be even all the way through. That was one of the reasons why it was suggested that there should be something embodied in the articles of association so that the control of British airports will be maintained within British hands.
However, one of the main points of this group of amendments is to suggest to the Government that merely to have it in the articles of association is not enough because the articles of association could be changed in the future. What we should like, therefore, and what these amendments seek to do is to have these conditions or conditions similar to these—and we shall be fairly flexible if the Government come up with better wording—appearing on the face of the Bill so that in future there will be no possibility of a board being able to change what I think is the genuine desire of both Houses in this matter, and of most of the people that I have spoken to, that, whatever happens to the airports, they should be maintained in the control of the British people.
I hope that the Minister will give thought to that. In view of the period that the Bill has been under consideration in the Commons from the Second Reading onwards and after the Second Reading in this House, I think that the department should by this time have worked out what no doubt is a rather difficult and complicated matter. I hope that they will be able to give us something that will allay our anxieties over the matter of the British airports remaining British. I beg to move.
I wish to speak to Amendment No. 8, which is standing in my name on the Marshalled List. I trailed this amendment at our Second Reading debate. I shall not delay your Lordships' Committee with a speech on the massive contribution made to our balance of payments by our tourism airline industry. Suffice it to say perhaps that the noble Lord, Lord Trefgarne, opening our debate on the White Paper noted that we had not only the world's "favourite airline" but also, in Heathrow and Gatwick, two of the world's busiest international airports.
It is this latter pre-eminence that my amendment seeks to preserve. Very simply, the amendment places restrictions on shareholdings of foreign competitor interests such as rival airports on the Continent or foreign airlines. The restrictions on foreign airlines—in sub-paragraphs (i) and (ii)—are to ensure that such entities cannot individually or in concert reach a position where they could influence the airport's management in favour of themselves and to the detriment of other airlines or, indeed, the airports' customers, whose interests must remain our prime consideration. Sub-paragraph (iii) makes similar provisions in respect of other foreign entities which might use control of the airports authority to advance the competitive position of other airports, to stifle traffic to London or otherwise interfere in what I deem 1300 to be key strategic and economic interests of this country. The amendment includes a power for the Secretary of State to vary the above provisions if he so wishes.
My amendment goes along with that moved just now by the noble Lord, Lord Carmichael, in giving the Minister an opportunity to tell us of the Government's thinking subsequent to his undertaking regarding the "golden shares" and the articles of association given during our Second Reading debate. I look forward to hearing progress on that matter. Meanwhile it might be felt that what I am proposing is somewhat strong in its restrictions but we live in a competitive world. The Committee may remember the hymn which begins: Christian, dost thou see them On the holy ground". The airports business is very much one where the troops of Midian, if I may say so, prowl and prowl around. My amendment seeks very basically to ensure that those troops do no more than prowl.
The noble Earl on the Front Bench is, I am sure, under no illusion that concern on this matter is felt only on the other side of the Chamber. I think he is aware that the general issue which this group of amendments raises is one that has caused a good deal of concern to some of his noble friends and it is a problem on which we are very much hoping to hear from my noble friend what the Government have in mind.
There seem to be two practical risks if control of the British airports companies which are to be set up under the Bill falls into the wrong hands. First of all, there is the point which the noble Lord, Lord Carmichael of Kelvingrove, made very well about a particular airline, foreign or British, obtaining such control over the airports that really matter, the major airports, particularly Heathrow, and using that control to further its own interests at the expense of other airlines—particularly, as he said, in the allocation of slots and also the provision of terminal facilities and the like.
There is then the subtler (but I should have thought not wholly non-existent) risk of an acquisition by foreign interests designed not crudely to damage the operation of our airports but working so as to prevent their proper development, to let them get out of date or inadequate in capacity so that airports in the countries from which these foreign holders came should benefit.
I mentioned in an earlier speech the obvious factor of the competition which exists at the moment between the London airports, on the one hand, and the airports in Paris, Amsterdam and Frankfurt on the other. Perhaps it is not too fanciful to see the possibility that, if interests associated with those European airports were to obtain control over Heathrow or over Gatwick, they would not sabotage Heathrow or Gatwick but they simply would not put in any additional funds to improve them, to enable them to become up to date and to remain competitive. They would let them gradually be faded out or phased out when new development was concentrated on their own airports in their countries.
With the difficulties that all of us know only too well that anyhow face those who want to improve and 1301 extend British airports added to by that sort of factor, we could very easily see our airports losing the supremacy which we have at the moment—with Heathrow with more international movement than any other airport in the world—to our European competitors. This is a risk which I think it is proper to ask the Government to ensure that the Bill deals with.
Reference was made by a noble Lord a few moments ago to the "golden share" concept. As I understand it, what is done in that case is to entrench in the articles of association some fairly definite provisions preventing the holding of more than a certain number of shares in the company either by a foreigner or by an interested party such as an airline and retaining the golden share in the hands of the Government, having provided that the articles shall not be amended save with the agreement of the holder of that golden share. I see the noble Lord nods his assent. I think that that is the golden share concept.
I should have thought it possible that that expedient was a practical one in that case. I am sure that my noble friend has considered it. But there are other variants. I do not pin my own faith solely on that but I say to my noble friend that it would be very wrong in the course of this—in my view—very proper privatisation of the British Airports Authority if we were to run even a marginal risk of losing control of our airports with the kind of consequences which I outlined a moment ago and which I shall not weary your Lordships by repeating. I shall listen to what my noble friend has to say—I always do listen to him with interest—with special interest on this occasion.
May I from these Benches support this raft of amendments in principle. I have my name attached to some of them, but not to others. It is not attached to No. 8, and there is a competition between Nos. 4 and 5 and No. 8 and several others. I do not think I need add much more, in terms of the principle, to what has already been said from all sides of the Committee.
It seems to me that there is one residual difficulty. As the noble Lord, Lord Carmichael, said, in putting down a number of these amendments we have excluded specifically ordinary residents in the European Community. That, presumably, is something that we have to do because of our membership of that Community. Nevertheless, it is from that direction that the danger may come most strongly. As the noble Lord, Lord Boyd-Carpenter, has said, it could come from the cities of Amsterdam, Paris or Frankfurt. I am sure that the Minister will give us a favourable reply in principle, and I hope that he can help us over that difficulty. It may be that the golden share would avoid that particular difficulty, but in principle I accept that one or other of these amendments, or indeed a Government amendment, should go through.
I believe that on the face of the Bill—and here I would reinforce what the noble Lord, Lord Carmichael, said—or in some other entrenched way about which we can have certainty, we must have protection from this predatory attack on our airports. It is not good enough at this stage for the Government to say that something will be written into the articles of 1302 association because, as the noble Lord, Lord Carmichael, said, there is always the possibility of articles of association being changed by a majority vote of the shareholders. I think we all look forward to having some positive support from the noble Earl.
Very briefly, I should like to support what has been said. Following the eloquent speeches of my noble friend Lord Carmichael and the noble Lord, Lord Boyd-Carpenter, I think very little needs to be said now on the point of principle. I can understand and agree with the noble Lord, Lord Tordoff, that so far as individual foreigners are concerned we cannot and should not seek to exclude any members of the European Community, but we can meet the real point to which, if I may say so, I thought the noble Lord, Lord Boyd-Carpenter, directed us very clearly; and that is competition from the states, their airlines and their airports. We can surely do that by excluding any airport company or authority, or any airline, including British, from holding any specified amount of shares. I would have thought there was no reason why they should have any shares in the company at all. That being the case, we would get over the problem of being in the EC as well as the other matters.
However, I would plead with the Minister that while we have a great respect for statements made by Ministers as to their intentions, and so on, this is an extremely serious matter and, as has been said, one that concerns all parts of the Committee. We will not be content to see this Bill become a statute without there being some entrenched provision on the points that have been raised.
I should like to support the remarks of all noble Lords who have addressed themselves to these amendments. The amendments relating to this question clearly are not proposed for incorporation within the Bill. If the case for restricting share ownership of certain categories is accepted, then it must be better to write any particular restrictions into the articles of association of the BAA's successor company, rather than write them into the Bill. But, of course, the first question is: should the articles of association contain any restrictions at all, and, if so, should they be along the lines proposed? If we were already to have safeguards elsewhere, then the current proposals might be either unnecessary or, counter-productive.
Under Clause 38 we know that the CAA, an airport regulator, has powers to prevent a trading practice which unreasonably discriminates against any other class of user. The CAA also has powers to prevent predatory pricing. Then, under the Fair Trading Act 1973 the Monopolies and Mergers Commission is empowered to prevent a shareholder from achieving too much influence over policy and from gaining effective control. But it seems to me that these safeguards, while serving a very useful purpose by addressing themselves to problems which are fairly easily noticeable and measurable, do not also tackle those which may well be less so. And where there is a conflict of interest of the type envisaged there could be all kinds of ways—some more subtle than others—in which investment policies contrary to the broader interests of United Kingdom aviation might be 1303 pursued. My noble friend Lord Boyd-Carpenter has already made that point very clearly: hence the need to restrict airline share ownership and foreign share ownership, where dual loyalties are present for both categories.
Regarding the consistency or otherwise of the amendments with other considerations, since nationals of member states of the European Community are exempted from the proposed restrictions there would be no contravention, for instance, of Article 221 of the Treaty of Rome. The fixing of restrictions at one per centage level rather than another might always fall foul of Stock Exchange or other regulations. Possibly my noble friend will need to comment on that point when he replies, if minor adjustments should be desirable to achieve consistency. Any other adjustments, if and where necessary, to what is proposed should not be difficult to make in order to arrive at an acceptable balance for incorporation within the articles of association. It is very much to be hoped that this matter will be dealt with in view of the nature of the Bill's existing safeguards in this context, which do not appear to go as far as they should.
So far this has been a classic House of Lords debate. In 21 minutes we have had six speakers who have each put over the points that they wanted to make very punchily. I think it shows that a short speech is more effective than a long verbose one, because one tends to lose the point. I have listened with great interest to this debate because I am under absolutely no illusions as to how seriously your Lordships take this matter. My right honourable friend the Secretary of State and I were discussing it this morning and we both agreed that the debate today would play an invaluable part in helping us to make up our minds on the final thoughts about it.
However, I believe that some noble Lords have tended to overlook the whole series of safeguards which exist against, undesirable action being taken by an airport company, control of which has been acquired by a particular shareholder or class of shareholder. My noble friend Lord Dundee was perhaps the exception. He mentioned some, but if the Committee will bear with me I should like to take your Lordships through them.
First of all, there are the safeguards in this Bill. For instance, the CAA, as airport regulator, has powers under Clause 39 of the Bill to prevent any trading practice or pricing policy which unreasonably discriminates against any class of user of an airport, or particular users, or which unfairly exploits the airport's bargaining position, for instance, in setting the general level of charges. These powers could be used if an airline gained a degree of control over an airport company and sought to charge its own aircraft at more favourable rates than those of competing airlines, or unreasonably discriminated over the provision of services and facilities to airlines using the airport. The CAA also have powers to prevent predatory pricing and at designated airports (which initially will comprise the BAA's three London airports and Manchester) the CAA will be required to set limits on airport charges and the Monopolies and 1304 Mergers Commission will review all aspects of the airport business every five years.
In addition there are safeguards to prevent discrimination over access to an airport. Airports which hold public use licences issued by the CAA must not allow discrimination over access, and Clause 33 of the Bill ensures that the CAA can require an airport to hold such a licence: that is, a public use licence. This power is further reinforced by Clause 28, which ensures that the Secretary of State can direct an airport to comply with our international obligations, including those in respect of non-discrimination over access to airports.
Safety will continue to be regulated by the CAA through the aerodrome licensing system. My department will continue to regulate security, issuing directions to airports, where necessary, under the Aviation Security Act 1982. In the event of war or emergency, the Government have wide-ranging powers under the Civil Aviation Act 1982.
It is therefore very difficult to see what benefit could be gained by an individual or company seeking to make a substantial investment in an airport company—other than the normal commercial benefit of investment in a profitable venture. To suggest that a foreign interest might invest very substantial sums of money—they would need to be such sums—simply to attempt to close down an airport, or to strip it of its assets, is not very credible.
I am sorry to interrupt the noble Earl. Will he respond to the point made by his noble friend Lord Boyd-Carpenter that if a foreign operator gained a predominant position in one of these airports it might by lack of investment let it run down to the detriment of that airport versus the European competition?
I hope I shall come on to that point in due course. Airports would only be of value to the investor when used for the purpose for which they are intended—to provide a service for airlines and their customers. If a certain section of shareholders run down that airport—the noble Lord, Lord Williams, has just reminded me of the point made by my noble friend—it is investing money to no great degree of remuneration, which would cost it dear.
There are also the safeguards of the Fair Trading Act, ensuring that there can be a reference to the MMC if a shareholder proposes to acquire enough shares to be in a position materially to influence policy or to gain effective control—another point for the noble Lord, Lord Williams. If the proposed acquisition is judged by the MMC as being against the public interest—and the effect on competition between airlines would be a relevant factor in this—my right honourable friend the Secretary of State for Trade and Industry has powers to prevent it. This provides yet a further safeguard against the purchase of shares for use in a manner detrimental to the interests of airports or their users.
In the light of this series of safeguards, I believe that any specific restrictions on the ownership of shares written into the BAA successor company's articles of association would be very much a belt-and-braces approach. Nevertheless, we have listened carefully to 1305 the concerns expressed—and I have listened carefully this afternoon—and I can tell the Committee that we are exploring the feasibility of introducing an appropriate restriction into the company's articles to meet these concerns.
The noble Lord, Lord Carmichael of Kelvingrove, said that we ought to have come forward with something by now, but I have to tell the Committee that considerable practical problems are involved. One of these has been recognised by the amendments as formulated. This is the fact that any general restrictions on foreign ownership would contravene our obligations under the Treaty of Rome. The amendments as drafted get round this by excluding Community nationals, but a foreign ownership restriction of this kind would be rather odd, bearing in mind that the London airports' main competitors are those in the Community, as the noble Lord, Lord Tordoff, has reminded the Committee.
I have more sympathy with the amendment's proposals to restrict airline share ownership, but here there is a question of compatibility with the Community admissions directive applied by the Stock Exchange (Listing) Regulations 1984, which requires shares to be "freely negotiable" and requires "equal treatment" for all shareholders.
As I have said, we are at present examining the need for and the feasibility of drafting restrictions on the ownership of shares in the privatised BAA and I hope to be in a position to report our conclusions shortly. I hope that that will be before Report stage. I should like to get it down as quickly as possible. If we decided to introduce restrictions, they would be written into the articles of association of the BAA's successor company, possibly accompanied by a golden share—an effective mechanism used in a number of other privatisations and understood and accepted by investors.
The noble Lord, Lord Carmichael, asked me to define a "golden share". A golden share would be one share of the company held by the Secretary of State which would give him a right of veto over any proposal to change the provision in the articles of association of the BAA which place restrictions on shareholdings. Specific provision in the Bill is therefore unnecessary. Restrictions in relation to the BAA's subsidiary airport companies should also be unnecessary as these will be 100 per cent. owned by the BAA successor company and their shares will not be offered on the open market.
We would not of course want to give local authority airport companies less freedom than the BAA to introduce such restrictions if they considered this was desirable. Your Lordships will have noticed that we are as a result bringing forward an amendment—Amendment No. 44—which is down on the Marshalled List to replace Clause 24 of the Bill, which as currently formulated would prevent local authority airports introducing restrictions of this kind in their articles, with a provision which will allow this type of restriction. I am sure that noble Lords will recognise this as evidence of our concern to allow for appropriate and practical restrictions where this is considered necessary—but in a flexible manner, without forcing particular types and levels of restrictions on to individual 1306 airport companies. The noble Lord, Lord Tordoff, said there was some competition between the amendments. That is not my true concern. My true concern is that we get it right, and this I hope we shall do.
Before the noble Earl sits down, perhaps I may say this. I may be mistaken but I do not believe that the noble Earl has answered the noble Lord, Lord Boyd-Carpenter. May I present a scenario and then ask the Minister for his view on it? Written into my memory of Liverpool and its misfortunes is the position of the Liverpool Docks and Harbour Board. That organisation had the responsibility of looking after Liverpool Docks. To hold shares in the Liverpool Docks and Harbour Board was considered to be very much a blue chip holding. It was almost considered to be a government-backed organisation. But over the years the control of that organisation got into the hands of people who used Liverpool's docks, and the vested interests of those people created such a situation that finally central government had to step in and establish a new set-up. It was quite simply done. Those people manipulated the harbour dues and everything else in order to ensure that their own trading interests in Liverpool Docks were safeguarded, and it led ultimately to the downfall of the organisation.
What has the noble Earl the Minister told us that deals with the position raised by the noble Lord, Lord Boyd-Carpenter? What if Amsterdam airport or any other airport within the EC decides on an issue of whether or not to invest a large sum of capital in that airport and then realises that if the same sum of money was invested in Heathrow there would be a conflict of interests? How, under the measures proposed by the noble Earl the Minister, will he prevent that happening? For one thing, he would not even know whether the company owning Heathrow had taken a decision. Secondly, it would not have to take a decision. All it would have to do would be to do nothing—just be absolutely negative—and in the meantime allow the airport companies or the airport organisations on the Continent to prosper. The net effect of that would be to decimate the airport industry in this country.
I am grateful to my noble friend for his response and in particular for his indication that it is his intention to make an early statement about the Government's proposals on this point. I was not sure whether I understood him to say that he would make it before the Report stage or during the Report stage.
I hope that it will be before Report stage.
I am not sure about that, but I hope that if it is announced before Report stage it will 1307 be my right honourable friend the Secretary of State who will make the announcement and therefore we shall also know in this House. Whether it will be by Statement I cannot say to my noble friend.
I am much obliged, and I share my noble friend's hope that it will be before the Report stage, not least because that would save us a great deal of time during that stage of the Bill.
Having cleared up that point, I want to take up gently one further matter with my noble friend. He did not seem to think much of my argument, which was picked up by the noble Lord, Lord Sefton, as to the possibility of someone with an interest in other, basically European, airports acquiring control at Heathrow and allowing it gently to run down. My noble friend said that such an interest would have to invest—and he is quite right—a substantial sum to get that control. But if they did, they would of course still receive for a good many years a good return on that money, because it would take a good many years before the deterioration that would follow simply from not expanding and not developing Heathrow was reflected in the receipts. Indeed, in the short term it might be more profitable because they would not have to raise new capital in order to make the extensions.
My noble friend seemed to doubt whether anyone could have a motive for doing that. I think that they could. If in return for an investment in Heathrow that would for some years, at any rate, be quite profitable and provide a good return, they could gradually have the major transatlantic traffic, above all, diverted to their own airport—be it Dutch, German or French—they would be building up their own asset into a highly profitable one. I beg my noble friend not to brush aside that risk quite as easily as I thought he did in his speech. It is a long-term matter. It is by no means a certainty; but it is a risk against which it would be wise at this stage to guard. I should be most grateful if my noble friend would consider that point in the context of the statement that he has promised to make to us.
The noble Earl would not be delighted if he had anything to do with shipping in Liverpool.
I do have something to do with the shipping in Liverpool and quite a lot to do with Liverpool docks at the moment, as I hope the noble Lord is aware.
The noble Earl should not be delighted, because it was an extremely serious situation. It was not caused by government doing anything; it was caused by government and other bodies not doing something.
The noble Lord is tempting me into a long shipping debate. I am delighted to be 1308 involved in Liverpool. I do realise the situation. I am also honoured to be involved in Liverpool.
My noble friend Lord Boyd-Carpenter has raised a very important point and I am grateful to him for expanding upon it. It is exactly the point that my right honourable friend the Secretary of State and I were discussing this morning. My noble friend's expansion of his point has been extremely useful and will enable us to formulate our thoughts more clearly. We welcome all contributions, and if any noble Lord wishes to pursue the matter further with my department, we will be very happy for him to do so. I particularly welcome the involvement of my noble friend.
We are all grateful for the great effort that the Minister has obviously made to try to find a way out of the problem. He spoke of being glad to see safeguards in the Bill, but those safeguards really have little relevance to the very serious problem that we are discussing. The noble Lord, Lord Boyd-Carpenter, was rather concerned with the brutal stripping of assets and with the closing down of an airport. The danger is possibly much more subtle than that.
What concerns me is how, in a Bill such as this, one guards against an interest taking control of our hub airports in particular, and taking traffic away from them, by sheer procrastination in the development of those airports. That is an extremely difficult situation to handle. I do not want to be too unfair to the Minister, and I put this with the very best of motives. We feel that it is absolutely vital that something should be written on the face of the Bill. After all, we could reach the stage where another Minister or Secretary of State takes a different view of how to use the golden share. Still the matter would not need to come before Parliament, and still there need be no possibility of Parliament having any control.
At the end of the day there must be wider protection. That is why, with reluctance, I ask the Committee to make a decision on this matter. I shall be very happy if the Minister is able to come forward at Report stage with something really suitable, with an amendment to withdraw in effect the amendment that I hope will be carried today. That may be unusual, but the situation is so serious that I would rather test the opinion of the Committee, so that the Minister and his department, as well as the Minister's right honourable friend, will be given that extra push to do what I know they want to do. I do not feel that we should let the matter go at this time without having such an absolute assurance. I therefore intend to divide the Committee.
I hope that the noble Lord does not choose to divide the Committee. I want to study everything that has been said today. I cannot over-emphasise that point. The matter is seriously under discussion in my department at the moment. My right honourable friend the Secretary of State, the Minister for Aviation and myself were discussing the matter only this morning. With due respect to the noble Lord, it would not be beneficial to divide the Committee now. At a later stage that might be the right thing to do, but I hope that the noble Lord will not choose to do so while we are still formulating our final thoughts.
I can see the difficulty confronting the Minister and the Committee. I hope that the noble Earl also recognises just how serious is this matter and will take it back. In the light of the assurance that he has given, and in particular his last contribution, I beg leave to withdraw the amendment.
Before my noble friend sits down, may we have a definite assurance that a statement of some kind will be made before Report stage? It would be a great pity if we missed the opportunity to record our view today and then at Report stage find that the whole thing is inadequate.
I am happy to give the noble Lord that assurance.
§ The noble Lord said: I rise to move Amendment No. 7, and it may be for the convenience of the Committee if I speak to Amendment No. 12 also. We come to a very important principle which we have examined in Committees of your Lordships' House dealing with other Bills. It is the question of parliamentary accountability under the proposed legislation.
§ Clause I of the Bill as it stands gives the Secretary of State very wide powers and wide discretion. He can change schemes put forward to him by the BAA, he can change articles of association; he has only to consult, he does not have to report back to Parliament, and he does not have to consult Parliament before making any changes that he is entitled to make under Clause 1.
§ Amendment No. 7 really has two points to it. The first is that the Secretary of State should be required to lay before Parliament a report as to the exercise of his functions before the appointed day. The second is that the Secretary of State should continue to report on the activities of the nominated company as and when it becomes the successor company and as and when it takes up the activities that the Bill gives it.
§ It does not seem to me to be a very onerous task that we are trying to lay on the Secretary of State. We are not asking him to come back to Parliament. We are not asking him to come back for authorisation. We are proposing to allow him to exercise the functions that Clause 1 of the Bill enshrines. Nevertheless, it seems only reasonable to ask that there should be some form of report back by the Secretary of State in each Session of Parliament on exactly what he has done and how the various successor organisations (or organisation) are performing.
§ Amendment No. 12 has a similar thrust except that it concentrates particularly on the ownership of the successor company and the sums realised on disposal 1310 of securities. We have had a debate on the question of foreign ownership and I do not intend to go over the ground that has been covered. Nevertheless, we again have here a problem of Parliamentary accountability, or at least reporting to Parliament.
§ Again, this amendment is extremely mild. The Secretary of State is merely required to lay a report before Parliament. I very much hope that the noble Earl, in replying, will accept that we on this side of the Committee, on this and on other Bills, have a problem of how Parliament is to be kept informed and how Parliament is to keep control of what goes on after a Bill is enacted.
§ Some of us, in other Committees, are moving rather more restrictive amendments which would try to control rather more precisely what the Secretary of State may do. These two amendments do not do that; they simply ask the Secretary of State to report. I very much hope that the noble Earl will feel that this is not such an onerous requirement and will be able to accept these amendments on behalf of the Government. I beg to move.
I want only to say that this seems to be a very gentle way of keeping Parliament involved, as the noble Lord said. I often find myself in difficulties when we table amendments which call upon the Secretary of State to place orders of one sort or another in front of both Houses of Parliament because by convention we do not seriously oppose them in this House. It seems to me that we might have slightly more control over the Secretary of State if he has to report and we can then put down a Motion on that report. That is why I admire the way in which these amendments have been drafted.
Legislation is increasingly giving powers to the Secretary of State and we need to have Parliamentary scrutiny of the way in which he has performed during a specific period. This is a Bill in point. There are many instances where the Secretary of State "may" or "shall" do various things. There is very little in the Bill to give Parliament the opportunity of looking back on what the Secretary of State has done during a year.
I know that we can always put down Motions but it is not always easy to do that from the Opposition Benches, and particularly not from the Opposition Benches below the Gangway. Therefore, I should welcome the opportunity of having a report to Parliament from the Secretary of State on which we can comment after having scrutinised it.
We have never sought to hide from Parliament or the public the facts about our privatisation programme. The reason for that is that we are very proud of our policy—a policy that is giving freedom and incentives to the managements of some of our greatest industries to go out and compete with the rest of the world. Noble Lords can be assured that we will continue to proclaim our success.
I can promise your Lordships that we will report to Parliament on the reorganisation of BAA under the powers in Clause 1 when it takes place. We expect this to be a single event—not one requiring repeated reports as this amendment would require. We shall 1311 also (as in all other privatisations) report the proceeds from the sale of shares. The figure for total proceeds from the Government's privatisation programme is currently in the region of £7.5 billion and we look forward to significant increases on that. It is likely that we shall sell the entire shareholding of the BAA's successor company in one transaction. Again therefore repeated reports on the Government's ownership of shares would not be needed.
In any event—and I hope the noble Lord, Lord Williams, will not mind if I point this out to him—under Clause 7 of the Bill my right honourable friend the Secretary of State is required to lay an order setting a target investment limit equal to the number of shares held by the Government after any have been sold and he can fix lower limits should disposals be made. Therefore, Parliament will be kept informed of the Government's shareholding should it be disposed of in tranches.
In view of what I have said, and although I agree with the noble Lord, Lord Williams, that the amendments are certainly not wrecking amendments, we feel that they are already catered for.
I am very disappointed with the noble Earl's reply, as I am sure he will recognise. I did not expect to get a party-political blast as a result of these amendments. We are not asking for the noble Earl to write the Conservative Party manifesto into the Bill. All we are asking is for continuing reports on what goes on. After all, as my noble friend Lord Underhill said earlier, this is the first major country which is to have a privatised airport system. It seems only right that Parliament should be informed by the responsible authority, which at the end of the day is the Secretary of State, on a continuing basis on how that is going.
I hope very much that the noble Earl will reconsider the matter. I also hope that, particularly on Amendment No. 7, he will see fit to take it away, look at it, and endeavour to come back on Report with something which will satisfy what I believe are legitimate demands from this side of the Committee.
§ Their Lordships divided: Contents, 80; Not-Contents 102.
Aylestone, L. Fisher of Rednal, B.
Beaumont of Whitley, L. Foot, L.
Boston of Faversham, L. Galpern, L.
Bruce of Donington, L. Graham of Edmonton, L.
Burton of Coventry, B. Grey, E.
Carmichael of Kelvingrove, L. Hanworth, V.
Cledwyn of Penrhos, L. Hatch of Lusby, L.
Crawshaw of Aintree, L. Hirshfield, L.
David, B. Houghton of Sowerby, L.
Dean of Beswick, L. Howie of Troon, L.
Diamond, L. Irving of Dartford, L.
Jenkins of Putney, L. Ritchie of Dundee, L.
Llewelyn-Davies of Hastoe, B. Silkin of Dulwich, L.
McNair, L. Stewart of Fulham, L.
Mais, L. Stoddart of Swindon, L.
Milner of Leeds, L. Taylor of Mansfield, L.
Nicol, B. Wallace of Coslany, L.
Ponsonby of Shulbrede, L. [Teller.] White, B.
Prys-Davies, L. Williams of Elvel, L.
Abinger, L. Lucas of Chilworth, L.
Alexander of Tunis, E. Luke, L.
Belstead, L. Macleod of Borve, B.
Brabazon of Tara, L. Margadale, L.
Brookes, L. Massereene and Ferrard, V.
Brougham and Vaux, L. Merrivale, L.
Caithness, E. Monckton of Brenchley, V.
Colville of Culross, V. Mountevans, L.
Cork and Orrery, E. Mowbray and Stourton, L.
Cox, B. Murton of Lindisfarne, L.
Cullen of Ashbourne, L. Poltimore, L.
De La Warr, E. Renton, L.
Ellenborough, L. St. Aldwyn, E.
Elton, L. Saint Brides, L.
Fanshawe of Richmond, L. Sandford, L.
Hailsham of Saint Marylebone, L. Todd, L.
Hardinge of Penshurst, L. Vickers, B.
Hives, L. Ward of Witley, V.
Kings Norton, L. Wolfson, L.
Layton, L. Zouche of Haryngworth, L.
§ The noble Lord said: In moving this amendment I find myself in something of a difficulty, as the noble Earl will recognise. He was kind enough to say to the Committee that he would take Amendment No. 4 and have a look at it and that before the Report stage of this Bill there would be a Statement which he hoped would satisfy the opinions that were expressed during the debate on that amendment and the other amendments which were linked with it.
§ To a certain extent this amendment follows Amendment No. 4 and the ones that were linked with it. We believe that if there is to be a golden share arrangement, it is not enough—as I think my noble friend Lord Carmichael of Kelvingrove remarked—just to have it in articles of association that are not in some parliamentary form, if I may use that expression. This is for the very simple reason that if it is in the articles of association—which is the normal way in which golden share provisions are drafted—any future Secretary of State who may well change his mind and decide that he wants to relinquish his rights under the golden share will not have to come back to Parliament.
§ The point of this amendment is that if the articles of association, which are to be changed by the Secretary of State are enshrined in the order, the order would have to be revised and again laid before Parliament so that Parliament would have the opportunity of discussing the matter. If the noble Earl will tell me that he will look at this point alongside the other points in connection with Amendment No. 4 and the amendments that are linked to it, I shall be happy to leave it at that. If he says that he is not prepared to do that, I should like to take the matter a little further. I beg to move.
Perhaps with Lord Williams, no; perhaps with Lord Graham, yes; we do not know. Of course I shall take it back and look at it because it relates to what I said on Amendment No. 4, and I think it would be wrong to take up the time of the Committee now in going back over what I have already said.
I am astonished that the noble Earl should think that I would lend my name to an amendment that was a Labour Party ploy or plot, or whatever he said.
I thought that the Liberals were quite happy to lend their name to anything which was a nasty ploy.
Only ploys of our own. I should like in fact to say again what I did not have the opportunity to say at the end of the last debate, which is that this again reinforces the strong feelings that there are on these Benches, as well as around the Chamber, not only that something must be done and be seen to be done, but that it really must be entrenched as firmly as it can be. Therefore, it seems to me that this provision needs to be on the face of the Bill and in such a way that successors—successive Secretaries of State—cannot change it without coming back to Parliament. Of course, nothing is permanent, but the place to make significant changes of this kind is Parliament. That is why this amendment is very important and I hope that the Government will incorporate it in whatever measures they put forward.
In the light of the noble Earl's remarks I beg leave to withdraw the amendment.
Clause 3 of the Bill cancels the liabilities of the BAA to the Secretary of State. It provides that the authority's outstanding debt be written off once restructuring has taken place. We understand that the debts are currently £45 million, but by the time of restructuring they could undoubtedly reach £50 million. The policy outlined in the clause is somewhat similar to that in relation to public transport under the Transport Act 1985. The public transport companies to be set up under that Act must be in operation by October 1986. In many of the metropolitan areas those public companies will be operated on a viable basis only by the PTEs servicing the debts, though the assets to which they relate will be transferred to the companies. The PTEs will have to service those debts by borrowing, naturally with interest to be paid. That will affect the limited support that may be available for the public transport network.
I mention that because there we have an example of what appears to be developing under recent legislation. Part of the external financing limit of the BAA for 1986–87 will undoubtedly relate to Stansted. As was explained at some length in Committee in the other place, that in effect would be writing off a further subsidy for Stansted. From reading the Official Report of the Standing Committee in another place it seemed to me that the Minister appeared to appreciate the 1315 concern expressed. It would be helpful if the noble Earl could not only express concern but would say what the Government propose to do if that concern remains.
The noble Lord expresses concern that by writing off the BAA's debts we seem to be indulging in a give-away of public money to a shortly-to-be-privatised company. I can assure him that this will not be the case. The debts in question are those of the BAA to the National Loans Fund. As the noble Lord said, those totalled about £45 million—in fact I have a figure of £45.8 million—as at 30th September 1985, which is a small proportion of the BAA's total value. The National Loans Fund is the government fund which is used for making loans to all nationalised industries.
Private sector companies are, as the noble Lords will know, financed by combinations of equity and debt. It would not be appropriate for the private sector BAA to continue to have loans from the National Loans Fund and such loans cannot be transferred to the private sector. Its debt must be converted to the private sector equivalent debentures and equity introduced into its financial structure. The mechanism for this change is as follows. Immediately before the appointed day (that is, the day on which the BAA's business passes to a company wholly owned by the Secretary of State) the public sector debt will be extinguished. The Secretary of State will then use his power to direct the company to issue to him securities to replace the loan.
The extinguishing is achieved by this clause; the replacement is effected by Clause 4. These securities will comprise some mixture of equity and debentures. We have given a firm commitment that at least as much debt will be created in the form of debentures as was written off from the National Loans Fund.
Let me compare the situation of the BAA just before the appointed day with the position of its successor company immediately afterwards. The BAA before the day will owe the Government's National Loans Fund something over £40 million. The successor company after the day will owe the Government that amount or more by way of debt instruments, and in addition the Secretary of State will have received without payment a large number of shares. On privatisation these shares and debentures will be sold to the private sector and the proceeds will be paid into the Consolidated Fund.
I appreciate that I have offered rather a technical defence of this clause, but it is an essentially technical matter. The write-off of debt is no more than a formal procedure to give the successor company appropriate liabilities for private sector operation. I hope that that explanation will satisfy the noble Lord.
We are grateful to the noble Earl for giving us the explanation of the clause. Am I right in thinking—it may be a slip of the tongue—that he was referring to Clause 5 as being the enabling measure which allows the Secretary of State to acquire securities, rather than Clause 4, which is entitled, Initial Government holding in the successor company"? I may be misinterpreting the Bill. That is just a point of clarification.
1316 But more importantly, and on a point of principle, I notice that there crept into his reply a number of phrases such as "equivalent or more". Such expressions kept on coming back; I noticed them two or three times. I should be grateful if he would explain what the Government have in mind. I can understand it if the Government say that there is a public sector debt and the exact equivalent will become private sector debt. That would seem to be a perfectly logical way of doing it.
But what I find difficult to understand is the Government saying that there is a certain amount of public sector debt and that the equivalent or more will become private sector debt. Does that mean that the Government intend to load the successor company with extra debentures, unsecured loan stock or any other piece of paper that they may feel is marketable? Does it mean that the Government feel no restriction on the debt that they are prepared to see the successor company assume? I should be grateful for the noble Earl's comments.
I am grateful to the noble Lord for that helpful intervention which allows me to reiterate that I was referring to Clause 4 rather than to Clause 5, because the matter has to go to the holding company first.
I said that there may be more solely because of the debt equity ratio. As the noble Lord with his vast experience in these matters knows better than I do, when one is launching a company into the private sector one wants to get the debt equity ratio in the right proportion. Therefore it may be more, but it certainly will not be less than the money owed to the National Loans Fund.
While I am on that point it is relevant when we come to the local authority airports that we get the debt equity ratio right. Therefore we require the flexibility. We have not finalised our thoughts on this matter, but the amount will certainly not be less than the sums owed to the National Loans Fund.
I am grateful to the noble Earl, and I am sorry to take up the Committee's time. But if we can just concentrate on the debt equity ratio, I can fully understand that the Government wish to have a proper capital structure of the successor company and that they rightly wish to redeem for themselves the money that they have lent from the National Loans Fund. That I understand perfectly. What I am worried about is the total amount of money that the Government are to accept in securities of the successor company versus the total amount of loans from the National Loans Fund. Whether the total in privatised securities are in debentures, convertible debentures, preferred shares or shares does not seem to affect the issue. As the noble Earl quite rightly says, it is a question of the debt equity ratio. I am talking about the total amounts and perhaps he would address himself to that.
At this stage I cannot give the noble Lord an answer. I do not think that we have finalised our thoughts on the matter purely because it is too far away from the appointed day when these 1317 decisions have to be made, and the market can change meanwhile.
§ Clauses 4, 5 and 6 agreed to.
§ ("Superannuation and pension rights.
§ The noble Lord said: Whenever we have a piece of legislation which deals with privatisation we always have the important question of employees' superannuation and pension rights. This has as much right to our consideration as any other part of a Bill that sets up private companies. BAA's combined trade union side has over many years co-operated in the maintenance and improvement of the superannuation scheme. I understand that it is self-financing and is a financially sound scheme. The employees are obviously extremely concerned that such a scheme should continue.
§ The Secretary of State has said that the authority's scheme for its employees is generous. It is index linked. It amounts to two-thirds of pensionable pay on retirement for an employee who has 36 years' service. Such a scheme is one which the employees will be jealous to keep in the event of privatisation.
§ We recognise that there may be some changes, but any changes should be made only with the agreement of the trade union side and with the central holding company, not with any of the subsidiary companies. In Clause 26 the Government have introduced the provision of limited protection for the pension rights of employees of local authority airports in the local authority airport companies which have to be set up. There appears to be nothing for the employees of BAA.
§ I recognise that the Secretary of State has said that there can never be a guarantee of pension rights in any undertaking which has been privatised, but we should receive some undertakings from the Government on the important question of the pension rights of BAA employees. The existing scheme is a good one. We must do everything that we can to ensure that the scheme is continued. It provides the most important point of co-operation between the management and the work force. I beg to move.
As the noble Lord, Lord Underhill, said, BAA provides a generous pension scheme for its employees. Pensions, which are index 1318 linked, amount to two-thirds of pensionable pay on retirement for an employee with 36 years' service.
Following consultation with my department Sir Norman Payne wrote to all BAA employees on 16th August 1985 making it clear that the pension rights of the BAA's existing staff and pensioners would remain unaltered following privatisation.
The scheme is managed by a board of trustees which is comprised of three representatives each from the staff and mangement sides, plus a chairman. Proposals for amending the scheme are discussed fully at joint meetings of managment and work force. BAA has shown in the past that it is ready to listen to its employees' views, as any good employer would be. Like any private sector company, BAA must retain the freedom to manage its own affairs, but I am sure that it will continue to do so in full consultation with its work force. I am pleased to see the noble Baroness, Lady Burton, in her place because she does not trust the Government. Do not believe me, believe the combined trade union side which wrote to me this morning. It commented on the new clause and said: We feel that there is no requirement to change the scheme for either the present or future employees. We accept that as has happpened in the past this scheme will be changed but this has always been carried out with the agreement of the combined trade union side". I therefore believe that there is no need for the amendment.
I am pleased with what we have heard from the noble Earl. How different this is from the arguments that we had on the buses Bill. I congratulate Sir Norman Payne and the combined trade unions on having, apparently, come to an amicable agreement on this matter. I wait to hear what the noble Lord, Lord Underhill, has to say in reply.
As we know, during the buses Bill last year the Committee was concerned at the lack of entrenchment of pension rights, but in this case there seems to be a mechanism and an intention on all sides to ensure that pensioners are no worse off than they would have been under their previous circumstances. I welcome that.
As the noble Lord, Lord Tordoff, has said, we welcome the statement made by the noble Earl. It is a step forward from the long deliberations we had on the subject of pensions on other privatisation measures. Although I have previously said that the Secretary of State may change and we should therefore have matters written in to the Bill, I appreciate the problems of trying to write into a Bill something which must be carried out by a public limited company which has its own rights under company law. The assurances that the noble Earl gave about the discussions held with the chairman of BAA on the future for the employees will be most welcome to the employees. Under those circumstances I shall not press the amendment. The statement will be clear in Hansard. If anything should go wrong, I am sure that the trade union side will raise the matter and quote the noble Earl. I beg leave to withdraw the amendment.
§ The noble Lord said: It may be for the convenience of the Committee if I speak to Amendment No. 15 as well. The amendments relate to trade unions wishing to maintain the present good relationship that there is between the employer and the trade union side. The noble Earl the Minister was good enough to pay a tribute to BAA as a good employer. He said that the combined trade unions were reasonable and were able to reach an agreement on superannuation and pension rights. I welcome that, and I agree with the noble Lord, Lord Tordoff, that there is a big difference between this Bill and the buses Bill where there was great uncertainty and worry throughout the country because it was not possible to make an arrangement between the trade unions and those who were going to take over the buses.
§ The amendments try to consolidate the good relationship. I hope that it will continue. I hope that there will be no possibility of a new group taking over and breaking up the existing collective bargaining arrangements. The present negotiation system within BAA has been in existence for about 19 years. The system has dealt with all issues of staff pay and conditions.
§ The main worry over the privatisation of BAA is that each of the airports will be set up as a separate limited company. It is possible that each company could attempt to negotiate separately with its own members of staff. That could result in a great deal of conflict and differential pay rates for each of the airports. That would stifle career development within the airports because one of the strengths has been that people have moved around the airports. There has been a genuine ladder of progress which has been for the good of the different airports. New blood with slightly different attitudes has come from other airports.
§ If the negotiations result in different rates of pay and conditions of service, it would cause friction among the airports and stop the cross-fertilisation from one airport to the other which has been to the benefit of the system as a whole. Whether or not the industry is privatised, it will still be looked upon as one industry. I therefore hope that the good points that have arisen from collective bargaining can continue.
§ All pay and conditions of service should be negotiated by the central trade union side as happens at present within the British Airports Authority. There is a policy of transferring employees from one location to another. If there was not some central negotiating machinery for pay and conditions, this would permit individual airports to negotiate separate terms which, in my view (and, certainly, the trade union side feels this) would be detrimental to the growth of the whole industry of British airports. I hope that the Minister will see the value of what I propose in view of the remarkably good co-operation that has been received 1320 from British Airports Authority staff. I hope that he will do everything he can to encourage it. We believe that these amendments will contribute to that process.
The noble Lord, Lord Carmichael of Kelvingrove, moves amendments in such a cosy manner that one is almost lulled into a lack of suspicion as to their possible effects. I felt myself rather subjected to that process during his short speech. On studying the amendments, however, I am not particularly happy about them. They are, I understand, intended to be the law for some time ahead. Therefore, to confine negotiations for all time, as Amendment No. 14 does, to the presently recognised trade unions plainly excludes the possibility of recognising any new union that might come into the field. It is an example of the closed shop that I would find some difficulty in accepting. It is not, after all, unknown in industry for new unions to emerge to meet situations. It might be almost tactless to remind the noble Lord that this is what happened in the mining industry where, following recent troubles, a new and strongly led union has emerged. To freeze for all time negotiating rights to what are deliberately described here as presently recognised trade unions seems a rather dangerous concept.
As to Amendment No. 15, I do not know why we should take it for granted, as the noble Lord seemed to do, that rates of pay and conditions should indefinitely remain absolutely the same at all airports. Conditions of work are very different; the stress of work is very different; the cost of living is very different as between one airport and another. I would have thought that these were matters properly left for negotiation between successor companies and whichever are the trade unions then appearing to represent the workers.
The noble Lord, Lord Boyd-Carpenter, has anticipated me in some of the remarks that I was going to make. I would like to reinforce the belief that the situation between employees and management in the British Airports Authority is in many ways a model of what should exist in the rest of industry. I see that the noble Lord, Lord Boyd-Carpenter, nods in agreement. It would be very much to the benefit of all if the machinery were to be kept intact, well oiled and properly working. The point made by the noble Lord, Lord Carmichael, about career development was something that I mentioned at Second Reading. The virtue of the structure that the Government have decided to set up for the future of the British Airports Authority is that it can allow transfer of personnel in a sensible career structure from airport to airport. That is a valuable asset.
However, like the noble Lord, Lord Boyd-Carpenter, I believe that the Committee would be foolish to entrench in legislation that current arrangements should be set in tablets of stone for ever and a day. Indeed, there may be new functions that come into the running of airports for which there is no known trade union at the moment. At the rate at which technology is progressing, I would hate to hear it said that anyone with a new skill necessarily had to become a member of an existing trade union. I support everything that the noble Lord, Lord Carmichael, said in terms of our wish that the good industrial relations 1321 that exist should continue and indeed flourish to the benefit of the airports. I cannot, however, go along with the amendments.
These new clauses would impose upon the BAA's successor company and its subsidiaries requirements that would exceed those placed on any other private sector company, or, for that matter, any employers in the public sector. The agreement of all recognised unions would be required before the introduction of any change in employees' terms and conditions that might include some element unfavourable to their members. I do not believe, with due respect, that the noble Lord, Lord Carmichael, has made a case for putting this group of employees in a privileged position, one of having statutory protection against changes in their terms of employment additional to those existing for other employees. They will have, like other employees, the protection of the Employment Protection (Consolidation) Act 1978 against any unilateral change in their terms of employment that amounts to a constructive unfair dismissal.
The pay of the BAA's employees after privatisation will be a matter for negotiation between employees and management. It would be wrong, we believe, to fetter this process as the noble Lord proposes. The position of employees will not be changed by the privatisation process. Contracts of employment with the BAA will be transferred to the successor company with no amendment.
The first new clause, Amendment No. 14, deals with collective bargaining procedures. It seeks to protect the presently recognised unions regardless of the future wishes of staff, a point ably made by my noble friend Lord Boyd-Carpenter and by the noble Lord, Lord Tordoff. I am pleased to have the noble Lord on my side. We can, I am sure, make room for him on these Benches should he wish to cross the Floor. This Government have given much more freedom to trade union members to determine how they should be represented. An essential part of this freedom is the ability to move from one union to another if one is dissatisfied with the way that one is represented by one's present union. This new clause would deny the BAA's employees that freedom. We believe that both new clauses are inflexible and unnecessary and to the detriment of the employees themselves.
I am grateful to the Minister for his explanation and for his remarks on my proposed new clauses. I am also grateful for the kind words of the noble Lord, Lord Tordoff, and also for the flattering words—although I am not so sure about this—as to the soporific quality of my speech made by the noble Lord, Lord Boyd-Carpenter. On reflection, I believe that it is perhaps too much to ask that this should be embodied, as the noble Lord, Lord Tordoff, said, in tablets of stone. We were concerned really to raise this matter and to obtain the good offices of the Minister in order that the British Airports Authority plc or its successor will recognise the feeling of people for the existing negotiating machinery. I was glad to note that the Minister said that contracts of 1322 employment would be the same when staff moved from the British Airports Authority to whatever successor company took over. With these explanations from the Minister and the guidance received from other noble Lords, I am glad to withdraw the amendment.
§ Page 9, line 18, at end insert— ("and (c) in relation to an airport vested in a passenger transport authority, includes that authority.").
(b) in relation to Scotland, means a regional or islands council".
§ It may seem rather strange but our only means of clarifying the Government's intentions in relation to the future ownership of Liverpool airport is through this amendment. Responsibility for the airport was only recently transferred to Merseyside passenger transport authority by order of the Secretary of State, under the provisions of the Local Government Act 1985. The passenger transport authority did not seek responsibility for the airport. Nor was it consulted before it was transferred. Nevertheless, the authority has accepted its responsibility with good grace. It is convinced that Liverpool airport brings considerable economic benefit to the region and is a stimulus to industrial development and urban regeneration.
§ Noble Lords will appreciate that unemployment at Merseyside stands at over 20 per cent. Therefore, good communications are essential if the area is to attract business and get these people back to work. This faith in Liverpool airport is shared by the EC, in particular, who with a now abolished Merseyside county council, and with the full support of the Government, have invested heavily in new facilities which significantly improve the operational efficiency of the Liverpool airport.
§ The financial effect of the Secretary of State's order transferring the airport to the PTA was to impose an operational deficit of £3.5 million in the current year. Unfortunately, the way the Government calculated the rate support grant made no allowance for the authority's airport expenditure. It is therefore seen as an overspending authority, and a grant penalty imposed. As I think will be appreciated, this is manifestly unfair on the Merseyside passenger transport authority, which is being penalised for the actions taken by the Secretary of State.
§ The key term is the "principal council". For these purposes that means, as I have said, a district or county council. I should say that there has been fairly lengthy correspondence with the department of which the noble Earl will undoubtedly be aware, and I shall not therefore refer to the correspondence in detail. As 1323 the Bill now stands there is uncertainty surrounding the future ownership of Liverpool airport which could unwittingly damage the marketing efforts being made to capitalise on recent improvements. We therefore think it is absolutely essential that we include in this definition of "principal council", where the airport is vested in a passenger transport authority, that it shall include that authority. That will help to clarify the position at Liverpool and any other PTA which might find itself in a similar position in the light of airport developments. I beg to move.
May I urge on the Government and in particular, the Minister today that this should be taken as an urgent matter. The history of Liverpool airport is a long and complex one. I think that at this stage I should refute completely the suggestion made by the noble Lord, Lord Tordoff, that Liverpool was behind Manchester in deciding to set up airport facilities within that town. When Manchester's airport facilities were as some people mentioned, a tent and a Nissen hut, Liverpool already had a permanent airport terminal—and a very good one, too. Although it is not my role to defend the City Fathers of the 1930s I must congratulate them on that, although they were certainly not of my political persuasion and left the place in a hell of a mess. That was the start. It was not long after the war when everybody realised the real need for an airport. The need for an airport does not start because someone says, "We shall put the airport there. That is where we used to have the ocean terminal and that is therefore the logical place for a new airport". An airport is justified by the activity that is contained within the area of that airport.
It was essential for the interests of the North-West that the airport should be centralised to handle that region's problems within the centre. Liverpool never objected to the concept that Manchester airport should be the central and growth point for airport facilities in the North-West. Obviously somebody coming from the other side of the Pennines would not want to pass Manchester and then go to Liverpool in order to catch a plane—although I could suggest that was better than going to Manchester.
The airport was then involved in a discussion about Burtonwood. When I was chairman of the North-West Economic Planning Council there was a very strong view that central government should subsidise the refurbishment of Burtonwood airport because at that time it was a much better airport from the point of view of runway facilities than Heathrow. It was equidistant from Manchester and Liverpool. The solution of the airport problems in the North-West would have been solved by that imaginative stroke. Unfortunately, the Coal Board were more interested in getting the coal out from under the runway. The North-West Planning Council had to take a decision. The Minister decided that coal was more important than setting up the infrastructure of airports in the North-West.
We then come to the modern situation. When I left Liverpool the situation was that it was quite prepared to give up most of its interest in the Liverpool airport if it could be established that we then had an airport 1324 consortium for the North-West. There is no doubt about this simple fact: if Manchester is insisting on staying on its own, ultimately it will come up against the problem that it will be constrained by the geographical factors around Manchester. It will not be able to expand in order to cope with the traffic that should be generated by the activity in that area. If that is true—and I believe implicitly that it is—the need for Liverpool airport will then be pressing and urgent. Therefore, Liverpool should be kept in existence.
I give that history in order to demonstrate this important factor. We have a letter written by the passenger transport authority to the Minister on 8th May. They still do not know the position. I plead with the Minister to let them know the position and, if possible, to tell the Chamber today. I appreciate that this may be under consideration in the environs of the Ministry, and perhaps they have not yet arrived at a solution to the problem.
The simple question is: where does the PTA stand? I believe that in the interests of the North-West, of airports generally and of the nation, these matters should be planned, and that if possible Liverpool airport should start the process of amalgamation with Manchester in order to have one company handling the affairs of the airports in the North-West.
I was not going to speak in this debate, and I do not disagree with some of the points of my noble friend and colleague Lord Sefton. Nevertheless, history is very often the history as written by the individual. Some historical facts to which my noble friend Lord Sefton referred are quite correct. There was the basis of an airport at Liverpool before that at Manchester. But he used the word "geographical", which says it all. If one draws a 50-mile radius around Manchester it is the biggest centre of population in the United Kingdom. Liverpool has the disadvantage that one side of it is water and the coastline. Before I left Manchester, in political terms, the catchment area for Manchester airport was then 14 million people. That is mainly the reason why Manchester progressed.
It would be wrong if I did not issue a warning. I have no direct interest in Manchester now. I do not live in Manchester, but in Leeds. However, I am familiar with the philosophy behind the development of Manchester airport. That was on a non-party basis. It was not only my party which was involved. Conservative councillors and aldermen at the time played as important a role in developing this on behalf of Manchester as any of my colleagues who were then on the council.
But it is not the first time that it has been said that there ought to be an amalgam of the two airports. Anyone who said that there ought to be an amalgam would literally have to force it on Manchester. In my view there is no way in which whoever controls the Manchester city airport now or in the future will accept that type of proposition because, as I have said, it is right in the middle of the biggest conurbation outside London. Indeed, if you drew a 50-mile radius around London, that area would encompass fewer people than would a 50-mile radius around Manchester. That is one of the major reasons why Manchester is a success.
1325 I have also heard it said in Leeds that Leeds and Bradford airport may well have developed faster than did Manchester, but that the people in political control in Leeds and Bradford—and they were members of various parties, not just one—were not as bold and were not as forward-looking as the people in Manchester.
I have made my intervention to put the matter in its proper perspective. In talking about the airport at Manchester we are talking about an airport which is situated in a bigger centre of population on the basis of a 50-mile radius than is any other airport in the United Kingdom. Anyone who loses sight of that fact misses out a large component of our discussions and arguments. Having said that, naturally I support the amendment and the way in which it has been moved.
We are in serious danger of this debate developing into a long discussion. I see that the right reverend Prelate the Bishop of Manchester is present as well as my noble friend Lord Crawshaw of Aintree, who is actually a Salfordian. I also see the noble Lord, Lord Scanlon, who may say something about the benefits of Barton Airport, because at one time he was a trade union branch secretary covering that particular branch area. However, I do not want to go down that track.
I wish to remind the Committee that this amendment is about a particular problem which is experienced by Liverpool and I am glad to be able to stand up in support of Liverpool and say that if the definition of "controlling authority" is not sorted out, a number of succeeding clauses which purport to deal with the situation will not appear to apply to Liverpool airport. I cannot think that it is the intention of the Bill, or even subconsciously the intention of the Bill, to put Liverpool airport out of business. However, reassurance is needed not only for Liverpool but also for the tour operators and airlines operating out of Liverpool. I hope that the Government will give a fair wind to the amendment or at least come up with some reassurance.
Will the noble Lord, Lord Tordoff, accept from me that had the Liberals had their way in Merseyside and Liverpool, there would not have been any airport about which to talk?
I am sorry; will the noble Lord repeat his question?
If the Liberal Party in Merseyside and Liverpool had had its way, there would not have been any airport about which to talk.
I have no idea. I shall not get involved in the competitive merits of Liverpool airport. Liverpool airport went down the drain because Liverpudlians thought that Cunarders would always go on taking people across the Atlantic and it was only later that they woke up to the fact that they had all moved to Southampton and then it stopped. I do not want to get into that argument this afternoon.
As the Bill is drafted a passenger transport authority owning an airport may, at the direction of my right honourable friend the Secretary of State, form an airport company and transfer to it—following approval of a scheme—the assets of the airport. But it may not hold shares in that company or do any of the other things which a principal council may do in respect of an airport. This was a quite deliberate decision taken by my right honourable friend because the Government did not see PTAs as an appropriate body to hold shares in an airport, to deal in such shares, to provide certain services to an airport, to make loans to it and the other things which principal councils are enabled to do under Clauses 15 to 26 of the Bill. We believe that public sector shareholdings in the public airport companies should be held by directly elected bodies, rather than indirectly elected ones. The proposed amendment would reverse that policy.
As the noble Lord, Lord Underhill, quite correctly pointed out, there is only one airport involved, and that is Liverpool. The Government believe that the principle that PTAs should not own shares remains valid. Furthermore, they believe that direct control of Liverpool airport by the five district councils involved—with freedom for shares to be transferred and traded—will, if anything, enhance the chances of Liverpool airport reducing its present high level of losses.
We fully appreciate the importance of all regional airports and I hope that what I have said has clarified the position. The noble Lord, Lord Underhill, and his colleagues may not like it, but I hope that I have clarified the position, which is what the noble Lord asked me to do. I do not believe that what I have said will affect the present marketing proposals of Liverpool airport. We wish it well.
If the people of Liverpool and Manchester wish to get together and rationalise their airports, that is up to them; it is certainly not a government matter. If that is what they wish to do, we shall certainly provide any help if they come to us and ask for it. However, we shall not take the lead on that matter. Therefore, it is a deliberate decision that the elected district councils not the PTA, should be the owners. I appreciate that the noble Lord, Lord Underhill, will ask, "Why is it a PTA only for one year?" I sympathise with the noble Lord. I think that perhaps it is not the most satisfactory way of doing it, but the overriding principle is to get the elected bodies as the shareholders.
1327 The next amendment dealing with Clause 12 refers to principal authorities and I shall be asking that certain things should be done. If by the amendment not being agreed to a PTA is not to be recognised as a principal authority, we shall have difficulties when we come to clauses such as Clause 12.
Therefore, the position has not been satisfactorily resolved or thoroughly cleared and our friends in Liverpool will I am certain still be rather confused as to, first the position of the ownership of the airport, and, secondly, the position of the debt to which I referred and the fact that the rate support grant presents them with certain penalties.
Before my noble friend sits down, it would be as well to make noble Lords present aware of the facts of the situation. There may be a slight difference of accent between the noble Lord Lord Sefton, and myself regarding Liverpool and Manchester airports. However, there are some facts on which we totally agree. The reason for some of the difficulties is that a government some years ago decided to reorganise local authorities. At that time the airport in Liverpool was owned by Liverpool City Council and the airport in Manchester was owned by Manchester City Council. I do not know what happened in Merseyside, but I know what happened in Manchester. The Greater Manchester County—the new body—immediately put it on its shopping list to take over.
It is a fact of life, and it can be examined in detail by anybody who wants to challenge what I am saying, that when the reorganisation took place in the early 1970s there was a whole series of disputes between metropolitan districts and metropolitan councils as to who would do what. One of the most profound disputes arose over the fact that there was removed from the local authorities—the districts—the right to manage their own pension funds. That type of activity was given to the counties, though the districts and the cities had done it well themselves in the past. We were faced with a situation in Manchester where I knew, as the then leader of Manchester City Council, that if the issue was unresolved by the two bodies concerned and went to the Secretary of State, there would be no question at all that he would have ruled on behalf of the new metropolitan county. There was a whole succession of disputes in various parts of the country between metropolitan districts and metropolitan counties. I think I am right in saying that without exception the then Secretary of State for the Environment, the Member for Hexham, found in favour of the counties.
I had to protect what I saw as my priority, the interests of the ratepayers in Manchester who had funded that airport, with various degrees of government assistance, during its history. An agreement was reached with the county council that there would be 50 per cent. control by each of them, with an annual change of chairman; one from the City of Manchester one year, and the next year from the county. That worked until the present situation.
I do not think it is being too simplistic to imagine that the Government may well have turned the clock back completely in what they have done, and handed 1328 the airports back to the people who had developed them originally. The whole situation is bedevilled by the enforcement of a situation on local authorities in a way that—and I hate to use the term—has a sense of hybridity in it whichever way you look at it.
In my younger days on the city council I was never able to obtain a place on the Manchester city airport committee because it was known as one of the blue chip committees, and the older and more experienced members gravitated towards it, but now we have a position where it will no longer be in that situation. At that time there was an airport committee which ran Manchester Airport. I have no doubt that there was one that ran the Liverpool Airport on a strictly municipal basis. They were just members of the council. They were not directors. The chief legal officer of the airport was usually the town clerk. Under him there would be what is termed now an airport director. We used to call them airport managers. Nevertheless, it worked.
I cannot for the life of me think who spawned this present suggestion to deal with airports, which originally were taken away from authorities without any attempt to find their views on what ought to be done. Literally at the stroke of a pen they were removed because the Government of the time thought that was the right thing to do. Those airports were developing well and functioning well. If the present Bill had been looked at in the sense of going back to the situation as it was before, a lot of the arguments and debates taking place in your Lordships' Chamber during the passage of the Bill could have been avoided, and the Government could have achieved their wishes in a far more acceptable way than they are doing today.
I apologise to Members of the Committee if they consider that I am wasting time, or keeping them here unnecessarily, but I should like to go back. The only reason I sketched in the history of Liverpool Airport and the North-West was to demonstrate the importance of something happening in Liverpool so that they know where they are. The history is quite clear. Liverpool City Council set up an airport committee and maintained an airport. The reorganisation of local government came in, and there was no dispute on Merseyside. The whole of Merseyside agreed that an airport was not really the right subject for a city, but a sub-regional affair that should be handled by the county. The county took it over. Then the Government were warned that if they went ahead with the local government Bill there would be some particular problems with regard to Liverpool, and the airport was one of them.
Come the Airports Bill and the dissolution of the county council, and Liverpool are prepared to take over the airport, full stop. But somebody in Whitehall decided, "You can't take the airport over because the other district councils are not so keen and enthusiastic". Hence my reference to Liberals in Merseyside, who in my opinion betrayed Merseyside, but that is all in history.
The situation now is that Liverpool do not know what to do. The Government have said to the PTA, "Take it over". The Government have produced this Bill. Then they say to the PTA, "But you can't be on 1329 all fours with other authorities which are taking airports over". It has not gone out of the hands of elected representatives through anybody's fault on Merseyside. It has gone out of the hands of elected representatives because of government and ministerial decision, and that is why it is not in the hands of elected representatives. All the PTA say is, "Don't put us in the situation of inheriting a debt that we may have to cover and then not give us the powers to set up the company and invest in Speke Airport for the future of Speke Airport and the North-West, or until certain other people in the North-West take a more enlightened view of the total problem in the North-West". That is all they want to know, and they deserve, and should get, a straight answer. Who owns it and who is going to be responsible for the administration of this Bill in regard to Speke Airport, or Liverpool Airport?
I thought I had given that answer. I apologise to noble Lords opposite if I did not make myself clear. It was obviously my fault. May I try once more? Clause 11 defined "principal council" for the purposes of Part II. The definition omits passenger transport authorities. However, Clause 12(7) effectively brings the PTAs within the definition for the purposes of Clauses 12 and 14 only—that is, the formation of a company and the transfer of assets.
I am sorry if it is not clear. It is clear to me that the PTA own the airport. We believe they are not the right body to own it, and we appreciate the problems that have arisen over the temporary basis, and perhaps it is not the ideal way of doing it, but we believe that following privatisation it should be the five district councils who own it. The PTA do now; they are incorporated into the Bill for Clauses 12 and 14, which are the relevant clauses for the purposes of the formation and transfer of assets.
The question of apportionment of debt is something we ought to wait for until the debate on that subject, because there are amendments down for a later stage of the Bill and it would perhaps be wrong of the Committee to preempt them now. I hope I have clarified the particular question that noble Lords asked me.
Does the Minister not understand that in his answer lies the inherent unfairness to the local authorities which spawned these airports, developed them, and were the sole controllers? They were taken off them without any compensation. Manchester got a 50 per cent. arrangement with the county, but in order to put a package together to form a plc Manchester suggested that 45 per cent. of the shares be divided among the other nine metropolitan districts, who played no part whatsoever in the birth or development of Manchester Airport.
As my noble friend Lord Sefton said, the original people who built and started Liverpool Airport—and he said that it had its financial troubles in running it but it must have had some valuable assets—are being asked to divide it among the other districts, which had no say in the birth or development of that particular airport. The other nine districts are exceptionally lucky in Manchester, in that Manchester, in order to form a plc, has made an accommodation for them to 1330 have a share in an asset that has nothing to do with them. If the Government had switched the clock back to the original position, I am sure that they would have avoided a lot of the contentious issues being raised during the Committee stage of this Bill in your Lordships' House.
I wish the noble Lord would not confuse Manchester with Liverpool, because there is a fundamental difference between the problem in Manchester and the problem in Merseyside. The fundamental problem is £3½ million. Manchester is making a profit. Who would turn that down? It has a good future for the reasons that I outlined. It is in the centre of the conurbation. Liverpool has not a good future. It has to be held in reserve in case Manchester cannot provide the necessary airport facilities in the future. While it is being held in reserve, perhaps we can settle my part of this debate anyway by asking the Minister whether he will please write to me to tell me what his department intend if the five district councils cannot agree to take over the responsibility through the PTA for floating any loans or investments in the airport? Will he tell me how he will handle the situation when the PTA has been compelled to take over the airport, but has been denied the jobs that the principal councils and the other authorities have in the airport structure? If the Minister will write to me, I can use his words in quotations.
I accept the noble Lord's offer with alacrity. I shall write to him.
I am sorry, but that does not help the rest of us.
Perhaps I had better put a copy in the Library.
That does not help us at this moment. Although I think that the noble Earl has gone some way to explaining the position I still do not think he has got to the nub of it. As I understand it, the situation is that on the break up of the Merseyside County Council, Liverpool City Council wanted to take over control of the airport. They were refused permission to do that on their own by the Secretary of State. I shall not go into Liverpool politics, for that is far too complicated; but for whatever reasons the surrounding district councils were not prepared to join a consortium of some kind and therefore the Secretary of State handed this over to the PTA, forced it upon the PTA. The Secretary of State is now saying that that will not do so far as this Bill is concerned except for the two clauses mentioned by the noble Lord.
Regarding the operating conditions, the PTA is left in complete limbo as well as having a debt round its neck. Unless district councils can be forced to join in or unless the Secretary of State is prepared to give it to Liverpool City Council (which it may or may not want, I do not know) the PTA is in this totally anomalous position of having a shell of a company with no real powers to operate and a £3½ million debt round its neck. I am afraid that the Minister still has been unable to explain to the Committee, or at least to 1331 me, where the PTA goes from here. I understand that it finds itself in an extremely difficult position.
I am grateful both to my noble friend Lord Sefton and to the noble Lord, Lord Tordoff, for putting the position regarding Speke Airport in the simple terms that are facing the people in the area. As I said at the outset, I believe that there has been lengthy correspondence with the appropriate section of the department from the PTA on this issue. I am not clear—I do not think many other noble Lords will be clear—exactly where we stand at this moment. The offer of the noble Earl to send a letter is appreciated. I hope he will send a copy to every noble Lord who has taken part in this debate. I think it is important that we should have that.
The noble Earl referred to Clause 12(7). This clause and Clause 14, together with Clause 11(3) and (4), shall apply to a metropolitan county passenger transport authority as they apply to a principal council. Speaking off the top of my head, I cannot say whether that is satisfactory. We shall need to seek advice about whether those sections cover all the dangers that exist without a PTA being classified as a principal authority. We shall need advice in the light of what the noble Earl has said.
Although the noble Earl said that we should leave the discussion on outstanding debts until we come to those items, I have a terrible feeling that when we come to those items of outstanding debt the noble Earl still will not be able to explain what will happen to the debt which is left apparently with the PTA which is not recognised as a principal authority. We may find ourselves in some difficulty when we reach that item. But with the assurance that we shall have this correspondence supplying the information before the Report stage, I beg leave to withdraw the amendment in order to solve our confusion.
§ Page 10, line 10, at end insert— (" (1A) The Secretary of State shall notify all the principal councils by whom an airport is controlled of his intention to give a direction under subsection (1) above relating to the airport and of the nature of the proposed direction and shall before giving the direction take into account representations made to him by any of those councils including any alternative proposals for the management of the airport.").
§ The noble Lord said: Now we come to the position of local authority airport undertakings. Amendment No. 17 refers to the important provisions under subsection (1). I draw attention to two aspects of the amendment. It reads: The Secretary of State shall notify all the principal councils". The Committee will notice that the reference to "principal councils" comes in once again. At the present time the Secretary of State can under Clause 12(3) decide for himself which local authority with an interest in an airport shall receive a direction. Where 1332 one authority owns the airport—for example at Luton—there is no problem. The authority will receive the Secretary of State's direction and will act accordingly. But there are many airports with more than one authority with an interest. Leeds—Bradford, Newcastle, Birmingham, Manchester, East Midlands and Teeside airports are some examples. In Manchester's case this could mean ignoring Manchester, or ignoring Birmingham in the case of that airport, in favour of another authority whose interest is much smaller in scale and importance. That decision is left solely with the Secretary of State. It is considered only fair and reasonable that all the authorities are notified with the direction.
§ In the Standing Committee in the other place, the Government proposed that if all the local authorities are agreed as to which authority took the lead that decision would be honoured by the Government. But that still leaves the question open as to whether decisions should be unanimous or by a majority. The Government have not given any indication about whether a decision on this matter has to be unanimous by all the princiapl authorities concerned or whether it is a majority decision. Therefore I hope that when the noble Earl replies he will clarify that point.
§ The other important words in the amendment are that, The Secretary of State shall … take into account representations made to him by any of those councils including any alternative proposals for the management of the airport". The local authorities see these consultations as an important means of making the provisions in the Bill more workable. I said at the outset that despite our complete opposition to the Bill we all want to make the position more workable. The local authorities believe that consultations are an essential part of that. Therefore this has relevance for all airports both large and small. If the Government follow their timetable to restructure the regional airports, local authorities will have little more than three months to create company structures and to submit to the Secretary of State a transfer scheme under Clause 14. This, I think it is generally agreed, is not sufficient time.
§ The other point concerns the provision of an opportunity for local authorities to submit alternative proposals for the management of their airports for the Secretary of State's consideration. This is a reflection of the fact that no two airports are alike and that it is unusual for the Government to argue that they are. That would arise from the present position under the Bill. To be effective, structures need to reflect the individual circumstances of each airport. There is no reason why local authorities will not take the opportunity of presenting constructive proposals to the Secretary of State if this amendment were supported.
§ The Government may argue that the amendment is unnecessary. I can assure the noble Earl that the local authorities do not accept this. They feel that it is necessary for them to have statutory a right to submit to the Secretary of State alternative proposals for his consideration. It is for that particular reason that I hope that the noble Earl will see the important point of consultation and the right of local authorities to submit alternative schemes and will see fit to accept this amendment.
The effect of the proposed amendment would be to require consultation before my right honourable friend the Secretary of State can issue directions to principal councils to form airport companies. The noble Lord, Lord Underhill, has said that the timetable was tight. Although tight, we believe it to be a practical one. I agree when the noble Lord, Lord Underhill, says that I would consider this amendment to be unnecessary. Clause 12(4) already provides that my right honourable friend may revoke any direction given under subsection (1) at any time before a company is formed. Thus, if a principal council is convinced that the formation of a company is unnecessary and is able to persuade my right honourable friend that that is so, any direction already given may be revoked.
There is no need for any such council to wait. The 16 airports to which my right honourable friend intends to give directions are well known. Those which feel that there are special reasons why they should be excused from forming a company need not wait until they receive a direction; they can make representations to my right honourable friend at any time. However, I am sure that my right honourable friend will need convincing reasons if he is to exercise his discretion not to require the formation of a company in any case which meets the requirements of Clause 13.
The noble Lord, Lord Underhill, in referring back to the previous amendment on the PTAs, said that there was going to be trouble with the principal council. I do not think that there is a difficulty because there are the cases when the PTA is classed as the principal council. I do not see any confusion arising there. The noble Lord, Lord Underhill, asked me which should be the lead authority. My answer to that is that we are happy to accept the majority decision at the time of discussion. I hope that that is helpful to the noble Lord. Our feeling is that this amendment is unnecessary.
The noble Earl says that he is willing to accept the majority decision. The majority of whom? Is it the majority of the local district councils? If that were the case, that could be as unfair as the noble Lord, Lord Underhill, has just suggested. They could be all of one political persuasion.
As I understand it, the noble Lord is correct in suggesting that it would be the local district councils.
I do not think that the noble Earl has really answered the point of this amendment. Clause 12(1) reads: The Secretary of State may give to any principal council who control (whether alone or jointly with one or more other principal councils) … to which this section applies … a direction requiring the council to form a company". It is left to him to decide. The point of the amendment is that all the principal councils by whom the airport is controlled should be advised of this direction. I have been criticised over words which we have suggested should be put in the Bill. Now we are told that the councils, if they wish to write to the Minister, can do so. There is no statutory right. There is also no 1334 statutory right that he shall notify them of any direction that he is going to give to a particular council. This is what the amendment is asking for—that he shall communicate his direction to all the authorities concerned and shall take into account representations made to him by any of those councils. If a decision can be a majority decision, surely the minority bodies, the minority councils, ought to have a right to submit representations if they wish.
I cannot understand why, on a simple matter like this, the Government cannot give way. A time comes when a government ought to give way on something that is reasonable and sensible. It appears to me that this is one of those cases where it will do a great deal of good if the Government say: "Yes, this is something that we ought to amend". Or, if the noble Earl cannot go as far as that, he ought to say: "This is a very sensible proposal. I cannot accept it at present but I will look at it and try to bring something forward at Report". If he will do that, I think it will be a sensible thing to do and, if I may say so, it is something which would meet with a lot of reciprocity on this side of the Committee.
I might not be able to go as far as saying that it is a sensible amendment. Of course I will look at it. The noble Lord can be assured that I shall. I cannot guarantee that I shall come forward with an amendment at Report stage. I shall look at this if that is helpful to the noble Lord.
I beg to move that the House be now resumed. I think it would be for your Lordships' convenience if I were to say that we shall not return to the Committee stage of the Airports Bill before ten minutes past eight.

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