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Orders Of The Day

Volume 13: debated on Monday 16 November 1981

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Civil Aviation (Amendment) Bill

Order for Second Reading read.

5.12 pm

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

This is not a legislative earthquake, but a straightforward Bill with only five clauses which should not be the subject of major controversy.

The Bill contains three main provisions. The first is to increase the statutory financial limit of the British Airports Authority. The second is to increase the statutory financial limit of British Airways and to clarify the application of this limit to British Airways foreign currency borrowings. I should like to make it clear at the outset that these provisions do not entail any automatic increase in external financing limits, public expenditure or the public sector borrowing requirement, as I shall shortly explain.

The third provision of the Bill accounts for by far the greatest part of its bulk, but will probably arouse somewhat less interest than the other two provisions because it deals with a highly technical matter—the consolidation of earlier civil aviation Acts. This provision is contained in clause 4 of the Bill, which gives effect to the amendments and repeals in the two schedules. It makes a range of amendments to existing civil aviation statutes, going back to 1949, to pave the way for their consolidation.

A consolidation Bill has been prepared by the Law Commission, which, if the House shows its approval of this Bill, will be introduced shortly afterwards. It will be taken, as is customary, by a Joint Committee of both Houses. But, because of certain inconsistencies of details, the present statutes are not easy to consolidate in their present state. Hence the need for the pre-consolidation amendments in the present Bill.

I now revert to this Bill's two more significant provisions. The first is clause 1, which proposes increases in the 13ritish Airports Authority's financial limit.

The British Airports Authority was created in 1966 to manage the aerodromes at Heathrow, Gatwick, Stansted and Prestwick and the the authority has since acquired those at Edinburgh, Glasgow and Aberdeen. The authority assumed at the outset a commencing capital debt of about £53 million, since when it has been consistently profitable and able to finance most of its capital expenditure from internal resources. In fact, for total capital expenditure of £400 million in the 15 years of its existence, the authority has sought loans totalling only £14 million.

Consequently, its capital base of £820 million is principally comprised of reserves which, at 21 March this year, amounted to £763 million. Compared with this sum, the amount of outstanding debt, at £61 million, is relatively small.

Does my right hon. Friend agree that some of the increases in airport charges appear to be very high? Will he confirm that they will be the highest airport charges in Western Europe?

My hon. Friend, with the prescience for which he is renowned, has anticipated a section of my speech, which was lovingly prepared by the Department of Trade. When I come to it I hope that I shall be seen to deal faithfully with the pertinent point raised by my hon. Friend.

The authority is now embarked on a major investment programme over the next six or seven years in line with Government policy to meet the forecast growth in air transport demand.

Where a nationalised industry's investment programme is singularly uneven, as is inevitably the case with large airport developments, we have always recognised that the industry's internal resources may sometimes have to be supplemented by external borrowing. The BAA's investment programme is currently expected to cost over £700 million at outturn prices over the next six to seven years. The authority will need to finance a proportion of this investment by new borrowings from the national loans fund. I expect the authority's cumulative debt, including its temporary borrowings, to reach £200 million in 1985.

Will my right hon. Friend explain why, as the British Airports Authority has been so profitable for so long—largely at the expense of civil air transport operators—it has not been denationalised or privatised long since? The capital programme could then have been funded out of loans or equity from the market.

I cannot recollect that the Conservative Party manifesto gave any indication of a proposal to denationalise the British Airports Authority, but I am, as ever, very open-minded on these matters. Some of the good gifts must be put on the stall now and some must be left until a little later. I do not in any sense want to deter my hon. Friend's enthusiasm for denationalisation, but I have to say clearly and openly to the House that the proposals in the Bill predicate the continuation of the British Airports Authority as a public corporation. I emphasise that ours is an open-minded party, and no debate is ever terminated. That is not to say that the debate proceeds with the utmost acrimony, which would be true of the Labour Party; merely that the debate within the Conservative Party is eternal and productive.

I know that it has been argued that more of the authority's investments should be met through borrowings rather than out of internally-generated profits—a point raised by my hon. Friend the Member for Southampton, Test (Mr. Hill)—and that airport charges should therefore be lower. Hon. Members will be aware, however, that a number of foreign airlines have taken legal action against the Government and the BAA concerning the user charges at Heathrow and the financial target which, in line with the policy of successive Governments, we have agreed with the authority. The case is now before the courts and it would be improper for me to comment in detail on either of these topics at this stage.

Although I fully understand that my right hon. Friend does not wish to comment on the cases involved, the points raised by my hon. Friends the Members for Southampton, Test (Mr. Hill) and for Ruislip-Northwood (Mr. Wilkinson) about the BAA's lack of efficiency have some weight. Any fool can make massive profits if there is a monopoly and he can just jack up prices when he wants. After all, the Secretary of State is responsible and, with respect, he cannot go on ducking the issue by saying that there is a court case. Will he instigate a thorough review management of British airports to see if they can be a more sensible footing that will allow foreign and British airlines to operate more efficiently?

As I would rather see my hon. Friend the Member for Surrey, North-West Grylls) in the Chamber than in Brixton gaol, I shall confine my remarks circumspectly and shall not comment on the matter before the courts. As regards the wider issue of the efficiency of the British Airports Authority, I hope my hon. Friend will not join those who carelessly to around accusations about the efficiency of public sector corporations. At the conclusion of the debate, the Minister will be happy to share with the House the recent discussions that the Department has had with the BAA about the pursuit of financial objectives that pay regard to certain measurements of productivity and efficiency. I hope that that will contribute to the campaign that my hon. Friend is conducting in respect of the BAA. Indeed, if a politician cannot live with campaigns he should go off to a monastery. I am happy that my hon. Friend is pursuing his campaign but I am not immediately convinced. However, I should be happy to consider all the points that my hon. Friend might raise in his campaign. My hon. Friend and the Treasury Bench have one objective that is shared by Mr. Norman Payne—the most effective running and performance of the BAA.

The BAA's investment programme includes expansion of its airports in the South-East to meet the forecast growth in air transport demand, to which I have referred. However, the increase in borrowing limits provided by the Bill has no implications for the proposals for new developments at Gatwick and Stansted which are currently the subject of public inquiry. As far as Gatwick is concerned, the House will know that my right hon. Friend the Secretary of State for the Environment and I have written to the parties to the inquiry indicating that they are inclined to grant permission for the development in the light of the inspector's report, but inviting their views on whether the new traffic forecasts have implications for the inspector's conclusions, so that they can be taken into account before final decisions are reached.

It is not possible for me to go further at this stage into the developments at Gatwick and Stansted, since they are the subject of public inquiries. I know that the House will not expect me to prejudge the evidence by commenting on issues which are likely to be examined at the inquiry, although I fully recognise the deep public concerns that are aroused by airport development. Indeed, that was evidenced only this weekend by the large demonstrations in the Federal Republic of Germany. However, the point I want to stress is that an increase in the authority's borrowing limits does not mean that either the Gatwick or Stansted developments will go ahead. It merely makes it possible for them to be started should that be the outcome of the inquiries.

I should perhaps add that the authority's investment plans also cover a continuing programme to improve and modernise the existing airport facilities, including interim developments at both Heathrow and Gatwick to remove particular capacity constraints at those airports until such time as the new terminals are available.

Will my right hon. Friend be kind enough to confirm, once again, that it remains the Government's policy that a fifth terminal at Heathrow should be built?

I am happy to confirm that the position is precisely as set out in a letter that I sent to my hon. Friend.

Finally, the BAA proposes to spend a further £10 million on essential improvements at Aberdeen to meet expected future demands for operational and support facilities as the result of the continued expansion of the North Sea oil industry.

The authority's present statutory borrowing limit, however, including its commencing capital debts and temporary borrowings, was set by the Airports Authority Act 1975 at £125 million. On the basis of its present investment profile, it would be in danger of breaching its present limit within a year or so. The Bill therefore proposes increasing the statutory borrowing limit of the authority to £200 million in the first instance, with a provision to extend this by order to £300 million when necessary. Unless there are some unexpected developments, I would not expect to have to seek the approval of the House for such an order before about 1985.

Clauses 2 and 3 deal with British Airways' borrowing powers. What we are proposing here is that British Airways' present financial limit of £1,000 million should be raised on Royal Assent to £1,200 million and that provision should be made for two further increases by order—subject to the approval of the House—to £1,400 million and £1,600 million.

An increase in British Airways' borrowing powers is necessary because their total outstanding borrowings is approaching the present limit of £1,000 million. The main reasons why British Airways need to go on increasing their borrowings is because of the heavy programme of aircraft investment to which it is committed. That is necessary if the airline is to have a modern and fuel-efficient fleet which can compete with other world airlines.

If my right hon. Friend believes that British Airways should be allowed to compete in the world's markets, can he explain why the private sector is not allowed to compete with the national carrier on domestic trunk routes and so have a free market in Britain as well as internationally?

I am sure that my hon. Friend appreciates that competition on domestic trunk routes is determined by the Civil Aviation Authority. Such matters are within its discipline. However, if my hon. Friend feels that the operation of the procedure is defective, I shall take account of his views. The House would be extremely ill-advised to move speedily from the determination of such matters by, on the whole, the Civil Aviation Authority.

This part of the Bill also deals with another problem to do with British Airways' borrowings. Most of British Airways' borrowings are taken in dollars. However, with the end last April of the Treasury exchange risk cover scheme, the value of British Airways' new and uncovered foreign currency borrowings is subject to fluctuations according to the day-to-day level of the pound against the dollar. The recent fall in the pound against the dollar has meant that the sterling value of British Airways' borrowings has increased even without any increase in the number of dollars borrowed. That means that in an extreme case British Airways could find themselves in breach of their statutory borrowing limit through exchange rate fluctuations alone. That is obviously unsatisfactory. Clause 3 therefore aims to remove that uncertainty and to enable British Airways to know exactly where they stand from day to day in relation to the statutory limit.

I now wish to make one important point clear. The proposed new borrowing limits—for both British Airways and the British Airports Authority—have nothing whatever to do with external financing limits. They do not mean, therefore, that, as a result of the increase in borrowing limits, there will be any increase in public expenditure. Nor will the new borrowing limits give the industries the opportunity to borrow up to the new limits as soon as they like. They will continue to require my consent for particular borrowings.

In giving or refusing my consent, I shall, as in the past, continue to have regard to the external financing limits that are set for each industry from year to year. The increase in borrowing limits will also make no difference to present arrangements for controlling individual major items of capital expenditure. Those require the approval of the Department of Trade and the Treasury and are subject to the need to achieve an agreed rate of return on the investment.

This has been a valuable opportunity to cover the broad financial provisions of the Bill, and also to describe some of the current and prospective fortunes of the two public sector corporations whose finances are to be sustained by this measure.

The House is necessarily accustomed to granting substantial borrowing powers to the public sector, and I have no wish to understate the fiscal or the budgetary implications of providing for additional borrowing facilities of £175 million for the BAA and £600 million for British Airways.

However, as I have explained, the House will have the opportunity to sanction the allocation of much of the new capital through the order provisions specified in clauses 1 and 2. Moreover, the decisions and performance of both BA and BAA will remain subject to the scrutiny of the Select Committee on Industry and Trade, and other Committees with responsibilities for public finance.

Those two industries, the borrowing powers of which the House is invited to consider this evening, are central to the communications network of the United Kingdom. A country such as ours, which derives no less than 30 per cent. of its national wealth from overseas trade, requires and deserves an effective transport network, and foremost in that must be its aviation service. The Bill seeks to make its contribution to that aim, and I commend it to the House.

5.34 pm

I do not intend to spend much time discussing the Bill. I hope that that sentiment is shared by the serried ranks of hobbyhorses that I see assembled before me on the Conservative Benches. No doubt this very simple Bill will give rise to some traversing of the countryside to decide where a certain airport may be situated.

On a point of order, Mr. Deputy Speaker. Is it in order for the right hon. Gentleman to refer to hon. Members, who are here to protect the interests of their constituents, as having hobbyhorses in such a disparaging, insulting and unnecessary way? Will the right hon. Gentleman withdraw his comment?

The right hon. Gentleman has already made his comment. It was not out of order.

I thought that I had a fairly wide range of insulting epithets at my command. Hobbyhorse is not one that I would have interpreted as being insulting. Perhaps I did not express myself clearly. I did not mean that the hon. Gentleman was a hobbyhorse. I thought that he might be riding one. As the debate goes on we shall see that he does. It is a familiar one, and we are used to his comments on the subject.

However, that is not the point of the Bill. The Bill increases the borrowing power of the British Airports Authority, and the Secretary of State has given good reasons why that should be done, but I believe that the time has come for us to look at the way in which we finance bodies such as the BAA. Too often we make the customer of today pay for the airports of tomorrow, when we should make the customer of tomorrow pay for the airports of tomorrow. The concept of the public sector borrowing requirement, which is the restraint on these matters, is due for some rethinking or revision. I hope that a Government will one day tackle the problem.

As to British Airways, on the previous Civil Aviation Bill we spent a long time discussing a Bill a great deal of which has not been brought into effect. We wasted much time, not only on the Floor of the House, but in Committee, by legislating for the scheme of privatisation that the Government then intended for British Airways. That has added to the uncertainties faced by the airline in recent years.

When we talk about British Airways, we should take into account the fierce international situation in which they have to operate. There has never been a time when international civil aviation has been more difficult for all operators, but especially difficult for a national carrier with such a wide network of routes as British Airways. The inevitable effects of the recession on any carrier have taken their toll on passenger traffic and, added to that, there have been steep increases in the price of oil, which has meant that the cost of oil has risen from 10 per cent. of the airline's expenditure to about 30 per cent.

British Airways have faced the complicated situation of deregulation. In Europe there is over-regulation, but there is possibly under-regulation in areas such as the Atlantic, where no carrier can conceivably make a profit in almost any circumstances. That situation appears to be so "shambolic" that someone will bite the dust in the near future. The airlines cannot continue to compete for ever at the present absurd levels. Even if the customer is the beneficiary from time to time, the customer also has an interest in the more stable future of international aviation.

British Airways have faced some of the painful changes very well. It would be helpful if Conservative Members, instead of sniping at every public industry—if they cannot complain about it, they wish to sell it off—would pay tribute to the skill of management shown in difficult circumstances by those who operate British Airways. Not all the decisions taken by the management—in present circumstances they are forced to make difficult decisions—will receive approval. I am sure that my hon. Friends representing Ayrshire will have something to say about the effect on Prestwick, so I shall not attempt to steal their thunder.

British Airways are entitled to support from the Government. They are an important national carrier. In the past they have not only had to make profits, but have had to carry national responsibilities in keeping open non-profitable international routes, which often had to be carried for what was thought to be the overriding national interest. Some of those routes will disappear as a result of decisions taken recently. However, we should take into account the fact that British Airways have had to take those national obligations into account, as well as take account of the obligations to make a profit.

Does the right hon. Gentleman agree that, from time to time, British Airways—as far back as the British Overseas Airways network—have had to accept unsuitable aircraft because various Governments have thought that the airline should use them?

That is said with feeling so often by airline employees that I am inclined to agree. There is a substantial amount of truth in it, although I do not know the merits and demerits of past decisions.

British Airways are entitled to receive more handsome and substantial support from the Government than that which they have sometimes received. I hope that we shall see a change of attitude in that respect.

To relieve British Airways of some of their worries the Government should drop the privatisation scheme now, and say that they are going to drop it. Much time was taken to put those powers on to the statute book. Hardly was the ink dry on the Royal Assent than the now Secretary of State for Employment was rather shamefacedly saying at the Dispatch Box that, for the forthcoming year, it did not look as if the Government could launch the scheme.

We told the Government time and again that the scheme would not work, irrespective of the merits and demerits from a political point of view, but the Government did not take account of the objections. Indeed, the Secretary of State seemed to think that whether an item was in the Conservative Party manifesto was important. He sought to defend his decision not to privatise the British Airports Authority by arguing that such a proposal was not in the Conservative Party manifesto. There was no mention of British Airways in that manifesto either.

Not only would it be a recognition of what is practical in the lifetime of the Government, but it would be settling if the Minister were to make it clear that the privatisation scheme is now a dead duck and that British Airways can be funded properly as a public corporation without having to look over their shoulders at this unnecessary worry put there by the Government.

I have not finished. Hon. Members cannot complain about the length of my speech. If they showed more restraint and were not so impetuous in seeking to make their speeches I should reach my peroration more quickly. I am about to reach that stage since I see little point in detaining the House at length on such a remarkably simple Bill.

I approve of consolidating in advance. I believe in the consolidation programme. Our laws are more intelligible if they are contained in one Act rather than being distributed liberally throughout the statute book. Unreservedly I support efforts to make consolidation more easily achieved. Since the Bill, unlike many proposed by the Government, will be of some benefit to publicly owned industries, we shall not oppose it.

5.42 pm

My constituents are bound to take a somewhat jaundiced look at any strengthening of the British Airports Authority's finances, as they are involved in a David and Goliath struggle over the proposals to develop Stansted airport. The BAA is not seen in a favourable light, since it has become the medium through which the third battle of Stansted is being fought.

I make no aplogy for raising the subject on the Second Reading of the Bill. I resent the disparaging remarks of the right hon. Member for Lanarkshire, North (Mr. Smith). He can have a smug detachment from these matters, but he should realise that hon. Members have to represent the vital interests of their constituents. A decision on airports policy can have devastating effects over a wide region according to how the decision goes. The right hon. Gentleman should not belittle hon. Members' attempts, on one of the too few occasions that they have, to make comments that are germane to their constituents on so great an issue.

My words were meant as lighthearted banter. Perhaps they were too heavy for some over-pompous Conservative Members. If I had the opportunity to support such economic development in my constituency, I should not be choosy but would welcome it with open arms.

If my powers of eloquence were great enough I should do all that that I could to ask the Government to shove the development in the right hon. Gentleman's direction.

I have a number of questions to ask about the purposes for which the BAA will use the extra finance which the Bill confers. I am not sanguine about whether I shall receive answers, let alone about what the answers will be. The Government seem to have invoked some type of sub judice rule and are refusing to answer questions by hon. Members to all Departments which have even the remotest connection with the airports issue. I am inclined to think that if one asked the Government what was the time of day at Stansted they would say that the matter had to be referred to the inspector for adjudication. The Government should not invoke such a rule to avoid answering questions about their policy or about facts which are part of the process of adjudication which a public inquiry entails. I hope that the Secretary of State will reconsider the position with his colleagues.

Have the financial arrangements, for Stansted, as originally anticipated, altered since the first announcement was made in December 1979? That is a legitimate question. What are the estimated costs today of proceeding with the development of Stansted airport? That is a straightforward question which needs to be answered and which should be put before the inquiry. I cannot understand why such questions are not being answered clearly in the House. I hope that the the matter will be reconsidered.

I should like to know the cost of the proposed development at Stansted. My right hon. Friend the Secretary of State must know that there is growing concern about the level of expenditure involved. I am bound to be suspicious, when the BAA is seeking extra money, about whether there has been some growth in the estimates that were put before the House.

We were told that no public money would be involved. That was a clear statement by my right hon. Friend the Secretary of State for Defence when he, as Secretary of State for Trade, made the initial policy announcement in the House. There are now legitimate doubts, judging by what has been said during the public inquiry, about whether that statement can be factually upheld. It is reasonable that we should ask to know more about it.

Does my hon. Friend agree that the comparison of capital costs between the development at Stansted and the development of the fifth terminal at Heathrow, as evidenced by British Airways—£869 million against £324 million respectively—although not perhaps absolutely accurate is broadly reasonable and should be taken as fair?

I am obliged to my hon. Friend. There is no doubt in my constituency about various aspects of airport development, not all of which were fully costed in the first instance. That information should be put before the House as well as before the public inquiry.

A second anxiety about why the BAA wants a strengthening of its finances relates to the extremely sensitive matter of property and land purchase in the area of the proposed development. This is a difficult matter. It was determined that a compulsory purchase order should be published so that statutory blight conditions could apply. That meant that people who felt that they were prejudiced when the development was announced would be able to require the BAA, as the proposed developer, to purchase their property from them. I believed that that was right because I knew of many people being trapped in difficult personal circumstances.

The Department of Trade has confirmed that the intention of allowing that was to aid the affected and aggrieved people and not to strengthen the BAA's case at the public inquiry. Nevertheless, the BAA appears to have acquired a great deal of property. It will say—and it is probably fair for it to do so—that it was by agreement.

It is a delicate matter to decide whether the BAA is over-stepping the mark by advising people of their statutory rights to be able to require purchase by BAA and suggesting that it would be to their advantage to do so. I am not sure what nods and winks and pressures might have been involved. On the whole, I have tried to be fair to the BAA. However, I cannot remain deaf to the complaints that in some cases excess sums of money—it is alleged—have been used so that certain properties can he purchased.

The BAA is accountable for this money. I understand that its generalised policy is that it is not able to reveal the sums that it has paid in a particular transaction, on the grounds of private confidentiality. I understand thatt argument perfectly well, but it still leaves the unanswered fear that excess pressure is being applied on people to sell their properties. I therefore hope that we can find some way of clarifying the situation.

That would clear the air in a manner that would be helpful to the BAA, the Government and my constituents. It would enable us to know the sort of criteria that have been used and whether or not we can be entirely satisfied that all the transactions have been accompanied by the same principles of objectivity. Without such clarification there is a continuing doubt in the area about the observance of fair play.

My right hon. Friend will be aware that the Government's policy is disagreeable enough to the majority of my constituents. It therefore does no good at all if claims about unfairness in the handling of this issue remain unanswered. I am as interested as anyone in seeing those matters dealt with once and for all, because the present atmosphere of speculation is most unfortunate.

I now address myself to the more fundamental question to which some of my hon. Friends have already referred in interventions. If we are considering an extension of the BAA's financial limits, it is right to ask whether we desire to maintain the BAA in existence in the future. I do not want to confine myself solely to the economic arguments about which I know many of my hon. Friends feel strongly. I share their feelings. However, generally speaking I have no complaint about the BAA's dealings with me as a Member of Parliament. But because of the way it is constituted, it cannot possibly put forward an objective national policy. How can any reasonable person suppose that a statutory body that has four airports in Scotland and three in the South-East can put forward any kind of policy that would mean the diversion of business to other airports in the country?

It defies credulity to suppose that people employed by the BAA should undertake any policy that does anything other than strengthen the BAA. I am sure that they are statutorily charged to make a success of the BAA. At present, it is a half way house, which is a nonsense. Either we should have a British airports authority that is truly a British airports authority or we should go for privatisation. I make no secret of the fact that I prefer the latter solution.

I realise that some hon. Members may feel that I have stretched the scope of the Bill to raise these questions. But this is a legitimate opportunity. We have too few opportunities to air these doubts, and that is even truer if the Government are extremely choosey about the parliamentary questions that they are prepared to answer.

I therefore hope that my right hon. Friend will understand the difficulties faced by my constituency over this enormous proposal that has far-reaching national implications whose very centre is in my constituency. It will be helpful to everyone if some of the doubts to which I have alluded can be clarified.

5.54 pm

I assure the right hon. Member for Lanarkshire, North (Mr. Smith) that I have no objection to the charge of being on a hobbyhorse. That is a. perfectly respectable posture for hon. Members, and it is a great deal safer and more useful than being on a real horse.

I have a great constituency interest in air travel. At present, that largely relates to the price of air travel. In recent years, British Airways has come near to pricing itself out of the market. It is cheaper to fly to Italy, spend a week there and to fly back again than it is to fly to my constituency. Many of the passengers on the aircraft are people such as myself, who are paid for by the taxpayer, or others who are travelling on expense accounts. The ordinary family, to whom this travel ought to have brought a new era of satisfaction, cannot make use of it.

The Secretary of State will have noticed that, apart from Stansted, on which we have just heard an eloquent speech—to which he will no doubt give answers in due course—there is concern that the British Airports Authority should have paid for its capital expenditure almost exclusively up to now out of revenue. There is a justifiable feeling that it would be legitimate to borrow for that purpose.

During the earlier part of his speech I thought that the Secretary of State was terrified by the bogy of the PSBR rearing its ugly head. I was therefore glad when he said that the BAA would be allowed to borrow more. It is one thing to borrow for legitimate, profitable, capital purposes, but quite another to borrow to make up deficits in revenue. The former has always seemed to me to be quite respectable.

I have never quite understood why the BAA and British Airways should not go to the market for at least some of their capital. The Secretary of State's answer was "It was not in the manifesto". That is a good reason for doing it. After many years in this House, I have learnt that whenever a Minister finally falls back on the fatal phrase "It was in the manifesto", it means that he will do something quite disastrous. The fact that a Minister says that this was not in the manifesto, and therefore it may be rather sensible, if anything, prejudices me in favour of it.

If there is any question of hiving off any part of the BAA, I hope that the Secretary of State will encourage people working in it to make a bid. They have already shown some interest. It is therefore something that he should keep in mind.

As I have said, my constituency depends a great deal upon air transport. At present, it faces certain difficulties. British Airways has made a large loss on its Scottish services in recent years. I am glad to say that it has now produced a new scheme which gives hope of better things. Incidentally, that shows how some threatened competition and even a touch of stringency can occasionally concentrate the minds of public bodies. Having said, that, I would not like to see it go too far.

This matter is now before the CAA, because private airlines are applying for the routes. Like the Secretary of State, I shall take refuge in the fact that this important matter is sub judice. The right hon. Gentleman is a lucky Minister in that he is surrounded by so much sub judice, but, of course, he has always been an exceptionally skilled and well-advised Minister.

It is essential that these routes should be continued at a reasonable price. Undoubtedly, the cost of airport landing charges has greatly increased the price of air travel.

In his statement on 13 May, the Minister pointed out that Sumburgh and Aberdeen were the two main airports in the north of Scotland. They come under the control of different authorities—Sumburgh under the CAA and Aberdeen under the BAA. There is some competition between them. I am not altogether sure whether that is satisfactory so long as they depend on public finance. If the airlines were to leave Sumburgh it would create great difficulty. A large amount of employment in the south Shetlands is dependent on Sumburgh. It would mean that the recently-built terminal to serve the oil platforms would become redundant.

I do not know whether the Minister has examined the history of this terminal building. It was built by the CAA, I suspect at unnecessary expense. I am told that the private charterers offered to build the terminal building but that that was rejected. I cannot vouch for that, but it is worth examining whether, if whole airports are not handed over to private operation, private operators and the work forces should not be brought in to take over particular parts.

As I have said, landing charges are a serious matter. It is not entirely satisfactory that the airports should be run by different bodies. Having said that, I should point out that Orkney and Shetland was anxious to remain under the control of the CAA because at one stage it could have come under the control of the BAA.

I want to touch on our policies towards aerodromes as the oil runs out. There are four aerodromes in Shetland and a number of air strips. It is important that air strips should be retained because they serve the islands and are in a different category. There is a danger that unduly onerous regulations and charges will seriously affect them. However, that is not absolutely germane to the debate.

There is also the question whether Shetland can afford four substantial landing places, one of which is a main aerodrome of the north. The Secretary of State for Trade is no doubt giving attention to that. It would be of advantage if he could soon amplify the statement of 13 May which was a little thin about Scotland. There is nothing sub judice now, except the determination of who is to carry on the flights. I do not believe that the question of aerodromes need be held up.

I ask the Secretary of State to bear my points in mind and to say a little more on why the BAA and the other authorities cannot borrow from the market. I ask him to reassure me on why the BAA needs an extension of credit and the CAA does not and that will not affect them adversely. The BAA has had no increase in its borrowing for some time for its aerodromes. I am not talking about other functions. Finally, I ask the Secretary of State to say a little more about why there should not be more money for perfectly sound capital purposes, and why that cannot be raised on the ordinary market.

6.2 pm

I am glad of the chance to intervene briefly, because my constituency contains many people who work at British Airways and Heathrow airport and some who work for the BAA. I want to state my position clearly. I believe that civil air transport should be a growth industry in the United Kingdom and that the Government should do everything in their power to promote an expanding and prosperous civil air transport industry.

The United Kingdom, by virtue of geography, has great advantages. It is a natural entrepot and has a natural position at the crossroads of the world—the Atlantic meets Europe, the developed world meets the underdeveloped and North meets South—and we should capitalise on that unique advantage. We also have extensive experience of civil air transport.

I intervened earlier because I believe that it is unjustifiable for the British Airports Authority, as currently constituted, to remain in being. There is no way that the authority serves the interests of either the travelling public, as it should, or the operators. I envisage a regime of competition in which the various United Kingdom airports compete to secure for themselves the maximum amount of civil air transport traffic. They would thereby cut landing fees and do everything possible to provide a convenient service to the passenger and to look after his interests. That is the right way forward. Therefore, I suggest that the British Airports Authority should be broken up and the constituent elements sold. In that way, British air transport would be best served.

We have to give sanctions for further borrowing for the BAA. I recognise that borrowing has not, in the past, been a feature of British Airports Authority financing. However, exorbitant landing fees which defy belief have been a feature. Most BAA airports operate night-time curfews and it really is a case of daylight robbery! That has driven carriers out of the United Kingdom to Schiphol, Frankfurt and other gateways to Europe. It is detrimental to the national interest and causes jobs to be lost.

I am sensitive on the issue of jobs, because in west London, Heathrow airport is by far the biggest single source of employment. The employment there is of a particular kind—highly skilled. Those skills do not exist in many other parts of the country. When airports policy is considered, it is considered not from a position which is partisan to the nation's economic interests, but from an environmental standpoint or from the point of view of conserving the countryside.

If the Stansted issue is considered rationally, one sees little merit in the proposal to develop the airport to the extent proposed by the BAA. Such a venture would be exceedingly costly. I gave the figures in the intervention to my hon. Friend the Member for Saffron Walden (Mr. Haselhurst). There is not exactly a wealth of civil aviation expertise skills in the Stansted area. Stansted has about 250,000 passengers a year. My hon. Friend will confirm or deny that.

I used to work at Stansted as a flying instructor and latterly, as a sales manager, established an air charter business there. Stansted has grave geographic disadvantages.

I do not foresee any harm in allowing Stansted to grow organically within its current limits—without putting down a new runway and terminal and without disturbing the beautiful nature of the magnificent surrounding Essex countryside. That would be sensible and it would not infringe on Luton. If Stansted were to be developed to the extent proposed by the BAA, it would ultimately interfere with air transport to Luton, and that would be regrettable from my point of view as I believe in airports such as Luton being encouraged.

There is the question of surface communications. Without the rail link and improved access from the end of the M11 to the City, it will remain exceedingly difficult to get to Stansted. I should like to see Stansted used more, but for goodness' sake, let us keep a sense of realism, which has been missing when we consider airport policy, as can be seen from the sorry Maplin fiasco. Anyone could have confirmed—as some of us did—how idiotic it was, in this day and age, to lay hundreds of millions of pounds worth of concrete on mud which was miles from the conurbation that the airport was intended to serve.

Technical developments make the question of noise no longer an overriding factor. From the late 1980's aeroplanes such as the Boeing 757 and 767, the British Aerospace 146 and further generations of airbuses will totally transform the picture.

Hon. Members, such as my hon. Friend the Member for Twickenham (Mr. Jessel), who so eloquently argued the case against the fifth terminal at Heathrow on the ground largely of noise, should consider the noise contours in the British Airways publication "Heathrow, the Right Choice". That publication states that, even on the worst case—which is a take-off to the east on runway 10 right hand out of Heathrow, not by the quietest aeroplanes envisaged, but by either a Tristar or a DC-10—the high noise nuisance decibel contour does not even reach Twickenham. The 105 PNdB noise nuisance contour is the one that I am talking about.

We should worry not so much about noise as about maximising the investment which has been made over the years by the air transport operators in their west London facilities.

The argument that my hon. Friend and British Airways rely on is a formula called the noise and number index, as a measurement of noise. It has components consisting of elements which allow for the average peak loudness of each flight and the number of flights. Far more weight is given in that formula to the average peak loudness of each flight than to the number of flights. Therefore, my constituents who are annoyed by the sheer frequency of flights—about 600 a day at Heathrow—are not considered adequately in that formula.

I did not wish to provoke such an exchange. I am relying on the evidence that is heard by my own ears. I live at Richmond, which is under the flight path concerned, especially the take-off path, for runway 10 right hand. The noise level is greatly reduced by the wide-bodied aeroplanes that are now coming into service. Even if the worst assumptions are made, we can reasonably expect the number of movements not greatly to increase because of the ever-increasing size of modern aeroplanes, which is an economic necessity because of increased fuel costs apart from anything else.

If we accept that Stansted is idiotic and recognise that a chance was missed by failing to construct a second runway at Gatwick, which was the sensible thing to do from an aviation point of view, there is only one alternative. That alternative is to make the best possible use——

Apart from Liverpool—of Heathrow. The Perry Oaks sewage farm is conveniently situated on the western side of the airfield. It could be the ideal place for the fifth terminal, provided that the surface infrastructure of the rail link to Feltham, the road extension to what I hope will become the M25 to the west of the airport and the extension of the underground are carried out first. If not, the traffic congestion in the area, which is already bad, will be made even worse.

My constituents have already suffered enough from the cutbacks in British Airways. I note that BA is expanding its redundancy scheme to about 10,000 because there have been many applicants for early retirement or redundancy. However, there is uncertainty in my constituency and jobs are at risk. If jobs are to be secure, it is important that British Airways are put on a sound financial and commercial footing.

I shall state my view categorically. Personalities do not enter into it. British Airways are of sufficient importance to justify a full-time chairman who is a professional in the airline industry. I have nothing against Sir John King. He is probably an admirable boss and he is realistic. I have no doubt that he is a good manager. However, the principle should be established that such positions are for professionals and should not necessarily be political appointments.

We should do nothing to delay the carrying into effect of the provisions of the Civil Aviation Act 1980 to privatise British Airways. It seems that British Airways, under this Bill, are to be drip fed. I understand that there will be three loan instalments of £200 million each to finance their re-equipment programme, which consists largely of buying 757s from the Boeing company.

British Airways are being resolute in trying to tackle overmanning and to carry out certain restructuring. That is to be commended. However, I think that we need an even stricter regime if British Airways are not to continue to be a major loss maker. I was interested when my right hon. Friend the Secretary of State for Trade said that the Bill's provisions will not lead automatically to more public expenditure. They do not do so automatically, but the Government will have to guarantee the loans.

I have not known a Government allow a nationalised industry to default on its borrowing. It must be recognised that there are public expenditure implications. We should not merely set returns on capital for Britishs Airways. We should set a date by which we expect them to have their house sufficiently well organised and in order to enable the proportion of the equity capital that is envisaged in the 1980 Act to be sold off to the market.

This is rather a sorry Bill although it is a measure of importance. I hope that my right hon. Friend will not take it amiss when I say that the Bill is so important that it did not deserve to be taken as flippantly as it was. It is a serious measure. Although there may not be a commitment in the Conservative Party manifesto to sell off the British Airports Authority—I have worked professionally as a tenant of the authority—we should do so urgently in the interests of civil air transport operators. We should also set a date for another idea that was not set out in the manifesto, as the right hon. Member for Lanarkshire, North, (Mr. Smith) said, and that is to privatise British Airways. That will not occur of itself if we continue to drip feed British Airways. We must set a date for the sale of the equity.

6.17 pm

Clause 5 and the first schedule bring Northern Ireland and civil aviation in Northern Ireland within the scope of the debate. I am sorry if notice to the Northern Ireland Office to that effect was given at a late stage; and if a Northern Ireland Minister is not able to be present, I am sure that the Secretary of State for Trade will ensure that my points are studied by his colleagues in the Northern Ireland Office.

What I have to say is not foreign to the generality of the debate as it turns upon airport charges, which have formed no small part of what is being said.

Northern Ireland is naturally sensitive about any limitation or obstacle placed in the way of transport between the Province and the mainland. The House will appreciate that at a time when one of the major surface links—the sea link between Liverpool and Belfast—has at least temporarily disappeared, we have been alarmed by the coincidental occurrence of two other limitations of Ulster's transport links—both affecting the air link. One is the further sharp increase in the real level of fares, especially on the British Airways route to Heathrow. The second is the reduction of the British Midlands service from jet aircraft to turbo-prop aircraft.

The people of Northern Ireland are much indebted to British Midlands Airways for the steady competition which it has offered to British Airways and the way in which it and its crews have served the Province during times of considerable pressure and danger. It causes us anxiety to observe again an apparent limitation of the service to Gatwick offered by that firm.

One of the major causes of these threats to the air link between the mainland and Northern Ireland lies in the ever-rising toll of airport charges. I will illustrate that for Northern Ireland with one or two figures. During 1979 and 1980 the airport charges there rose by 38 per cent. more than the rate of inflation during those years—that was a sharp increase in the real incidence of airport charges—and the increase of over 20 per cent. in 1981 has again been substantially ahead of inflation. Thus, we have had three years in which airport charges have raced ahead both in money terms and in real terms. If rumour has it correctly, we may be facing yet a further increase in the next financial year.

This issue needs to be considered critically by the Government. The impact of these charges may be illustrated by comparing routes of similar distance within other European countries with the vital link between the capital city of the United Kingdom and the principal city of Northern Ireland.

The fixed charges for operating a Trident 3 under certain conditions this year between Heathrow and Belfast are £2,202—that is, with 125 passengers and two hours' parking at each end. I will now read to the House the figures, exactly comparable in terms of operation, for routes of similar length on the Continent. Between Bordeaux and Paris the comparable figure is £976 or less than half. Between Hamburg and Stuttgart it is £930. Between Rome and Milan it is £644—that is, one third of the incidence of airport charges which has to be borne by the service between London and Belfast.

What my colleagues and I are not asking for is consideration of an operating subsidy. However, we do believe that the relationship between the capital investment of the Northern Ireland Airports Authority and the landing charges has been misconceived and that a proper allocation of those costs in terms of charges—the Northern Ireland Airports Authority has been extremely coy as to the basis of calculation that led it from the one figure to the other—would reveal possibilities of avoiding a continuance into the future of the increase in burden that I have described.

The second consideration that I offer to the Government relates to phase 3 of the new Aldergrove airport. Phase 2 is now drawing to completion; and the airport is perfectly operable—and would be operable with a much larger throughput than is at present using it—with the existing phases 1 and 2. My hon. Friends and I would like to ask the Government: is it really right at this stage to go straight on, as one gathers is intended, with phase 3 of the development? If that will mean a proportionate further increase in the overheads—the fixed charges of operation—the new airport in its finished form will be not the blessing that it ought to be to Northern Ireland, but a curse. Naturally, one looks forward to seeing the total concept eventually realised that has been before us on the placards at the airport for so long. However, the Government should surely be sensitive to the possibility of re-examining the capital programme, particularly when one realises the direct impact of this capital expenditure on the running of the service.

What is important to Northern Ireland is cheapness and frequency of transport between the capital and Belfast, not that in the foreseeable future we should have the completely laid-out international airport that is projected. It is bread and butter that we need in Northern Ireland; and the bread and butter is in danger of being taken out of our mouths. We would not like to see a new phase of capital development have that reality.

The Secretary of State has been good enough to say that he will ensure that those matters and all other factors which affect the burden of airport charges are considered by his colleagues in the Northern Ireland Office. I trust that he will do so.

6.23 pm

As many hon. Members have said, the Bill at least gives the House the opportunity to discuss a matter that is all too infrequently debated. I am therefore pleased to be able to debate the issue this evening.

I shall divide what I have to say into two; first, British Airways, and, secondly, the British Airports Authority. Hon. Members have confirmed that it is our commitment to put British Airways on the market as and when it is in a fit state. In my constituency I have seen the success of the British Aerospace sale, in which about 54,000 employees have bought shares—let alone anyone else, like myself, who managed to buy one or two shares—and that is to be encouraged. I hope that we shall be able to do that with British Airways and perhaps at a later stage with the British Airports Authority.

British Airways has had problems over recent years, culminating in the last year or so in problems which they are not alone in experiencing in the aviation industry. There is a new chairman. I disagree slightly with my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), in that it is clear that although many senior managers in British Airways were doing an excellent job—I single out the deputy chairman and chief executive, Mr. Watts—the expertise and experience of Sir John King have added to that. They have done an amazing job in getting British Airways back on the road to recovery. They have a mandate to reform, which is being put into effect.

British Airways is not the only airline with problems. British Caledonian, for example, one of the most productive airlines in Europe, still made a loss this year. Pan Am, facing the biggest crisis of its career, was forced into a crisis sale of Inter-Continental Hotels. It was forced to change its management almost at gunpoint, and staff cuts were made at various levels. Braniff, another major company that has achieved much publicity in recent years, is reportedly having to pay for almost everything that it purchases in hard cash. Sir Freddie Laker, the man who has done so much to revolutionise flying in various parts of the world, and to whom we owe a great debt——

Sir Freddie Laker is beginning to experience financial problems. He has suggested that he needs an increase in fares as soon as possible and perhaps a little protection in his operations across the Atlantic.

In addition to those problems, British Airways face the problems of fuel. Whereas before that represented only a percentage of its operating costs, it now represents probably the largest operating cost. The situation is not getting any better. British Airways have had problems with air traffic control. The cost to British Airways of the civil servants' strike recently was about £60 million out of its profits. The recent PATCO strike in the United States also caused problems. The most intractable difficulty in air traffic control, however, is that posed by Eurocontrol, an organisation that is supposed to act as the controlling operation for air traffic movements in European airspace.

Many criticisms have been made of the way in which Eurocontrol operates, not least the dog-legging that must go on, with diversions around various destinations and the taking up of much extra fuel and mileage in so doing. There have also been problems in avoiding military airspace. All that adds to costs. At the recent annual general meeting held by IATA the view was forcefully expressed that Eurocontrol needed a radical overhaul. People at the meeting pressed for direct routeing for all aircraft with inertial navigation systems. I have yet to hear a reason why that should not occur.

There is also the problem of artificially low fares. In whose long-term interest is the argument for continually reducing fares? Even Sir Freddie Laker wants an increase to cover his costs. IATA raised that at its annual general meeting as a matter of considerable concern. With regard to airport charges, a particular problem to be borne by British Airways is that of using Heathrow and Gatwick as their main home. I shall refer to that later when I discuss the British Airports Authority.

What have British Airways done to try to cope with the problems? Comparisons have been made between, for example, Delta Air Lines in the United States, one of the most productive and successful airlines, using the smallest number of staff of any airline in the world, and British Airways.

British Airways have reduced their operation at all levels. They have a scheme of voluntary redundancy which will find redundancies for 9,000 people by June 1982. That represents a 30 per cent. reduction in three years, which is a tribute to the work of the new radical management. As has been said, it has given a great deal of attention to overhauling its Scottish services. It has replaced the Viscounts with the Hawker Siddeley 748s. It is to turn the £5 million loss in that area to a £1 million profit next year. It has put its catering out to tender, leased out the West London air terminal, sold the Victoria terminal, sold five 707s and one 747, put aside the two 747s on order and sold its 747 freighter, and no directly operated cargo activities are now planned. It has introduced a new product in Europe, which has been extraordinarily successful. It has also instituted greater punctuality and staff productivity.

No one disputes that, but it is a tribute to the management and the work force that those improvements have been made.

British Airways have introduced new computers on the flight deck and polished up the engines, which will save about £10 million in fuel costs next year alone. The new economical aircraft that British Airways are introducing—the 757—and the Vertol 234, together with the Westland WG30 in the helicopter range, will all be more productive, more economical and more efficient and less noisy.

British Airways were in bad shape. They are still not 100 per cent., but they are perking up still further. As soon as the industry, of which British Airways are a large part, gets to grips with all its problems, under its new management and once properly privatised, with its shares owned by a variety of people inside and outside the company, British Airways will have a great deal of hope ahead.

I referred earlier to airport charges. I deal now with the operation of the BAA. My right hon. Friend the Secretary of State said that the increase in the BAA's borrowing requirements is only £75 million to £200 million, with power for £300 million later. If the increase had been in line with inflation, it would have been to £500 million.

The BAA runs seven airports, but the Heathrow-Gatwick-Stansted argument has inevitably focused attention on those three airports. Two of my hon. Friends have dealt with Stansted in detail and with cogency, so I shall not dwell on it. However, a pernicious argument abounds—that there is room for a Euromega—airport, as it could horribly be called, from Schiphol. I regret that one of my hon. Friends, who is not in the Chamber—I am sure for perfectly respectable reasons—argues that case, but it is not in the interests of Britain or of people working in avaiation in this country.

My hon. Friend casts an aspersion on a colleague but does not name him. I believe that he is referring to one of our hon. Friends who represents Luton, who is putting forward an alternative to the Stansted proposal, which, if fully developed, would seriously degrade civil air transport services to Luton for air traffic control reasons.

I was referring to my hon. Friend the Member for Luton, West (Mr. Carlisle). He believes that his argument is perfectly respectable, but I disagree with it. I contested the constituency in the 1974 elections and understood the problems and success stories of the airport. I agree with my hon. Friend the Member for Ruislip-Norwood (Mr. Wilkinson) that the argument is causing difficulty in the area.

If the London airports do not expand, the business will go to Europe. However, no British carrier operates on a long-haul route out of Schiphol—unless one counts the Dan-Air route to West Berlin as long haul. The only airline to benefit from a move to Holland would be KLM.

Politics is about perceptions, and so it is with airports and those who use them. Perhaps because of my interest in aviation I hear this more frequently than others, but people must also tell other hon. Members that Heathrow is the most awful airport that they have ever been to. I do not share that view. Bearing in mind what it has to do, Heathrow is remarkable.

One or two facts bear repeating. Heathrow is the busiest international airport on the world. About 55,000 people work there—more people than live in my constituency and those of many other hon. Members. On average, 100,000 people a day pass through Heathrow. Excluding the London railway termini, which do not have the problems of customs and immigration, no other site compares with that. Heathrow is a unique institution. About 10 per cent. of the world's jumbo fleet lands at Heathrow in the early hours of every morning. My hon. Friend the Member for Bristol, North-West (Mr. Colvin) and I have seen that for ourselves. It is a remarkable experience.

Is not Heathrow also remarkable for the enormity of its landing charges, for its staffing levels and for pursuing a pay increase policy quite out of keeping with that of the airlines operating out of the airport?

I do not dispute that Heathrow has its problems, but I was dealing with the pressures on an airport coping with such numbers. Many of us would like to see a radical overhaul of the way that airports operate, and I appreciate my hon. Friend's point about landing charges. However, the pressure on British airports is to break even or to make a profit, so we must bear with the airport charges for the short term, much as we may dislike them. Having heard the argument, no doubt my hon. Friend the Minister will deal with it.

One criticism that I hear is that there are insufficient trolleys at Heathrow, but I learnt the other day that Heathrow has more trolleys than any other airport in the world—4,500. I was told that Atlanta airport always has trolleys available, yet Atlanta has only 500. Although Members of Parliament clearly feel that sufficient trolleys are not always available, it is an indication of the number of passengers passing through that all those trolleys are always in use.

Does my hon. Friend agree that the interesting and unique feature of Heathrow is that it not only has more trolleys, but has many more porters leaning on their elbows than any other airport in the world?

As I never use porters, I cannot comment on that. I know that there are problems. I do not seek to hide that fact, but one must recognise the pressures on an airport as busy as Heathrow. Most of the problems arise because it is a fairly small and highly congested airport. This results from the piecemeal development over the years, on which the arguments about Manchester, terminal 5, Stansted and so on will centre during the next few months and years. Compared with airports such as Atlanta and Schiphol, Heathrow is an old airport, so clearly the pressures are far greater.

A major criticism of Heathrow, which should be cleared up, is the recent pejorative description of it as "thief row rather than Heathrow". I pay tribute to the BAA and to the police for the improvement that has taken place as a result of their attention to this matter in recent years. In 1976, for example, there were 876 cases of theft involving about £3,150,000. That is a massive sum by any standards. Last year, as a result of the work of the police and the BAA, the figures fell to 160 cases involving about £410,000. That is a great tribute to the detection work carried out in catching those responsible. Although the figures in 1976 were devastating, they were by no means dissimilar to those at Kennedy airport. Nevertheless, the figures have been reduced. That is a further success story which bears repeating.

In my parliamentary activities with regard to aviation, I have always found British Airways and BAA extremely responsive to the criticisms—constructive, and even at times destructive—that we have made. At Gatwick, for instance, there have been complaints about the nonproductive use of the runways, taxi facilities and similar matters. The BAA has always been most helpful in trying to do something about matters of that kind. I shall not deal with the successes of the Scottish airports, as I am sure that my hon. Friends will wish to do that.

In conclusion, I wish, not exactly to welcome the Bill, but to welcome the chance that it has provided for us to highlight some very serious problems. I agree entirely with my hon. Friend the Member for Ruislip-Northwood that we should be able to debate these matters at greater length and depth so that instead of dealing with them in a shallow and trite way we can investigate them in more detail. I hope that there will be a further debate in the near future so that we may deal with the problems raised by my hon. Friends about the changes in the BAA and in airport policy generally. I wish the Bill well in so far as it meets that wish.

6.43 pm

The hon. Member for Saffron Walden (Mr. Haselhurst) voiced his opposition to the proposed development at Stansted and suggested that the BAA should instead maximise its present capital resources at the existing airports. If the hon. Gentleman wants support against developments at Stansted, he will certainly receive it from a number of Opposition hon. Members, especially those from Scottish constituencies. They will also oppose the development of a fifth terminal at Heathrow, to which reference has already been made.

If international airport facilities are to be developed in the United Kingdom, we should get away from the London mentality and look to airports such as Prestwick in Scotland, the other international airport, but one that is being killed by the policies of the various groups associated with the British aircraft industry.

I do not accept the view that if we do not allow developments to take place in London they will be transferred to Europe. I believe that if we hold back developments in London they will go to other parts of the United Kingdom. I believe also that these developments should be directed to Prestwick, which should become the "third London airport" and one of the major international airports of the United Kingdom. If people are prepared to come from other parts of the Continent, or from the United States, to airports on the Continent, surely they could use the underdeveloped resources at Prestwick rather than the overdeveloped resources of other airports in Britain and, indeed, on the other side of the English Channel.

Three Labour Members from Ayrshire—my hon. Friends the Members for South Ayrshire (Mr. Foulkes) and for Kilmarnock (Mr. McKelvey) and I—have put forward a scheme to the BAA and to Ministers to develop a task force for Prestwick. I shall not deal with that in detail as I am sure that my hon. Friend the Member for South Ayrshire will do so, as it was on his initiative that the scheme and the demand for a task force were put forward. Not only does the BAA seem to have forgotten the size of its capital investment at Prestwick, but British Airways has decided to withdraw all its services from that airport. We now know that British Airways has not heeded the representations of Ayrshire Members to continue the services so that we could have further discussions with the Government and with other airlines to replace the lost services. It would not listen to those arguments, and the services have been withdrawn.

There is also growing competition among the BAA airports of Edinburgh, Glasgow and Prestwick. Those of us who are interested in the development not just of Prestwick but of Glasgow and Edinburgh have noticed that one airport is being set against another. Some people argue for the development of Glasgow or Edinburgh while others argue for Prestwick when the real enemy is not other airports in the Lowlands of Scotland but the policies of the BAA and other agencies such as the CAA and British Airways.

I was interested to hear the right hon. Member for Down, South (Mr. Powell) state that not only were British airport charges higher than those at any other airport in the industrial world, but that there were plans to increase the charges still further. Throughout last year, those of us who are interested in airports and airlines received representations from the airline companies against the charges set by the CAA and BAA for using United Kingdom airports. They argued that they were being discriminated against and that instead of trying to develop their services to United Kingdom airports they were being diverted to other European airports where charges were much lower. At that time, a great deal of pressure was exerted upon the Government by hon. Members on both sides of the House to re-examine the policies being forced upon the BAA and CAA. We were unsuccessful, as there are now rumours that the BAA is once again looking for substantial increases. We are told that these might be along the lines of average inflation—say, 12 per cent. I am sorry that the right hon. Member for Down, South is not present. If he believes that these are the charges and percentages that the BAA is examining, he has another think coming.

The leaked consultative document from the Civil Aviation Authority relating to the air traffic charges that it will levy gives some idea how the two bodies, the Civil Aviation Authority and the British Airports Authority, are looking at charges. I should like to refer to what the CAA proposes because it is possible that the BAA is considering similar proposals. I am informed that the Civil Aviation Authority is treating each airport on its own. It is drawing up a balance sheet and saying "That is income. That is expenditure. That is a profit. That is a loss."

If the airport on its own is making a profit, there will be no increase in charges. If the airport is making a loss., the increase will be based on that loss. That would be acceptable if it were the only criterion to be used. Organisations such as British Airways, by withdrawing services from Prestwick, are creating a loss-making operation at Prestwick. One nationalised concern does that and then other nationalised concerns—the Civil Aviation Authority and the British Airports Authority—say that because the airport is making a loss, it will have to pay increased charges.

The leaked document shows that proposed increases in air traffic control charges from 1 April 1982 will be 18 per cent. for Glasgow airport, 16 per cent. for Edinburgh airport and 28 per cent. for Prestwick airport. This is discrimination against Prestwick and in favour of Edinburgh and Glasgow. However, when the percentage increases for Edinburgh, Glasgow and Prestwick are compared with those for the London airports at Gatwick; Heathrow and Stansted, it is found that the increase for the London airports is between 7 per cent. and 8 per cent. London is receiving an advantage from the fact that traffic is being directed into London. As that happens, together with increased provision of facilities at London—whether a fifth terminal at Heathrow or a new international airport at Stansted—the discrimination in favour of London against regional and Scottish airports becomes greater.

The Minister who will reply represents a Scottish constituency. He must answer to the Scottish people for the difference in these airport charges. The figures from the Civil Aviation Authority have not been denied. If that line is followed by the British Airports Authority it will mean the death of regional airports and certainly the death of Prestwick airport. At the same time as we are trying to persuade the Government, through a task force, to develop facilities and utilise under-used resources at Prestwick, we find that Government policy, implemented through other organisations, is killing Prestwick. I plead with the Minister to give an answer to my hon. Friends the Members for Kilmarnock and South Ayrshire and me on our proposal that a task force should develop the facilities at Prestwick.

Conservative Members have spoken about the importance of Heathrow as a major employer of 53,000 people. The number working at Prestwick is 1,500. However, as a proportion of the working population, the effect is greater than in the London area. If resources and employment levels at Prestwick are allowed to decrease, this will be happening in an area where unemployment—taking my constituency as an example—is running at over 23 per cent. and where major closures are announced every week. If the Government do not take action, unemployment will be further increased. I hope that the Under-Secretary will speak up for Scotland and Scottish airports and provide the Scottish voice that has been lacking for the last two or three years in the Department of Trade and other Government circles.

6.55 pm

As an aeronautical engineer, I always view Bills about civil aviation with interest. Seeing a Bill that inclines towards improvement in its title—the Civil Aviation (Amendment) Bill—I have high hopes. It was only when I came to read through the Bill that I found it distinctly doubtful. But for the fact that the Bill is in the hands of my right hon. and hon. Friends on the Government Front Bench, I would consider it a dangerous Bill. Reading between the lines, I fear that I can almost hear the tramp of the Whitehall warriors as they come forward with begging bowls at the ready. For all the commendation of my right hon. Friend for the Bill, there was a clear statement that the extra £825 million that it is possible for the two authorities—the British Airports Authority and British Airways—to borrow can go against the public sector borrowing requirement. That means that the taxpayer has to pay.

With respect to my right hon. Friend, I should have thought that the best course would be to offload the British Airports Authority, as would be possible, and to get it to raise money in the market. Even if it remains nationalised, can we not get past the Treasury's reluctance to allow nationalised corporations to go into the market to borrow money without it being set against the public sector borrowing requirement? It is ridiculous. The result of this £825 million increase in borrowing will inevitably mean that other Departments are required to cut expenditure. We shall end up with a Bill containing high-flown phrases about civil aviation but amounting simply to full begging bowls for people who spend the taxpayers' money.

I have a lot of time for Norman Payne, the chairman of the British Airports Authority. I am sorry that he has never been recognised, as I had hoped might happen. Sir John King is also a man who gives of his best to make British Airways a success. However, the money they will receive has to be seen in the light of the competition for money for other good works.

The British Airports Authority is allowed to borrow 140 per cent. more and British Airways 60 per cent. more than is allowed at present—despite the problems of air transport all over the world. After all, air transport is an international industry. In the current edition of Aviation Week, the chairman of the International Air Transport Association's finance committee, on which British Airways are represented, stated that airlines had committed far too much capacity last year during a period of recession, low traffic growth and inflation and that the error had been repeated this year.

I fear that British Airways have been encouraged by the Government to go out and buy aircraft that they will probably not want. The fact that they have the ability to borrow the money will make them buy the aircraft anyway. We shall end up not only with a commitment but with even more traffic having to be fought for at ever lower prices. I fought to the best of my advocacy for Freddie Laker and Skytrain. Freddie, talking about low fares, is the world authority. He described recently what was happening over the North Atlantic as suicidal marketing and totally irresponsible. We are encouraging British Airways to go out on a suicidal course. There is no chance that British Airways can compete better than Freddie Laker with much lower cost operations. The chief executive of British Airways, Roy Watts, to whom credit has correctly been paid in the House, was quoted in a report from the United States as saying that last year British Airways lost $261 million and that this year they would lose $180 million. He went on:
"No business can survive losses on this scale unless we take decisive action now "
In such circumstances, the corporation should not be asking for more money. The last thing that it wants to do is to increase its debt. Yet here are people speaking of allowing it to borrow more money, and we shall allow it to do so.

I question whether British Airways will get round the problems that they would have if they went into the market to borrow the money by getting Government backing for this loan. One of the biggest lenders in the world for air transport purchases is the Merrill Hill partnership in the United States. Last week, its vice-president said that he expected the capital market to be more selective than it had been in the past. The Bill is a passport giving British Airways the right to buy new aircraft. They would not be able to get the money if they went into the market without Government backing.

We shall have to test the Bill assiduously in Committee. We need to be told exactly what is to be done with the money which we are allowing to be borrowed. How can we stand in the way of a solution to London's air transport problems by turning down the British Airways' option, which is only 40 per cent. of the cost of that which the British Airports Authority wishes to propose, and at the same time agree to let the BAA go out and borrow that money? We need a lot more explanation, and I am sure that it will come in Committee.

My final question to my hon. Friend the Under-Secretary is: when will the money be repaid?

7.2 pm

There is another important debate to follow this one, so I shall not make a lengthy contribution. However we should not underestimate the importance of this debate not just to individual constituencies but to employment in both Scotland and England.

There seems to be a concerted, orchestrated campaign among Government supporters—no doubt it is orchestrated from Central Office—in favour of the privatisation of the British Airports Authority. The hon. Member for Saffron Walden (Mr. Haselhurst) at least had the courtesy to say that there was another "sensible option—the sensible option that the BAA should take over all the airports in Britain and work out a strategic plan for them. If that is not done, the magnet of the south-east of England—or, since aircraft know no national boundaries, it could be the magnet of Schiphol—will attract the traffic away from the other airports and result in a downward spiral of the provincial and Scottish airports.

It was interesting to hear the hon. Member for Ruislip-Northwood (Mr. Wilkinson) call upon the Minister to announce a date for the privatisation of British Airways. If it had been propitious for outside investors—the friends of Government supporters—to privatise British Airways, the Under-Secretary would have announced a date by now. However, what was said by my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) and other Opposition Members in Committee was proved right. Again and again we said that the Government were foolish to push through their Civil Aviation Bill because there was no way in the immediate future that they could privatise British Airways. The same goes for the British Airports Authority. The suggestion is pie in the sky.

There is no question of any Central Office orchestration. The truth is that Government supporters believed that it was in the interests of the travelling public that privatisation should occur as quickly as possible. I suggested a date so that British Airways might be set a target date by which they were required to put their house in order so that they could get on a footing similar to that of Delta Airways in the United States and become a first-class, competitive international operator.

We asked repeatedly in Committee for a date. We asked the Government to insert a date into the schedule to the Bill. The Government were not willing to do that in view of the circumstances then prevailing. But every word of the Opposition's was proved right, and every word of the now right hon. Member for Chingford (Mr. Tebbit) was proved wrong. It is obvious that in the Government there is no correlation between success and promotion. The right hon. Member was moved out of the Department of Trade before the consequences of his actions were seen. Then he was moved out of the Department of Industry before the consequences of his destructive actions there were seen. I do not know to where he will be moved next. The Prime Minister had better he careful: there seems to be no other place for the right hon. Gentleman to go.

Glowing tributes have been paid by Government supporters to British Airways, and I respect the corporation for some of its actions. However, the amazing decision to pull out of the services between Prestwick and Toronto and New York was unbelievable. How can British Airways, our national flag carrier, not operate from the second most important airport in the United Kingdom? It is inconceivable.

What is more, why cannot British Airways make a profit when CP Air, Air Canada and North-West Orient apparently can and when Laker is applying for the vacant licences? Incidentally, I hope that the Civil Aviation Authority will grant Laker the licences, despite all my reservations about Freddie Laker. However, he has changed his tune. He is no longer talking about the low fares bonanza. Now he says that fares cannot be quite as low as he thought originally. I understand that he is even reluctant to meet the press. That is quite a change of tune. He does not want to talk too much about the money that he has to repay. But it is ridiculous that British Airways cannot operate a transatlantic service out of Prestwick.

I come now to the increase in borrowing limits proposed for the British Airports Authority. People in Scotland—I hope not in any traditional way fulfilling other people's perception of us—ask what is in it for them and what will come out of it. Although the outcome of the inquiry at Stansted is awaited before the necessary money is allowed for Stansted, if we look at what is proposed for Stansted we see that £380 million must be spent on its development, and that is merely the current estimate. It makes no allowance for inflation and no allowance for the way costs escalate. The final sum will be many millions of pounds more than that.

In this huge inquiry, the British Airports Authority and British Airways seem to be locked in mortal combat, each of them spending taxpayers' money, with the inquiry itself costing a great deal of money. This amazing battle, which my hon. Friend the Member for Central Ayrshire (Mr. Lambie) described as futile, is being waged despite the view the air traffic should be redirected from the south-east of England, with Prestwick being developed as the third or fourth London airport. That may seem crazy geography, but it is sensible planning. It is not just saying that people from Scotland and the north of England who at present go through London should be redirected on flights out of Prestwick or any other Scottish airport.

I do not often welcome changes and promotions, but it is good to see a Scottish Member being appointed Under-Secretary of State for Trade, and I shall flatter him even more in a moment. I hope that he will give serious consideration to the possibility of encouraging, if not directing, some of the airlines to have most, if not all, of their transatlantic travel out of Prestwick instead of out of airports in the south-east of England and then having feeder services from the various provincial airports into Prestwick so that passengers do not have to endure the congestion of Heathrow. That would be sensible. We would then get not only a major influx of transatlantic flights out of Prestwick but an increase in domestic travel within the United Kingdom, and, I hope, a reduction in the cost. It would improve the internal services as well as the facilities at Prestwick and the transatlantic services.

The hon. Gentleman talks about improving the domestic services. Is he aware that British Midland has been trying to get a licence to compete with the national carrier from London Heathrow to Glasgow and Edinburgh, but that the Civil Aviation Authority keeps turning it down? Does he support the idea that the national carrier should have a monopoly between London and Scotland?

It is clear that in present circumstances it is up to the CAA. The CAA makes the decision. But if more and more people based in England had to fly out of Scotland for transatlantic travel, there would be a much greater likelihood of that sort of request being granted. I also suggest that it is not inconceivable that United Kingdom-Scandinavia flights should go from Scotland, and that people from England should interlink in Scotland with flights from Scotland to Scandinavia. Flights to North America and Scandinavia could sensibly originate from Scotland, with feeder flights from England into Scotland. That would cause a major shift in a large percentage of travel out of south-east England and through Scotland.

As my hon. Friend the Member for Central Ayrshire said, my Ayrshire Labour colleagues and I have asked the Government and the British Airports Authority to take some positive action to stop Prestwick airport limping from crisis to crisis, as it is now. We have asked them to consider setting up a task force to look at the possibility of stopovers by the European carriers on their transatlantic routes at Prestwick airport before going on to Schiphol or to Kastrup, Copenhagen, Stockholm or elsewhere. We have asked for the task force to look at the improvement of the surface access to Prestwick airport. In that connection, we all hope that Strathclyde regional council will make an early decision on the electrification of the Ayrshire lines which will help to improve access.

We have also suggested that the task force, or the Government, might look at the possibility of setting up a duty-free zone based on Prestwick aiport. On this matter I pay tribute to the Under-Secretary, the hon. Member for Aberdeen, South (Mr. Sproat)—a most rare and fascinating and, in this case, pleasurable thing to be able to do. He has written to me, unsolicited—not even having had a prod from me—saying that, as the new Minister, he is very interested in the idea of a Prestwick free port and is considering it. I am encouraged by the fact that the new Minister has taken such a positive initiative at such an early stage in his job.

I hope that the Under-Secretary will recover from that compliment by an Opposition Member. What I am about to say to him may finish him off. I wish to goodness that he would get the same sort of urgency into the Secretary of State for Scotland, who ought to have rather more interest in the development of Prestwick airport, since he represents the constituency in which Prestwick is situated. It is not in central or south Ayrshire—although many constituents from those areas work there. It is in the Ayr burgh constituency. I hope that the Under-Secretary will galvanise his right hon. Friend.

The hon. Gentleman is making quite unfair aspersions about my right hon. Friend the Secretary of State for Scotland. Over the last 16 years my right hon. Friend has represented Prestwick airport amazingly well and maintained employment there in very difficult circumstances.

I appreciate that. No doubt the Secretary of State for Scotland will appreciate even more what the recently honoured Member for Dumfries (Sir H. Monro) said. However, there seems to have been a great deal more urgency put into this matter by Labour Members in Ayrshire in the last couple of years. Perhaps it is because the Secretary of State—the right hon. Member for Ayr (Mr. Younger)—is in a difficult position. I asked a question of the Secretary of State for Scotland last week, and his Under-Secretary gave me a very mealy-mouthed reply about the task force suggestion. In his response this evening, I hope that the Under-Secretary of State for Trade will follow his good example with regard to the free port and say that there will be a positive initiative by the Government—not waiting for the other multifarious bodies involved to get their acts together—making it clear that Prestwick will be developed upwards and will not be allowed to go downwards into the ever-decreasing spiral that we have seen over the last few years.

7.15 pm

I am sure that the hon. Member for South Ayrshire (Mr. Foulkes) will forgive me for not being drawn into what looks like becoming a bit of a parliamentary dust-up between Scottish Opposition Members and my hon. Friend the new Under-Secretary.

I imagine that at this time of difficulty in civil aviation there are similar Bills to this one before other Parliaments around the world in countries where Governments play any part in the financing of airlines or airports.

This Bill is proof, if proof is still required, that there is a world recession, and that it is not something that has just been dreamt up by Government spokesmen in order to explain a lack of growth in our economy.

Civil aviation, since its birth at the beginning of this century, has thrived on the growth of the economies of the countries which it has served. Most airlines have survived not necessarily because they are profitable but simply by persuading the banks that cash flows will steadily increase, and the banks, because of Government participation and guarantees, have been happy to roll up interest payments—hardly the way to run a sound business. But sooner or later, the crunch has had to come. The world recession, with growth temporarily halted, has forced airlines to face up to their day of reckoning.

The international air industry is now facing a critical financial plight. According to the International Air Transport Association, whose membership includes the world's major airlines, its members face a collective deficit of some $2·1 billion in the current year, and a potential operating loss on international scheduled services alone of 900 million dollars in 1981. That is before taxes, interest or other non-operating items. Interest payments in 1981 will total a staggering $1·2 billion—an increase of one-third over. the 1980 figure. Drastic measures are required if enormous corporations, including British Airways, are not to be forced into liquidation.

We must view the proposals in the Bill in that very gloomy context. There is no realistic immediate alternative to what is proposed. If and when it is enacted, the Bill will enable British Airways to proceed with the measures which they already have in hand, to—in British Airways' words—reduce the flab in the corporation, so that they can regain competitiveness, because that is the only way to survive in the long term.

It is a lesson which the rest of British industry is now learning fast, as we fight our way back into international markets in the face of cut-throat competition.

I have referred to the measures taken by British Airways to reduce its flab. I know that comparisons are dangerous, but there is one airline to which previous speakers have referred and with which all other airlines should be compared—the American Delta company. For many reasons., that company is unarguably the most successful airline in the world. Even today it pays cash for new aircraft when other airlines are selling aircraft. Back in 1974 Delta's productivity was twice that of British Airways. Perhaps being non-unionised has something to do with that. But I remember the then chairman of British Airways saying that, provided British Airways did not increase their work force, thanks to the growth of business in civil aviation, productivity would double in 10 years.

Alas, the growth years are gone, and who knows if and when they will ever return? British Airways' record loss of £141 million in the financial year 1980–81 was no surprise, but the drastic action called for to bring the corporation back into profit was already well in hand under the leadership of the new chairman, Sir John King, and the deputy chairman and chief executive, Mr. Roy Watts. I should like to put on record our appreciation for the brave way that British Airways' problems have been tackled by all involved, from the chairman down.

In the most difficult area—staffing levels—great strides have been made in reducing costs. Staff are now down to below 50,000—fewer than there were in 1969—while production in terms of seat miles has doubled over the same period. British Airways are well on their way to achieving their 42,600 staff target through the success of their severance plan, for which there have been 12,800 applications.

The new plan for Scottish internal services, which has been referred to by earlier speakers, should turn a £5 million loss it that area into a £1 million profit.

Internationally, 16 routes have been suspended and eight international stations are to close.

Previous speakers referred to the sale of assets. Among those are some aircraft. Five of the old Boeing 707 aircraft, which are very thirsty on fuel and are out of date, are to go. One Boeing 747 which is in service is to go. Two more which have been ordered are not to be delivered. Another airline is interested in BA's Boeing 747 freighter.

The hon. Member for Hastings (Mr. Warren) raised the question of British Airways using their new borrowing powers to buy new aircraft, but if they are to stay in business they need new, fuel-efficient, quiet aircraft.

Every effort is being made to get agreement on lower fares in Europe. Hon. Members have said that air fares are too low, but surely Europe is the one area in which they are at present too high. I hope that my hon. Friend the new Under-Secretary of State—whom I congratulate on winning his parliamentary wings—will be successful in the series of meetings upon which he is currently engaged with our European Community partners to bring about lower fares.

All is not doom and gloom in British Airways. In Mr. Roy Watts' words in today's Daily Mail, they are not the whingers and whiners that that paper suggested that they were last week. British Airways grew fat in the good years and must now get fit or go under. They have shown that they can rise to the challenge, and are worthy of our parliamentary support. The sooner the increased limits are available to them the happier I, as a taxpayer, shall be.

There is, of course, one other way in which British Airways' costs could be reduced. I refer to the very high cost of using airports. Earlier, I spoke of the success of the Delta airline in America. It uses Atlanta as the hub of its activities. In the same way, British Airways use Heathrow, where they are the biggest single user, with 14 million passengers a year using over half Heathrow's flights.

The public inquiry into the future development of Stansted to provide the additional terminal space for passengers travelling to and fro the South-East of the country is under way.

It has now been shown that the development of a fifth terminal at Heathrow might be cheaper by about £545 million. It is more popular with passengers, it is environmentally acceptable, and it could save British Airways the extra £150 million a year in costs if their overflow had to move to Stansted.

There is growing support for the idea of a fifth terminal at Heathrow. I remind hon. Members that the inspector who conducted the inquiry into a fourth terminal for Heathrow—which is only now starting to be built—pointed to the advantages of the Perry Oaks site, and described the failure to develop it as a saga of lost opportunities. However, I do not believe that the opportunity is lost. I hope that the Government have not closed their mind to the possibility of a fifth terminal at Heathrow.

With regard to the British Airports Authority, I accept that the higher financial limits are necessary, but I question whether more public sector borrowing is the best way to finance BAA's activities; nor do I accept that squeezing airport users until the pips squeak is any better, especially when coupled with the artificial and arbitrary return on capital called for by the Government.

Other alternatives are available. The sale and leaseback of capital assets such as buildings, the lease of commercial concessions at airports, and the issue of bonds paying tax-free interest, as in the United States, are all alternatives which should and must receive urgent consideration.

I should like to see the day when not only British Airways but the British Airports Authority is instructed by Parliament to prepare a prospectus for the sale of shares to the general public. We have seen the salutary effects which the need to prepare a prospectus has had on decision-making at all levels at British Airways. I am sure that the same could happen at BAA. We could then have in this country an airport system as well as a national flag-carrier airline that was really capable of meeting the challenges of the twenty-first century.

7.26 pm

I should like to speak from a different angle from the one that has been largely canvassed throughout the debate, and to say a word on behalf of general aviation. By that I mean executive aircraft and light aircraft, which have an important part to play in the general development of aviation.

We are, after all, supposed to be a nation of entrepreneurs. We should be encouraging light aviation, as we did in the 1930s. That encouragement enabled us to have a highly efficient auxiliary Air Force and reserve Air Force when war broke out. But now it is extremely expensive to learn to fly and to keep a pilot's licence. That is partly due to landing costs, and it must be taken into account when we discuss a Bill which deals, in part, with the inevitability of increased airport charges.

I hope that the Minister will bear in mind the impact of the legislation on general aviation, which is often pushed to the side of an airport, far away from public transport, and is generally the Cinderella of aviation. General aviation should be encouraged to play a much more important part. Encouragement can come through fair treatment over costs and facilities and through fair treatment concerning the use of aviation fuel for light aircraft. At present, it costs about £1 plus VAT per gallon more than the equivalent octane of motor fuel, and that is totally unjustifiable.

Through the Civil Aviation Authority, the regulations should be examined from the point of view of engineering and engine use, but there is no reason why ordinary motor fuel—carefully checked for cleanliness—should not be used for light aircraft. I hope that the Minister will consider the proposal seriously, because at present there is a lot of red tape getting in the way of progress.

I am glad that Opposition Members have already mentioned Scotland, because the impact of the legislation on Scotland will be important. We want Scotland to receive its proper share of the money that is to be spent on developing airports.

It is right that we should speak in praise of Prestwick, which has such a remarkable record for serviceability—and of course, Edinburgh and Glasgow. We should look at the question again in the context of the possible use of Stansted. However, the adoption of Stansted is hard to justify. There is not much difference in the time that it takes to get from London to Manchester compared with the time that it takes from London to Stansted. When we have good airports such as Manchester and Prestwick we should, wherever possible, develop them.

Aircraft take off from London to go to Boston, Atlanta and many other cities. Therefore I cannot see why everyone should think that they must come to London. On the rare occasions that I fly in from overseas, I would be happy to land at Prestwick or Manchester instead of fighting my way through Heathrow airport. Therefore, we want a fair proportion of the development money—if that is what the Bill will eventually produce—to be spent on the Scottish airports for which the British Airports Authority is responsible. Allied to that, we want the maximum opportunity and assistance to be given to Scotland's internal airlines. There is no doubt that pioneers such as Loganair have done a magnificent job, not only in running air ambulances but in running fine internal air services. Such companies, allied with companies such as British Midland Airways and those that wish to develop in Scotland, should be given every encouragement.

Where there are sea crossings and difficult terrain to be covered, the better the air service is, the better it is in every way for productivity in Scotland. Transport equals time and productivity. We need every possible facility to improve our connections to major cities in the South and to help develop Scotland's economy. That point will not be lost on my hon. Friend the Minister, because every time he visits his constituency he will find that to be so.

By and large I welcome the Bill because it will help to develop aviation in the broadest possible sense of the word. However, I hope that my hon. Friend the Minister will think about the few points that I have put to him and that he will ensure that Scotland gets its fair share of such an important development.

7.32 pm

The debate can be divided into two separate sections. I shall devote my initial remarks to the British Airports Authority. After the war I joined the British Overseas Airways Corporation and at that time, in 1947, Heathrow was already in being. When I started to fly aeroplanes out of Heathrow—after two years on flying boats—I used London airport as a permanent base. In those days the airport consisted of a series of caravans, a lot of mud and one runway, 280 degrees right. It is no longer a series of caravans, but a series of islands of almost bungaloid existence that are loosely connected with one another.

Heathrow—which was chosen then as an ideal site for a major London airport—is still the ideal site for such an airport. The argument has centred on whether the British Airports Authority should extend Heathrow—after the fourth terminal has come into existence—and build a fifth terminal. It is argued that Stansted should not be put forward as the third London airport. I was against the idea that Maplin should be the third London airport, because people, airlines and employees like convenience. Maplin would have necessitated not only a large airport and a seaport, but a city of 250,000 people. Therefore, we are not talking about Stansted in terms of the airport that exists now.

A B 17 squadron was based at Stansted during the war, and Stansted was an American base. The runways were in existence at the end of the war. When we talk about a major airport, we are talking not only about the building itself but about the build up round it and the 250,000 people that will live in the area. To build an airport vast areas of land have to be purchased and thousands of people have to be disturbed.

The alternative to Stansted is a fifth terminal at London airport. We have heard about noise and pollution of the environment. Indeed, my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) said that he lived in Richmond and was on the right turn out of 010 degrees runway. All those in aviation know that the prevailing wind at London airport comes from the west. The runways most often in use are 28 left and 28 right. That helps those who want London airport to be extended by a fifth terminal, because from an aviator's point of view it is far better to take off to the west in a prevailing wind than to the east over a tremendously built-up area.

I happen to live just down the road from Parliament, and the early morning aeroplanes that come in on final for the 28 left and 28 right are often extremely noisy. However, at least the noise is contained within that area. My hon. Friend the Member for Twickenham (Mr. Jessel) should perhaps have a course on circuits and bumps at London airport to get a feel of where the noise patterns would create the most disturbance.

It can be seen that I am firmly against Stansted and in favour of an extension of London airport. I was against the idea of Maplin, and I am against a further extension of Gatwick. There are aviation problems, noise patterns and restrictions that the normal pilot will agree would put Gatwick out of the contest if it came to a choice between another runway at Gatwick and an extension at Heathrow. I am sure that my hon. Friend the Member for Ruislip-Northwood will support the idea of Heathrow having a fifth terminal.

The British Airports Authority has been castigated for its charges. I recall that charges had to be increased to such an extent that the Secretary of State for Trade was presented with an order by the various airlines to the effect that such action was unlawful. It was claimed that the charges were far too high. That is true. As I said earlier, the charges at Heathrow are the highest in Western Europe. No hon. Member will contradict that. Those charges have an effect on the price of air tickets. Those who rent shops and the so-called duty-free stores have to pay extremely high rents. The small man does not even get a look in. At the big airports, there is no room for him.

I was chilled when I heard a remark to the effect that the British Airports Authority should take over all the United Kingdom's airports. Some airport authorities—I think, in particular, of a private one in Southampton do not inject enough capital into new buildings and facilities. Therefore, in certain cases the BAA would probably use the weight of its financial stability to produce a better service. However, the majority of airports are well run.

It would be impossible to call Prestwick the third London airport, but in my flying days we were happy, when the weather had closed in at London, to land there. It was a diversion airport then, but it is a perfect airport. It has great potential—if only we could see it—with excellent feeder services. It could be a force to be reckoned with in the aviation world.

I now deal with British Airways, which in my day was called British Overseas Airways and British European Airways. They had links with the Empire, and unprofitable routes had to be kept on. They then had links with the Commonwealth, and routes had to be kept open for political purposes.

There was no question of making profits. They have made a loss since they have been asked to operate unsuitable aircraft. We all remember the farce of the Princess flying boat—which resulted in the loss of a lot of money—the Brabazon and the Hermes aircraft that British Overseas Airways were forced to operate and which had to have a 115 per cent. payload in order to make money. Of course, no pilot, no matter how skilled, could make an aircraft with a 115 per cent. payload take off.

All those aircraft were forced on to the airline management at the time. How often those concerned must have said—especially an outspoken chairman such as Sir Miles Thomas—"God save me from politicians". Politicians were destroying the industry, even in those days. There were too many politicians with too many fixed ideas. They were trying to operate an airline as if it was the political arm of a party, consequently forcing upon the management decisions that would prove loss-makers long after the politicians had released their hold on the matter.

British Airways are trying very hard. They have an excellent chairman. I agree with my hon. Friend the Member for Ruislip-Northwood that the chairman is there on a part-time basis and is an expert in banking. At the time he was thought to be the ideal chairman because of his banking expertise. We all believed that the company was about to be floated on the market. That has not happened yet, but it would seem that soon we shall find British Airways shares—it is a limited company—coming onto the market.

As there are no Ministers on the Front Bench, I must rely on those present to relay my message to the Secretary of State or the Under-Secretary of State. If my hon. Friend the Under-Secretary of State who will reply to the debate cannot privatise now and has to wait for a profit margin before he can offer the shares, in the light of the profit and loss accounts of British Airways, can he visualise those shares being offered on the market during the lifetime of the present Parliament? If British Airways do not make a profit they should be released from the dread, as they see it—not as I see it, as a Conservative—of hovering privatisation.

The threat of hovering privatisation is working on the staff. Many of them have taken redundancy because they feel that there is no future for them if the company is privatised. If the company can be made to run more efficiently, they will be considered the inefficient arm of it. I ask my hon. Friend the Under-Secretary of State to say categorically this evening whether he will issue the shares in the market place within the lifetime of the present Parliament.

If my hon. Friend will not issue those shares, careful consideration must be given in the Department to the release, on a time scale, of the effect of hovering privatisation. I wish desperately for the privatisation of British Airways. Many people—ex-employees such as myself and present employees—will see the romantic side of aviation and will buy those shares, although they may not give a very good return. Many colleagues have told me that they will buy British Airways shares when the Government release them. Why not put that to the test? We should not have hard-fought battles in the House of Commons to get privatisation and then take no action at all. No action is a sign of weakness. If British Airways make a profit, how will the matter be resolved in the Department? On the figures, a decision should be made to release staff from the anxiety of privatisation.

The great thing about British Airways is that they provide a first-class service throughout the world. They run many unprofitable routes. They are pruning 16 other routes now. Others—such as the Concorde route to Singapore—were unprofitable but were continued for some time. They are great entrepreneurs, although subject to political interference—rightly or wrongly. They should be given encouragement to replace some of their doddering old aircraft. For example, Tridents are unsuitable competition on the London to Paris route. There is no contest. British Airways wish to, and should, use much of the further financing to increase their fleet and, if necessary, buy the Boeing 757s and 767s. I would prefer them to buy the Airbus—the A320. If they want new aircraft they must spend money. That is what the Bill is about. I wish British Airways well.

7.48 pm

I agree with my hon. Friend the Member for Southampton, Test (Mr. Hill). The important thing in running any airline is to have the right aircraft doing the right job. A difficulty from which British Airways have suffered is that they have been flying the wrong aircraft from the wrong airports and doing the wrong job. No doubt some parts of the Bill will deal with that.

The hon. Member for South Ayrshire (Mr. Foulkes) referred to the Secretary of State for Scotland. That hon. Gentleman would be the first to agree that the Secretary of State for Scotland was instrumental, in no small measure, in bringing the Jetstream project to Prestwick. The hon. Gentleman knows that, because he and I were actively involved in the project.

Does the hon. Gentleman agree that there would be no Jetstream project at Prestwick or any Scottish division of British Aerospace if the Labour Government had not nationalised the industry—a move that was vigorously opposed by the present Secretary of State for Scotland?

I am sorry that I allowed the intervention, because, as ever, the hon. Gentleman is uncharitable enough not to recognise that we must often work together to achieve the best results for Scotland. It does not serve the best interests of Scotland to fight each other.

I fly as a passenger at least twice a week in and out of the two London airports now in use. When using the British Caledonian service—which is the regular one—I fly into Gatwick. Alternatively, I use the shuttle service to Heathrow. Therefore, I speak—like many of my colleagues—as a regular user of those services. In my spare time I fly machines of different types, some with engines and some without. I shall, therefore, take up later the argument expressed by my hon. Friend the Member for Dumfries (Sir H. Monro), who dealt with light aviation.

Clause 1 deals with the British Airports Authority's financial limits. I make a plea for some of the increased finance to be used to do something about the standards of facilities available to shuttle passengers. The standards fall far short of what we expect from a modern airport. The boarding gates are now open 25 minutes earlier, but there are still problems. On many occasions passengers are delayed because of technical problems. 'A technical problem on Friday evening was a strike by the Transport and General Workers Union, which delayed many people at Heathrow. We had to make use of the facilities, but they were not good enough. I refer in particular to the lounge and toilet facilities. Some of the money should be used to improve them.

In Scotland we are worried about the high cost of landing fees levied by the authority on the airports under its control. It has an adverse effect on civil aviation development in Scotland. I hope that the Minister will remember Scotland's problems when he is sitting in his office.

I am aware of the current litigation, which will affect BAA's charges and how they will be levied in the future. I understand that the BAA, in co-operation with the industry, has set up consultative machinery to deal with that and related matters. I stress that this is not the time to play about with structures and additional charges. I hope that the Minister will convey that to the BAA. Any increase in the near future must be on a basis that can be fully justified, instead of the across-the-board increases with which we have been faced. Until the litigation is completed, that is the way to handle any increases if they are contemplated.

When the litigation is concluded, consideration should be given to either privatising the BAA—breaking it up and giving it to the private sector to run, as has been done so successfully elsewhere in the world—or transferring Scotland's airports to the Scottish Office so that it can look after the Scottish dimension, and in particular the tourist traffic which is so important to Scotland. That would remove Scotland from the constant bickering about the London airports problem, which has dominated today's debate.

Reference has been made to the British Midland Airways application. I believe that the Civil Aviation Authority came up with the right answer. There is no need for another operator on the Edinburgh to London or Glasgow to London routes. One can fly on British Caledonian aircraft without any trouble, because there are always plenty of seats. The shuttle service is a vital part of the Scottish business man's life. Anything that would put the shuttle in jeopardy would not be well received.

In clause 2 the financial limit for British Airways is increased by £200 million. I congratulate the chairman and board of British Airways on the way in which they have set about reducing the overmanning that has bedevilled management since the merger of BOAC and BEA. I trust that they will be successful in reaching the objective of a reduction of between 9,000 and 10,000 by 1982.

I am particularly interested in the Scottish internal plan. I congratulate managment and employees on their realistic approach to the introduction of new working methods. It is a major breakthrough, which should not be ignored. I hope that the Minister will note that. Some of the new working practices proposed might be said to turn the clock back. My hon. Friend the Member for Southampton, Test will remember when it was not unusual for air crew to help to refuel. I am pleased that at long last sanity is being applied to operations.

It will be no mean achievement if the number of staff is reduced from 600 to 180. Every air traveller in Scotland will wish the scheme well. I look forward to the introduction of aircraft that are more suited to the routes and more in keeping with the needs of the 1980s. Putting the right aircraft on the job and introducing work practices to suit the needs of the travelling public is the way forward.

I am sad that part of the British Airways recovery plan involves a loss of flights from Prestwick. However, I recognise that it is not possible for the airline to break even and continue to operate on routes and from airports that contribute to the airline's losses.

Reference has been made to the successful Delta operation. Delta is successful because it operates out of one airport on a spoke principle. If British Airways were capable of doing that, that would change dramatically the burden of financial involvement and costs. That is an argument for another terminal at Heathrow. It makes sense that the flight carrier should operate the bulk of its services in the way in which Delta operates in America.

I am saddened that British Airways have decided to pull out of Prestwick, but I am delighted that other operators are keen to get in there and take over the services. I hope that the Secretary of State will give every encouragement to the other operators who are trying to get into Prestwick.

The hon. Gentleman has said that other operators are considering moving into Prestwick. Is he aware that Jetsave has applied for permission to operate a route from Edinburgh to Toronto from 1 April? Is he aware also that instead of going to Prestwick the companies to which the hon. Gentleman refers are considering Glasgow and Edinburgh, because of lower charges?

I have no doubt that the Minister will have noted that. I have no wish to direct any airline to a particular airport in Scotland. The three airports have to be made as viable as possible. Our job is to try to keep all three going. I do not wish to argue the case for one against another. I am delighted that operators want to operate out of Prestwick. British Airways, in common with other United Kingdom airlines, are continuing to press for lower air fares on their European routes. That is an important aspect of the problems of modern aviation. The high charges in the EEC on routes within the EEC do nothing for the Community. They damage its interests. It is time that the Community came to terms with that and did something about it.

The two biggest problems facing airlines are the effects of the recession, which have reduced the number of passengers, and the cost of fuel. The light commerial side of the industry has suffered considerably. The cost of Avgas, which is now over £1 per gallon more expensive than motor fuel, is the principal fuel in use.

In my constituency, one of the country's leading training schools is suffering a massive reduction in revenue. Most of the students trained by Air Service Training at Scone aerodrome are from overseas. Flying training has already been reduced at the school by 50 per cent., and many instructors have been made redundant. That applies also to maintenance and engineering training. Unless remedial action is taken soon that flying school, which has contributed to the nation's overseas earnings since the end of the Second World War, might have to cut back even further on staff. The Minister is due to visit the school soon, and I hope that he will bear that in mind.

Clause 4 deals with statutes relating to civil aviation. I welcome the cleaning-up process, because one of the problems experienced by everybody in the flying business is the frightening array of regulations. I am delighted that we are trying to tidy things up.

I come now to the concern felt by light aviation users of airspace that is becoming increasingly controlled by the national air traffic services and the difficulty they are experiencing. I make a special plea on behalf of glider operators. Although gliders are allowed to fly through airways, they are not allowed to climb up airways. That makes it difficult, because it is now proposed to have a new airway between Edinburgh and Aberdeen.

The proposal is to take the airway over Portmoak, which is one of the finest gliding sites in the United Kingdom, if not in Europe. That site is ideal because of the wave lift—in other words, the lift that comes from the mountains to the north-west. If a glider climbs in a wave he climbs vertically, but under the rules that is not allowed. Therefore, the thought of putting an airway in the path of one of the finest gliding sites in Europe is frightening.

I refer next to the difficulty experienced by local authorities that operate airports. In the main, these authorities supply the facilities that are used by the light aircraft users. The Tayside region, which operates the Riverside airport at Dundee, has been actively involved in upgrading that airport in an effort to attract more business from oil-related industry. Rapid communications are an essential part of that business. The airport at Dundee requires upgrading, which means that the local authority must borrow money.

Unfortunately, in this instance the Secretary of State for Scotland has not been as helpful as I would wish. I therefore hope that my hon. Friend the Under-Secretary of State for Trade will advise him of the importance of local authority airports operating to the maximum efficiency. To do so one must have the right aircraft doing the right job. If the runway happens to be short or too narrow it is impossible to fly the right aircraft for the right job. That situation exists at Dundee airport.

The EEC has already agreed to provide substantial funds. Once the Scottish Office has assisted in "topping up", the runway will be extended to 1,100 metres. That will enable the airport to operate the type of aircraft that will make it economically viable to offer a service from Dundee, via Carlisle, to London. It is important that such improvements take place, because without a feeder network there will be no future for our main airports.

8.2 pm

I listened with great interest to the speech by my hon. Friend the Member for Perth and East Perthshire (Mr. Walker). The debate has been noteworthy partly because such a large number of Scottish Members have taken part.

We would all like more tourists to visit Scotland, but, as in other countries, tourists seem to congregate at certain places that are of special attraction to them. I live just by Hampton Court in my constituency. That is the third most visited site in the country after the Tower of London and Stonehenge. I sometimes feel as if I see all the tourists at home in the morning; and again here at the Palace of Westminster in the afternoon.

One wishes that national airport policy could encourage tourists to travel around, because there are man, other places to be seen in Scotland and other parts of the United Kingdom from which they could derive much enjoyment without the overcrowding that takes place at the most popular places.

But the fact is that at present the overwhelming majority of tourists and, indeed, visiting business men come to London and the South-East, for one reason and another. We cannot make them go to Scotland, or even Liverpool for that matter—I notice my hon. Friend the Member for Liverpool, Wavertree (Mr. Steen) in the Chamber—simply by siting airports and operating aircraft to fly to those places. Therefore, the Government, the airlines and the airports authorities must decide whether to cater for the demand that actually exists.

I wonder how much that demand will increase in the future. I hope that in his reply my hon. Friend the Under-Secretary will make clear the assumptions on which the supposed unavoidable expansion in the number of tourists is based. The massive relative reduction in the real cost of air travel has been one of the major factors that has caused the enormous expansion in the number of passengers in and out of airports. Technological advance has also played a part—for example, the use of large aircraft that make each seat for each journey cheaper, especially over long distances.

About 20 years ago, I remember seeing a large placard on Cromwell Road out of London advertising BOAC economy class return fares to New York for about £200. Today, people can fly to New York for less than £100. When inflation is taken into account, the real cost of visiting New York is now only about 10 per cent. or 15 per cent. of what it was then.

Another example of a price falling fast is that of ballpoint pens, which now cost about 20p whereas they were about £5 just after the war. There are few other examples of prices of commodities having fallen so sharply. That has happened with air travel, but I am not at all sure that it will continue in the future. I believe that costs will increase, and I doubt whether the major factor is airport landing charges, as some hon. Members seem to suggest. Oil price increases and other costs are likely to be bigger factors. The demand for air travel is elastic in its response to price. If the real price of air travel increases, the number of people wanting to travel in aeroplanes is likely to diminish.

I am not convinced that there will be a major growth in the number of air travellers in the mid-1980s and 1990s, as British Airways, other airlines, the airports authorities and the Government seem to assume. However, I am willing to be convinced on that point, and perhaps my hon. Friend will produce the arguments.

Until we are more certain about the number of future air travellers, I hope that we shall not proceed with any airport expansion at Stansted. I certainly hope that we shall not proceed with the fifth terminal at Heathrow.

From what the Government have said, both in the House and in letters, I understand that their policy is quite definitely that the fifth terminal at Heathrow should not be built. To dispose of any doubt, I quote from a letter from my right hon. Friend the Secretary of State which he sent to me on 4 August after I had seen him. He wrote:
"As you will recall, in his statement on airports policy on 17 December 1979, John Non said:—'We have also given careful consideration to the possibility of constructing a fifth Terminal at Heathrow, on the Perry Oaks site, in order to increase still further the capacity of that airport. However, we estimate that it would take at least 12 years to complete such a project, and it would impose added burdens on the surrounding area'—"
I have a great interest in trying to prevent that—
" 'these considerations have led us to the view that a fifth Terminal should not be provided'. In his letter to you of 13 November 1980, which was issued as a Press Notice by my Department, Norman Tebbit, the then Parliamentary Under-Secretary of State for Trade, confirmed that the Government's view remained unchanged; and in reply to a Parliamentary Question by Kenneth Carlisle on 13 May 1981, I reaffirmed the Government's view that a fifth terminal at Heathrow should not be provided. I do not think this can leave you in any doubt about the Government's views on the matter."
I congratulate the Government on making their position so clear, and I congratulate the BAA on the strong stand that it has taken to the same effect.

If what my hon. Friend says is true, why are the Government wasting money on a public inquiry at Stansted at which the question of a fifth terminal at Heathrow will be one of the most important items on the agenda?

I agree with my hon. Friend. It is a total waste of time and money for the Stansted inquiry to consider the fifth terminal. It should not have been allowed. It should be stopped at once. The inspector was right when he questioned whether, in the light of Government policy, his being allowed to inquire into the fifth terminal was wasting time, because of the Government's clear policy that such a terminal should not be provided.

The problem arose when a local authority in Essex applied for planning permission for the fifth terminal at Heathrow, even though the airport is at least 50 miles outside that authority's territory. The London borough of Hillingdon, in which the relevant part of the airport is sited, decided that it could not, or would not, deal with the application. It referred the matter upwards to the Department of the Environment which, instead of taking a separate decision, said that the application could be considered at the Stansted inquiry.

The way in which all that has evolved suggests that coordination between the Department of the Environment and the Department of Trade is not what it might be. It would have been much better if the planning application for a fifth terminal had been considered separately instead of being rolled into the Stansted inquiry where it has caused a great deal of unnecessary confusion.

Aircraft noise is a highly sensitive subject in many constituencies near Heathrow. Aircraft noise interferes with people's lives in many ways. It affects work in offices, schools and hospitals and spoils people's private enjoyments, such as sitting in the garden or watching television. It must be said that some people do not seem to mind the noise and have become almost immune to the nuisance. But it is annoying to a large proportion of my constituents.

British Airways produce glossy leaflets at taxpayers' expense—I view that as an improper use of public money, because the airline is virtually running a political campaign in support of its views—but it is not enough for British Airways to say that, if a fifth terminal were built, there would be no increase in noise levels. We want not merely no increase, but a positive, substantial and permanent reduction in noise round Heathrow. We want to take advantage of the development of wide-bodied, quieter aircraft to get less noise near the airport.

As I made clear in an intervention during the speech of my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), the noise "footprints" are based on the noise and number index which attaches more weight to the peak loudness of each flight than to the number of flights. The index was introduced 15 or 20 years ago when there were fewer flights—they now total 600 a day in and out of Heathrow—and my constituents are concerned less about peak loudness—except of the noisiest planes—than about the constant interruption of their lives every two or three minutes. We ought to take advantage of the increasing number of bigger, as well as quieter, planes to get fewer flights from Heathrow.

British Airways are one of the finest airlines in the world. I am second to none in my admiration of them. I often fly with British Airways. However, like other industries, the airlines must respect the health, peace and quiet of other people. We have health and safety legislation concerning industry, and it is up to society, expressing itself through Parliament, to make sure that airlines do not interfere unduly with the health, peace and quiet of the people.

British Airways blithely assume that the sewage works at Perry Oaks, which is one of the largest works in the country, could be resited, but they do not suggest where it would go. If there is any question of putting the works in Twickenham, I shall fight like a tiger to stop it. I am sure that my lion. Friend the Member for Ruislip-Northwood would do likewise in Ruislip-Northwood. I see on the Government Front Bench my hon. Friend the Member for Putney (Mr. Mellor), who has been implacable in his opposition to aircraft noise and diligent in campaign against it. I am sure that he would not allow the sewage works to be resited in Putney. I am sure that the hon. Member for Feltham and Heston (Mr. Kerr) would not allow the works to be resited in his constituency. If British Airways imagine that the sewage works can be moved without a hell of a fight, they are making a serious and simplistic mistake.

I end where I began, with a reference to Scotland. At least the Scottish economy benefits from the operations of the BAA, because the authority makes a profit of £20 million on its sales of duty-free whisky.

I thought that it was. It must be at least partly duty-free, because the BAA makes an enormous profit on its aircraft whisky sales. I should like to see that profit used to provide double glazing for the windows of the homes of my constituents who have to suffer from the noise round Heathrow.

I support the suggestion of my hon. Friend the Member for Harrow, Central (Mr. Grant) that it ought to be possible to buy duty-free drink at the end of a journey, not merely at the beginning or during a journey. The present system results in unnecessary effort for passengers and a waste of fuel; and safety considerations are also involved. I hope that the Government will enable passengers to buy duty-free drinks at the end of their journeys.

8.17 pm

After such a lengthy debate it would be wrong for me to detain the House for longer than necessary. I told Mr. Speaker that I would speak for no more that six or seven minutes, and I propose to keep to that.

By giving British Airways the opportunity to increase their borrowing requirement, the Government are increasing their commitment to the national carrier, which must have a detrimental effect when private airlines seek licences, through the CAA, on routes on which British Airways are currently enjoying a monopoly. I refer particularly to domestic flights.

It is true that the Government's policy has been to liberalise international routes by deregulating licences and lifting artificial contraints which, in the past, have prevented private enterprise from competing with the State airline. That is why Laker and British Caledonian fly to the United States and to Hong Kong, but the Hong Kong route was won only when the Secretary of State for Trade overturned a CAA decision. That was a landmark for private carriers who were at last given the opportunity to compete for a share of the international traffic on major trunk routes.

Unfortunately, the Secretary of State has yet to take the same enlightened entrepreneurial decision on the domestic trunk routes on which British Airways hold a monopoly. That is preventing the private sector from operating and is denying private airlines the opportunity to compete with the State airline, except in one or two cases.

That is rather odd, because when British Midland applied recently for a licence for the Belfast-London route, the CAA said that British Airways had poor timekeeping and was unreliable. When British Midland's application for a share in the Glasgow-Edinburgh route was turned down a few months ago, British Airways were told by the CAA that their fares were too high. In spite of these criticisms and customer complaints, British Airways have been allowed, with one or two exceptions, to continue unchallenged on the London-Scotland routes. The Civil Aviation Authority has protected the State carrier's status. That is a further example of the way in which the Government are protecting State enterprises.

Why is the CAA turning down the private sector and favouring the public carrier on the principal domestic routes? I understand that it claims that it is the wrong time to introduce competition, especially as British Airways are in a bad way. If that is the reason for protecting the State carrier, there is a stronger case for refusing new licences to permit competition with existing private sector operations. However, the CAA has approved licences for non-regulated charter flights to the Channel Islands, and has allowed them to encroach on the established private sector scheduled air services, which flies throughout the year. I understand that only 100,000 use that service whereas 1 million use the Glasgow service.

The private carriers are being given the worst routes and are being made to fight one another for the crumbs while the State carrier is allowed to remain unchallenged on the principal routes.

When British Airways left Speke airport, Liverpool, about three years ago they were losing £1·6 million a year. British Midland applied to the authority to obtain the licence.

It has cut dramatically the losses of £1·6 million a year in spite of the recession and the ruinous three-month air traffic controllers' strike earlier this year. However, several million pounds will be lost on Merseyside and British Midland will, I am told, pull out if it is prevented from competing fairly with the major State airline on the major trunk routes. If the Government believe in contracting out local authority services to private enterprise, what have they against contracting out airline services to private enterprise? Why are we not prepared to do in the sky what we are prepared to do on the ground? It cannot be good policy for the Government to discriminate in favour of the State airline if that means putting private enterprise out of business.

What is the point of having a Minister responsible for Merseyside who is concerned to attract private enterprise to the region if, at the same time, existing private enterprise is caused to go out of business because of the direct intervention of Government policy? I ask the Minister to give these matters consideration when examining British Midland's appeal against the CAA's decision to refuse it a licence for the Glasgow-Edinburgh routes. Further, will he reaffirm that the Government will liberalise the domestic licence system from the top downwards—in other words, from the trunk routes to the small routes? Will that be done on lines similar to those that have been taken on the international routes?

If the Government continue to favour the monopoly of British Airways, British airlines and other entrepreneurial independent private airlines will be hammered into the ground. That will happen not because of free competition on the open market and not because other airlines are running a better service, but because the Government are protecting the State monopoly and so prohibiting fair competition or, indeed, any competition.

8.25 pm

I welcome the fact that the debate has been wide-ranging. As my hon. Friend the Member for Preston, North (Mr. Atkins) said, we do not have as many opportunities as we should like to debate these extremely important matters. I welcome the chance that we have been given this afternoon and evening to do so. I shall turn to some of the issues that have been raised that ranged rather wide of the fairly narrow contents of the Bill. Before I do so, I shall underline the essentials set out in the Bill from which, perhaps, some attention has been distracted during the debate.

The main purpose of the Bill is simply and straightforwardly to increase the borrowing limits of British Airways and the British Airports Authority. I say in response to my hon. Friend the Member for Hastings (Mr. Warren) that the BAA needs to have its limits raised because it has extensive plans for improving and extending facilities at the airports which it currently runs. I give the assurance to my hon. Friend the Member for Perth and East Perthshire (Mr. Walker) that some of the money that the authority will be seeking to borrow will be used to improve the facilities that he thinks are below standard.

Secondly, the authority needs the money to provide for terminal 4 at Heathrow and, subject to the relevant consents that have not yet been granted, terminal 2 at Gatwick. Those are in part the reasons for seeking to raise the authority's borrowing limits. However, the great majority of the money that will be spent on these projects will come from the authority's profits.

My hon. Friend the Member for Surrey, North-West (Mr. Grylls) drew the attention of the House to the authority's finances. He did so during the speech of my right hon. Friend the Secretary of State for Trade, who said that I would say something about them. I am extremely glad to do so. However, I am curtailed somewhat because the authority and the Government are being sued by several foreign airlines.

I recognise the pressures upon my hon. Friend, which determine what he can and cannot say. Will he bear in mind that, while we recognise and support the welcome decision that was published this morning about the terminal 2 inquiry at Gatwick, and the decision to consult further about flow forecasts and other matters, there is an urgent need to reach a decision as soon as possible so that people's minds can be put to rest, whatever side of the argument they favour?

I am acutely aware of the importance of my hon. Friend's intervention. As I have said, I cannot say much about the authority at present. However, I can remind my hon. Friend the Member for Surrey, North-West that at least the authority has been consistently profitable over the years. That is an achievement for a nationalised industry that we should not underestimate. Off the top of my head, I cannot think of any other nationalised industry that has a similar record. In spite of that, successive Governments, and especially the present one, share the feeling of my hon. Friend and others that the authority has not been doing all that it could by way of financial return. That is why the Government agreed with the BAA a specific target to get a real rate of return in cost accounting terms of 6 per cent. per year spread over three years. That has been agreed between the Government and the authority in the general interests of the taxpayer. We believe that it is absolutely right.

I make it clear that we have agreed not only a 6 per cent. real rate of return, but two performance criteria—I am sure that my hon. Friends will be glad to hear it—both with regard to the ratio of employees to passengers in BAA airports and the ratio of costs to passengers. I hope that, as I have said those few words about the financial targets that we have set the BAA, my hon. Friends will understand that I cannot say more because of the litigation currently before the courts.

I was saying why we need the increased limits. I have explained why the BAA needs them. British Airways need them because, if they are to reach profitability, it is essential for them to fund investment programmes to which they are already committed—for fuel—efficient aircraft and less noisy aircraft, particularly the Boeing 757. I emphasise the point strongly made by my right hon. Friend the Secretary of State—that every major new borrowing will require his consent. There is no question of British Airways or the BAA being able to race away with the money without parliamentary or governmental control. With regard to what we are discussing today, there is no necessary effect on the external financing limits.

The right hon. Member for Lanarkshire, North (Mr. Smith) invited me to say that we would forget the pledge that we made about the privatisation of British Airways. I am sure that he will not be surprised when I tell him that I have no intention of saying any such thing. I give a specific and immediate pledge that the Government intend to denationalise and privatise British Airways at the earliest practical moment.

If that is so, can there be any justification for preventing the private sector airlines from competing with the State carrier on the principal domestic routes now?

I do not want to go into that matter in great depth. My hon. Friend can raise it in Committee. Dan-Air has been on the London-Aberdeen route for almost exactly two years and has had the most beneficial effect on prices, the quality of the hot food and all the other frills that go with good aircraft service. Therefore, there is already competition from British Caledonian and Dan-Air, which has been extremely beneficial.

The right hon. Member for Lanarkshire, North also mentioned the North Atlantic. Although it is not central to the Bill, it is such an important matter that it is right to say a few words. It is an extremely good deal for the travelling public. The Government are dedicated to giving the best value for money to the air passenger. That is happening on the North Atlantic. It is worth reminding the House of this as there was so much criticism by the Opposition of the effect of low fares. That arrangement was negotiated under the Bermuda 2 Agreement. Before Bermuda 2 there was not one year before 1945 in which United Kingdom airlines out-earned United States airlines. Last year, for the first time, the three United Kingdom airlines out-earned the nine United States airlines. That is a splendid achievement for the British aviation industry. It has come about under the competitive environment that we have fostered through Bermuda 2. We have no intention of going back on the spirit of that agreement.

However, I say to the right hon. Gentleman and several of my hon. Friends who mentioned the point, that, of course, there remains genuine concern about the financial stability of airlines on the North Atlantic route, as on others, in the midst of a world recession. We accept that it is vital to maintain a balance between consumer interests on the one hand and the long-term financial stability of the airlines on the other. For that good reason, officials from the Department of Trade were in Washington last week to discuss that point with their American opposite numbers. At the beginning of December, members of IATA are also meeting to discuss it. I assure both sides of the House that the Department is acutely aware of the need to keep a proper balance between consumer interests and airline stability.

My hon. Friend the Member for Saffron Walden (Mr. Haselhurst) raised a controversial topic. It is ludicruous to accuse him of riding a hobbyhorse. The House respects him for the strength and determination with which he is fighting the corner for his constituents who share his convictions. He accused my right hon. Friend and me of perhaps being a bit coy, and he asked why we did not say more. Department of Trade officials are ready at any time to appear before the inspectorate at the Stansted inquiry and give factual information, but that is a different matter from Ministers giving opinions. Later, it may be necessary for them to sit in a judicial capacity, so it would be wrong to go into detail over the questions of Stansted, and the capacity for the South-East. However, the Department's officials are ready at any time to give my hon. Friend any facts and figures that he requires.

Is it not sometimes difficult in those circumstances to separate the role of protagonist from that of umpire? The Government have a declared policy, and at the same time they wish to be fair and neutral. At times there must be doubt about whether the line is maintained in the best way possible for my constituents.

I shall do everything in my power to see that the proper line is maintained.

The right hon. Member for Orkney and Shetland (Mr. Grimond) said that fares are far too high. Many consumers would agree. However, fares on the North Atlantic routes have tumbled, largely thanks to the splendid efforts of Sir Freddie Laker. In addition, one of the main thrusts of Government aviation policy is to see fares tumble in Europe. We want the lowest fares possible consonant with the airlines' costs The third aspect of how we are enabling fares to be reduced on the North Atlantic routes, in Europe and internally is demonstrated by the famous flight that the right hon. Gentleman and I often share from London to Aberdeen. Dan-Air has sharpened British Airways' competitiveness and reduced prices.

Fares across the North Atlantic have tumbled, which makes it particularly irritating to my constituents and others that fares are kept high in Europe by a monstrous cartel and that in Orkney and Shetland they are going steadily up.

The right hon. Gentleman should give us credit for the successes which our competitive policy has made possible. If he gives us a wee bit more time, I dare say we may do the same for Orkney and Shetland.

At the beginning of his interesting speech, my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) said that we should promote an expanding civil aviation industry. That is the prime aim of our aviation policy. He mentioned the fifth terminal, and I can say no more than I have. My hon. Friend the Member for Twickenham (Mr. Jessel) read out what the Government's views were before. Those views are being considered by the inspectorate of Stanstead.

The letter that I read was from the Secretary of State for Trade and was dated 4 August. When I intervened my right hon. Friend said that he stood by what was in the letter, so will my hon. Friend withdraw the word "before"?

No, I certainly will not withdraw the use of the word "before". I assure my hon. Friend that the Government have not changed their mind on this matter, but we await with great interest the findings of the Stansted inquiry. The Government's views on this matter have been well known for a long time and have not changed.

If the Minister believes that there is no significance in the use of the word "before", why did he use it?

I did not say that there was no significance in the use of the word. I said that I would not withdraw it, which implied that there was indeed significance in it.

We continue to hold the view which my hon. Friend the Member for Twickenham (Mr. Jessel) read out in the letter, but we are waiting with great interest to give careful consideration to the views expressed at the Stansted inquiry.

I turn with some interest to the speech of the right hon. Member for Down, South (Mr. Powell). As the right hon. Gentleman knows, Aldergrove is not a BAA airport and is not the responsibility of the Department of Trade, but I undertake to see that his remarks are brought to the attention of the Northern Ireland Office.

My hon. Friend the Member for Preston, North made an extremely well-informed and fair-minded speech. He said that certain areas of the aviation industry were experiencing problems as a result of the actions of Eurocontrol. I shall preside over a meeting of Eurocontrol later this week and I shall see that my hon. Friend's criticisms are specifically drawn to the attention of members of Eurocontrol on that occasion.

My hon. Friend also listed the details of the British Airways recovery plan. He and my hon. Friend the Member for Bristol, North-West (Mr. Colvin) spoke in support of that plan. The Government welcome their support. The Government wholeheartedly support the efforts of Sir John King and Mr. Roy Watts to bring British Airways back into profit. I should say at this stage, linking this with my remarks about privatisation, that Sir John King is convinced that British Airways will be in profit by the end of the financial year 1982–83 and that that will provide the base from which to launch British Airways privatisation. That is his view, which we look upon with great favour, as the House may well imagine.

The hon. Members for South Ayrshire (Mr. Foulkes) and Central Ayrshire (Mr. Lambie) referred to the difficult question of Prestwick. I can understand their deep worry for constituency reasons and reasons which affect the whole of Scotland. The Department of Trade appreciates their concern, and my right hon. Friend the Secretary of State for Scotland, about whom some unworthy references were made, shares that concern. We give a 100 per cent. guarantee that we shall do everything realistically possible to see that Prestwick has a long and prosperous life and not the death to which the hon. Member for Central Ayrshire referred. Having said that, the decision to withdraw from Prestwick was made by the British Airways board because British Airways were making a substantial loss at Prestwick. Since we are backing the determination of Sir John King to bring British Airways back to profitability, it would be wrong for us to intervene. The Government therefore have no wish or intention to intervene over the British Airways decision at Prestwick.

Before I come to the good news, which I shall give in a moment, I should like hon. Members to get out of their minds the idea of Prestwick as a substitute for a London airport. As I have explained, I cannot comment on this in detail because of the Stansted inquiry, but the notion of Prestwick as a third London airport is too ludicrous and time-wasting for them to pursue. Let them fight for Prestwick by all means, but I beseech them not to fight on such absurd grounds. When 70 per cent. of passengers coming to the United Kingdom come to London and no fewer than 80 per cent. of them terminate their journeys in London or the South-East of England, it would be impossible and quite wrong for the Government to try to direct those flights to Prestwick. It is too absurd to contemplate that a person whose destination is Guildford in Surrey should be told that he must fly from Baltimore to Prestwick first. The Government will not contemplate direction of that kind.

Having said that, however, I should stress that I believe that there is a very bright future for Prestwick. As the hon. Members for Central Ayrshire and South Ayrshire will know already, both Air Canada and North-West Orient have said that they intend to increase the frequency of their flights. Laker has already expressed the wish to fly from Prestwick to New York and Toronto. In addition, there is the extremely exciting prospect of Federal Express and Concorde which might come to Prestwick. Hon. Members would do far better to concentrate on those matters rather than on will o' the wisps about making Prestwick the third London airport. I promise them that in those matters, particularly in relation to Federal Express, the Department of Trade is 100 per cent. behind them in trying to achieve those services for Prestwick.

As I have said, we have had a very wide-ranging debate. No doubt we shall have the opportunity to return to some of these matters in Committee. I have replied as briefly as I can but, I hope, with some courtesy to the house. We have before us a modest, simple and straightforward Bill. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Civil Aviation (Amendment) Money

Queen's Recommendation having been signified—


That, for the purposes of any Act of the present Session to make further provision with respect to the financial limits applying to the British Airports Authority and the British Airways Board, it is expedient to authorise any increase in the sums payable out of or into the National Loans Fund or the Consolidated Fund or out of moneys provided by Parliament which is attributable to—
  • (a) increasing the limit in section 5(4) of the Airports Authority Act 1975 From £125 million to £200 million and providing for its further increase to £300 million;
  • (b) increasing the limit in section 9(1) of the British Airways Board Act 1977 from £1,000 million to £1,200 million and providing for its further increase to £1,600 million.—[Mr. Thompson.]
  • Nuclear Industry (Finance) Bill

    Order for Second Reading read.

    8.48 pm

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

    The intention of the Bill is to alter the financial limit imposed by section 2(1) of the Nuclear Industry (Finance) Act 1977 in relation to British Nuclear Fuels Ltd. It was decided in 1976 that BNFL could borrow in the market, but that a Government guarantee would be necessary. The 1977 Act established a limit of £300 million, with the power to raise this to £500 million by statutory instrument. The BNFL (Financial Limit) Order 1981, which was debated in Standing Committee in March of this year, accordingly raised the limit to £500 million. BNFL expects to reach that limit by the middle of 1982.

    The financial limit is the aggregate of the total paid for shares, loans by the Secretary of State, the principal of loans guaranteed by the Secretary of State and amounts due in respect repayments by the Secretary of State on any loan under guarantee. Those four categories make up the financial limit, but the House is in effect concerned today only with the question of loan guarantees. The Bill proposes to set a new limit of £1,000 million, with power to raise that by statutory instrument to £1,500 million.

    It is appropriate at this stage to say something about the history and activities of BNFL. It was established in 1971 to take over the production functions of the Atomic Energy Authority. Its function is to provide nuclear fuel cycle services to the electricity generating boards, that is to say enrichment, fuel fabrication and the reprocessing of spent fuels. The company also generates electricity.

    It is right also to pay tribute to the exporrt record of BNFL. It exports fuel cycle services where to do so is profitable and beneficial to the services provided for domestic customers. From a figure in 1971–72 of £6 million, exports have grown to about £41 million in 1980–81. The majority of its present business—about 60 per cent.—is work carried out for the generating boards of the United Kingdom. All the BNFL activities are pursued subject to the necessary standards of safety and environmental protection and in accordance with Government guidelines on the non-proliferation of nuclear weapons.

    I should say something about the successes that BNFL has achieved over the past decade. It is, indeed, a successful company, both commercially and technologically. It has been consistently profitable since 1971. Its turnover in 1980–31 has grown to about £349 million. It is a profitable company. Its profits after interest and tax in the last financial year were about £12·9 million. Its principal shareholder is the Secretary of State for Energy. Dividends have been paid to the Government since 1976–77. Last year's dividend was £2·7 million. It is an advanced technology company. It employs engineering and chemical technology of the highest standards.

    I give the House one example. The centrifuge process of uranium enrichment jointly developed by Urenco in a collaborative project with the Dutch and the Germans puts this country in the forefront of technological development in this field.

    On the question of Urenco, it may be legitimate to ask whether in the light of the well-known case of Dr. Ali Quatar Khan and the breach of security that may, heaven help us, result in a quicker delivery of an Islamic bomb than anyone would have wished, the security arrangements at Urenco and Almelo have been tightened, as promised. I do not expect the Minister to give an answer off the top of his head, but a comment can perhaps be made in the winding-up speech.

    I shall be prepared to do as the hon. Gentleman suggests.

    I now deal with the investment programme that lies at the heart of the Bill. The company plans to invest, at constant 1981 prices, about £3½ billion over the next 10 years. Actual investment will depend upon the rate of inflation. On the company's inflation projections, the actual outlay could be about £6 billion. Individual requirements within that total will principally be reprocessing—the largest investment amounting to perhaps £3 billion in plant for the reprocessing of irradiated fuel from our Magnox and AGR reactors. It is estimated that the additional cost of the Magnox reprocessing investment could be about £1,000 million, and the construction of a thermal oxide reprocessing plant to serve our existing AGR stations as well as some light water reactor fuel from abroad could be about £1·6 billion.

    On enrichment, about £800 million is likely to be invested in the centrifuge project. On the fuel division, about £400 million may be invested in fuel fabrication and related activities. Up to £800 million has been set aside for unspecified projects. It is right to tell the House that much of this will be concerned with the management and processing of nuclear waste, but that specific projects that are likely to be required by the end of the decade cannot be more fully identified at this stage.

    Finally, in the area of waste management, about £220 million is likely to be required for a plant for the vitrification of highly active liquid wastes. It can he estimated that about 25 per cent. of the total investment programme will be concerned with improving and expanding storage and handling facilities for all types of nuclear waste.

    As the House will have gathered, this is an ambitious programme, but we believe that it is a sound one. In coming to that judgment it is important to bear a number of matters in mind. First, there is the long-term nature and the large financial scale of the nuclear industry. Secondly, it is crucial when assessing this expenditure programme to recognise that BNFL is not engaged in major speculative investment. The company is confident that about 86 per cent. of the investment contained in the current programme is covered by secure contracts which provide at the very least for the recovery of all its costs. The other 14 per cent. is largely investment in the centrifuge project where BNFL is collaborating with both the Dutch and the Germans, and the kind of guarantees which are present in the bulk of the company's business are not possible in this project.

    I might also point out that the investment programme for domestic customers is mainly to provide services for the existing United Kingdom nuclear power programme. It is not significantly dependent upon future nuclear expansion.

    On waste management, how much is going into vitrification and, crucially, on what time scale, against the background of the argument that waste management techniques can wait for the long term, or at least the medium term—not an argument to which many of us subscribe, but an important one? It would be interesting to have some details of the time scale and the expenditure on vitrification.

    I know how closely the hon. Member for West Lothian follows these matters. I shall endeavour to satisfy him about this when I reply to the debate.

    I was dealing with the investment programme for domestic customers of BNFL and saying that this was mainly to provide services for the existing nuclear power programme. Investment for overseas customers is to provide services for existing nuclear facilities overseas. There is nothing speculative about BNFL's assessment of the size of the current nuclear power market.

    I want now to explain a little further the commercial soundness of this expansion. BNFL can take confidence from the fact that about 60 per cent. of the investment is to provide services for the United Kingdom generating boards. Business between BNFL and the boards is conducted under terms of trading which provide for recovery of the company's costs and for a return on its investment, with incentives and penalties related to performance.

    Much of the other 40 per cent. of the investment, which relates to export services, is for reprocessing. BNFL's major overseas reprocessing contracts are on a cost-plus basis, which gives the company more security than almost any other type of contract that would be possible in these circumstances. These contracts and, indeed, all of the company's export business, are designed to generate profit and to broaden the company's base so that it can provide competitive fuel cycle services to all its customers, but most particularly the domestic generating boards.

    I come now to the important question of how this ambitious expansion programme is to be financed. The purpose of the Bill is to give the Government the power to guarantee the borrowing necessary to finance the investment programme. According to its latest forecasts, which have recently come before the Department, BNFL will be able to finance from internal sources about 70 per cent—that could be over £4 billion—of planned investment over the next decade. The company has a very small equity base—only about £32·7 million. The Government do not intend to increase that base, nor indeed, in normal circumstances, as I have made clear, do the Government envisage lending money direct to the company.

    Our intention is that BNFL should obtain the additional finance for its expansion by borrowing in the market. That will mean that BNFL will need to borrow up to £1,500 million over the next 10 years. Again, this figure depends, as do all such figures, on the rate of inflation that prevails over the next decade. Again, as I have indicated, it was recognised, very rightly and properly, during the lifetime of the previous Government that BNFL could and should borrow in the market but that, because of the scale of its borrowings, a Government guarantee would be necessary.

    The nuclear industry is exposed to political risks—for example, sudden curtailment of the nuclear programme or part of it as a result of a change on political direction by a future British Government. BNFL must also react to the regulatory regime imposed on it in the public interest—for example, the closure on safety grounds of some part of its plant. In view of these considerations, which are quite exceptional when having regard to the normal companies that go to the market for substantial loans, it is right and proper, in the Government's view, that BNFL should be supported by a Government guarantee.

    I must emphasise that the power to guarantee is permissive. It will be invoked in respect of specific loans and will be used subject to our satisfaction that the proposals that the company is making is sound. As shareholders, and already, therefore, as guarantors of some loans, we naturally take steps to satisfy ourselves that BNFL's business is on a sound footing. In particular, the company submits annually its rolling 10-year corporate plan to the Department of Energy and to Treasury Ministers for approval. There is a system of regular financial reporting and day-to-day contact with the company by my Department on a whole range of relevant issues.

    As regards parliamentary discussion of BNFL, at present the company has outstanding long-term loans-guaranteed by the Government of about £220 million, to which must be added direct Government investment of about £20 million. In Standing Committee in March of this year hon. Members debated the raising, by order, of BNFL's financial limit to £500 million. Today, therefore, marks the second debate this year alone on BNFL's finances.

    The company expects to reach the present limit of £500 million towards the end of next year. The limit of £1,000 million proposed in the Bill would be reached in the mid-1980s, somewhere between 1984 and 1986, depending upon the rate of inflation. There would then be the opportunity for a further debate on the company's finances. We believe—and I hope that the House agrees—that that is adequate for an industry of this nature. Additionally, individual guarantees—at the heart of the measure—require Treasury consent.

    It is not merely in the hands of my right hon. Friend the Secretary of State, because, having given the guarantee, my right hon. Friend must lay a statement before the house and the other place, showing the extent, character and circumstances in which the guarantee came to be given and thereby enabling parliamentary scrutiny of what is done, pursuant to the powers which we hope the House will give us in the Bill.

    I can confidently assert that BNFL has shown itself to be technologically and commercially sound in its record over the past decade. It justifies the confidence that successive Governments have placed in it. On energy policy grounds, it is plainly desirable that fuel cycle services should be provided by BNFL for the home boards. It is also commercially justified, given that some services are not available elsewhere.

    The exports involved are also beneficial. The company's planned expansion seems to us to be sound. We support it and are prepared, in principle—although individual applications must be looked at on their merits—to guarantee the necessary borrowing. As shareholder and guarantor—which is the role of my Department in this matter—we shall oversee expansion with care, as would any prudent banker in that situation. It is in that spirit that I commend the Bill to the House.

    9.7 pm

    This is an extraordinary Bill to bring forward at this stage, because, as the Under-Secretary of State told the House, it was only a matter of months ago that the Government sought by order to extend the borrowing requirement of BNFL to £500 million. However, within a few months the Government are seeking to extend that borrowing requirement, not by about £200 million, as in the previous order, but by three times the amount of the potential borrowing requirement. One would have thought that Conservative Members would be jumping up and down on the Back Benches at the idea of a Treasury guarantee to a 100 per cent. nationalised Government-owned company, allowing it to treble its borrowing requirement and to expand its investment programme.

    The Minister, in his lengthy speech, made no effort to explain the development and evolution of BNFL. The reason why the Chancellor of the Exchequer is not feeling queasy or worried about the impact that the Bill might have on the public sector borrowing requirement is to be found in the explanatory and financial memorandum to the Bill, to which the Under-Secretary made no reference. By an incredible, strange and curious factor of the nature of this company, the borrowing requirement of £1,000 million, rising to £1,500 million, does not fall on the public sector borrowing requirement. However, as the Minister explained, it does involve the possibility of Treasury guarantees behind the company's borrowing.

    The Minister must find it ironic—bruised and battered as he is after his earlier battles on gas-gathering pipelines, and his total failure to deliver the Treasury's agreement on a modest guarantee for a commercial and potentially successful gas-gathering pipeline which was turned down—[Interruption.] It was turned down by the Treasury on the ground that such a guarantee would involve a great addition to the public sector borrowing requirement. Yet apparently Sir John Hill at BNFL and our legislators have managed to produce one organisation, 100 per cent. Government-owned, which is now seeking a very large borrowing requirement, backed by Treasury guarantees, not a penny of which falls upon the sacred PSBR.

    If the debate does nothing else, it ought to register the nonsense—the absurdity—of the way in which the public investment sector of our economy is treated in PSBR terms. It is extraordinary that, in respect of BNFL, there can be a nil effect upon the PSBR, when in practice the Treasury has to provide exactly the same guarantees as BNOC would need or as British Gas has needed or asked for at various times. I hope that hon. Members on both sides of the House will be willing to recognise the absurdity to which I have referred.

    In paying tribute to the company, the Under-Secretary of State perhaps did not underline as forcefully as he should have done that BNFL is a nationalised concern. It is a major example of a 100 per cent. Government-owned company which, according to the diktat and the ideology of Conservative Members, should be losing money. But, like Amersham International, which we debated earlier, and like BNOC and British Gas, here is another company, in which the Government are a 100 per cent. shareholder, which makes a profit of £2·7 million in a year for the Government. The company is rather awkward proof that a 100 per cent. Government concern can be a commercial success. Indeed, the Under-Secretary of State paid tribute to its viability.

    In his annual report as chairman of the company, Sir John Hill states that, had it not been for Government policy, the company would have made more money. Indeed, half the chairman's review of the year's work represents a justifiable series of complaints about Government policy in relation to the economic climate in which BNFL has had to operate.

    I repeat that here is yet another example of a 100 per cent. nationalised concern which is making profits for the community, as well as endeavouring to serve the community as a whole in the very sensitive area of nuclear power. I shall shortly deal with that sensitive area.

    The Bill refers to shareholding but the Under-Secretary made no mention of that in his speech. I hope, therefore, that the Minister will give the House the clear and categorical assurance that the Government have no intention of selling off the majority holding in this successful nationalised company in the way that they did in Amersham International.

    The hon. Gentleman should ask the Under-Secretary that question. On an earlier Bill we debated why it would be nonsense, in this extremely strategic and sensitive area, to do anything that would lead to large-scale privatisation. I hope and believe that even this Government will not be foolish or stupid enough to embark on such a course. I would not have bothered to raise the subject had it not been for the fact that in June 1981 an order was sneakily laid to transfer all the company's shares from the Atomic Energy Authority to the Department of Energy. That order was confirmed on 3 August.

    If the Government were to privatise the company, would the Labour Party—should it, unfortunately, be elected to office—renationalise it without compensation?

    The hon. Gentleman, who is an active participant in all our debates, knows exactly where the Labour Party stands on the subject of compensation. However, I hope that we will get an assurance from the Minister and that the issue is hypothetical.

    In June and July 1981 the shares were transferred, by order, to the Department of Energy. The order was finally approved on 3 August, when most of us were thinking about our holidays. What is the Government's intention regarding the shareholding in British Nuclear Fuels Ltd.? That question is relevant to the Bill and to our attitude towards BNFL. Although provision was made as long ago as 1971 for the possibility of a shareholding in the company, we would bitterly oppose and utterly reject the nonsense of privatising a large portion of such a strategic and sensitive industry, which involves properties and concerns such as Capenhurst and Windscale. I hope that the Minister will give the assurance that I seek.

    A large part of the Bill's borrowing requirement is supposed to underpin the capital investment programme and its point and purpose. A useful statement has been made about the various items of capital expenditure involved. It is good to have a statement on the record of exactly what BNFL is up to. The heavy investment in reprocessing is interesting and important. To what extent does this capital investment programme relate to, or have any significance for, the Government's nuclear power programme, as outlined in 1979, and the absurd and unrealistic concept of a large-scale pressurised water reactor programme throughout the United Kingdom?

    I have raised that point because in two of BNFL's annual reports the chairman refers to the Government's nuclear power programme. On the review for the year 1979·80, the chairman began—this will be pleasant, sweet music to Conservative Members—by saying:
    "The new nuclear programme by the Government last December was welcome news for BNFL."
    In other words, BNFL clearly anticipated considerable benefits—as obviously there would be—if the Government managed to implement the huge pressurised water reactor and nuclear generating power programme that was envisaged in the statement made in December 1979.

    In his annual report for this year, the chairman returned to that point, and said:
    "The Government has received a Letter of Intent for the manufacture of PWR fuel for the CEGB, subject to the outcome of the Government's Inquiry into the PWR."
    That is extremely important. Whatever divisions of opinion there may be between us, the House should be clearly told to what extent the borrowing power and capital expenditure programme anticipates the pressurised water reactor programme.

    I say to the Under-Secretary of State that if, by approving the Bill, we were to approve the capital expenditure programme and the assumptions about the PWR programme, we would be hesitant to accept it.

    I believe that I made it clear that the assumptions behind the investment programme are based on existing nuclear plant, whether in Britain or overseas. In no way does the investment programme anticipate the outcome of any PWR programme in Britain. That is freely accepted by the Government. That is why we have announced that there will be a wide-ranging inquiry. We must await the outcome of that inquiry before any plans can be made.

    That is an important assurance for hon members who have strong feelings about whether we should have a large nuclear programme. The House must take note of the ambivalence, almost to the point of neurosis, that is genuinely felt in many communities. If we do not take note of it, the public will make us do so.

    The idea, perhaps in the way it was presented, especially in the White Paper, of a new PWR almost every year led to a deep and genuine reaction. The PWR is one of the few stations that has failed and caused danger to a community. That is why we should be fundamentally queasy and concerned about the way in which that programme may be implemented in Britain.

    My second point relates to the capital expenditure programme of BNFL. Much expenditure is and will be required to handle waste management in a way that is absolutely safe. The word "absolutely", as I shall draw to hon. Members' attention in a moment, is not one that can be used in nuclear power terms.

    My father helped to build Capenhurst and I lived in its shadow during the early construction period. My father died at Dounreay in Scotland. Therefore it is only by accident that I was associated with the building programme of the Atomic Energy Authority as well as BNFL. I had not concentrated as deeply as I should on the question not only of waste management but of the safety of those plants.

    In preparing for the debate, I was shaken to find that I had not read "The management of safety" report on Windscale by the Health and Safety Executive. When one comes afresh to the report, one reads:
    "By the early 1970s the standard of the plants at Windscale had deteriorated to an unsatisfactory level."
    The report goes on:
    "We are strongly of the opinion that such a situation should not have been allowed to develop, nor should it be permitted to occur again."
    One gets the chilling feeling that if there is any complacency—as the report seems to indicate there once was—we shall be dealing with a very dangerous world. The BNFL should devote sufficient resources to ensure the timely completion of the review which has been taking place since the incidents which led to the heightened interest in safety and waste management.

    I do not know whether the report has been debated since its publication early this year. It deserves parliamentary and public attention, as does the whole waste management issue. The report reveals that large sums of money are not necessarily needed. Many of the 30 incidents a year referred to in the report are due to human error and procedural breakdowns which do not involve large-scale capital expenditure.

    Headlines say that the United Kingdom is becoming the nuclear wastebin of the world, because we are buying waste from elsewhere to process at a profit. I do not make a party political point. I have not done since I mentioned privatisation.

    That is a party political point.

    The hon. Gentleman is too sensitive. I was not expressing a party political view. Nothing that I have said implies that I was. The Minister must have misconstrued my remarks, or perhaps he was not listening.

    I was listening. The hon. Gentleman is not making a helpful or constructive speech. If he has done the homework that he claims to have done, he would realise that the safety record in the nuclear industry is second to none. To make such mischievous and troublemaking statements is wrong. I hope that he will think carefully before he makes anymore such statements.

    With respect to the hon. Gentleman, I have not made a statement on my own behalf. I have read from a report on safety and waste management produced by the Health and Safety Executive. I make no allegations of any kind. I was saying that, as someone new to the subject I had picked up a report and was shaken by its references. Fortunately, many of the references are now history, although recommendations are made about the need for action and resources. That is the point that I was making. I was not speaking in a party political or partisan sense. It is wrong for the Minister to interpret my remarks in that way.

    The provision of a large sum for vitrification, for example, is vital. The idea of hot liquid gases sloshing around in tanks is daunting and worrying. However safe the tanks might be, leaking and seeping has been a problem in some respects and in other circumstances. The possibility of embarking on a vitrification programme which eliminates or reduces massively the dangers is important and is a feature of the capital expenditure programme.

    I conclude in the same tenor as I began and as I continued until the Minister chose to make his foolish intervention. I echo the Under-Secretary of State's view that we should debate the nuclear power programme and BNFL. We have yet to hear a response from the Government on the programme. We should certainly maintain a close scrutiny of BNFL's operation and expenditure, because it is a 100 per cent. Government concern. Above all, we should seek assurances that there is no plan or intention in any way to alter fundamentally what has been a remarkable success story.

    In saying that, I hope that I end on a note of concord, at least between the two Front Benches. Although 100 per cent. Government-owned, BNFL has been remarkably successful in its commercial dealings and its safety record. Its expanding capital expenditure programme is important, and we certainly do not wish to oppose that. Therefore, we shall not oppose the Bill.

    9.31 pm

    The hon. Member for Merthyr Tydfil (Mr. Rowlands) must be aware that there has not been a fatality at a nuclear power station. I think I am right in saying that that also covers the installations at Sellafield. On the other hand, he must be conscious of the fact that a number of mining deaths occur each year. Therefore, we come to the conclusion that it is more dangerous to work in the pits and the collieries than it is to work in a nuclear power station.

    So great is the care taken by the nuclear industry that even a small leak which may be of no significance is made known, because the idea is to reveal to the public as much information as possible.

    I congratulate the Minister on presenting an excellent case. However, I should like to ask several questions about privatisation. The hon. Member for Merthyr Tydfil and I served on the Committee that considered the Atomic Energy (Miscellaneous Provisions) Act 1981. Like the hon. Gentleman, I noticed two orders that were of relevance to that Act. The first was Order 1981/850 dealing with Radiochemical Centre Ltd., subsequently renamed Amersham International Ltd., whose work involves radio isotopes. The second was Order 1981/868 relating to BNFL and concerned various aspects of the fuel cycle. Shares in both companies have been vested in the Secretary of State and have been removed from the Atomic Energy Authority.

    I doubt whether that has occurred by accident. With regard to Amersham International Limited, I believe that the Government intend to sell in 1982. However, does the Minister contemplate the sale of an interest in BNFL within the foreseeable future—possibly next year or the year after? After all, this commercial enterprise is profitable and capable of standing on its own feet. It would be useful to know at this stage whether such a sale is anticipated.

    Section 1 of the Nuclear Industry (Finance) Act 1977 states:
    "The Secretary of State may guarantee repayment of any loan made to …BNFL".
    Why is a Government guarantee required? Admittedly, this company has a small equity base of £32·7 million which could be expanded. The company is self-financing. Only a guarantee is required, but we know from experience over the past 20 years that no guarantee granted by the Government on a company such as this has ever been called in.

    The company is subscribing 70 per cent. of the moneys that it requires, and that is internally generated. In my opinion, if such money came from a banking consortium or the European Investment Bank, that would be enough by itself. However, the Minister also mentioned the advance payment made by customers. In fact, 86 per cent. of the capital expended is covered in advance contracts already negotiated. Contracts with the Japanese, Brazilians and others account for 26 per cent. of that amount. The remaining 60 per cent. is covered by the CEGB and the SSEB. I should have thought that there was cast-iron security.

    The Minister indicated that this was a sensitive area and that one could have a President Carter-like Prime Minister who would say that the processing of nuclear fuel elements was not to be carried out and that they were to be kept in storage for many years. The Minister mentioned the possibility of the closure of a plant. It is unlikely that that would occur. The amount of electricity which presently comes from nuclear power stations is about 13 per cent. We hope that, in the not too distant future, that figure will rise considerably, but I do not think that it will ever rival that of certain Continental countries.

    I have looked into this matter fairly carefully. Publicly owned companies may borrow without Government guarantees. For example, the BNOC has done that with Brit-oil and has an enormous investment. It did not require a Government guarantee. It was a profitable company and borrowed the money against the revenues from the North Sea. I believe that British Telecom will be given similar powers—I do not know whether it has those powers yet. The Radiochemical Centre Ltd. also had the power to raise money without guarantee.

    I know the European Investment Bank tends to insist on Government guarantees, but it has a discretion to dispense with that requirement. Recently, when British Rail asked for guarantees for borrowing for electrification, the Government were able to attach certain conditions. If the Government give guarantees so that conditions may be attached to a grant, I ask the Minister whether any conditions have been imposed in the case that we are considering. We are concerned with a commercial undertaking making a healthy profit: it is well managed and directed. In other words, it is a sound company and there is no reason why it should not raise its own capital on the open market without Government guarantees. I hope that the Minister will explain why he thinks that it must be the exception to the rule.

    The Minister mentioned that the money was required for a number of purposes, including Magnox fuel reprocessing facilities, thermal oxide reprocessing plants and the treatment of PWR fuels subject to authorisation by the planning inquiry. He also included the Magnox fuel fabrication and the vitrification plant on which £220 million is to be spent. Much progress has been made and the United Kingdom has borrowed the AVM technique from the French for use at Sellafield.

    Those in the know have probably looked into the figures carefully, but there seems to be a slow-down in nuclear planning growth worldwide. By the end of the 1980s most of the Magnox reactors will be nearing the end of their lives. If we have substantial over-capacity in most of the nuclear fuel services, what is the position with regard to processing? The report of the BNFL states on page 7:
    "In the Fuel and Reprocessing Divisions Planned Expansion Schemes are having to be reexamined."
    The Minister said that the figures were based on existing nuclear programmes. However, will all this money to be guaranteed be required? If it is less, perhaps there will be anxiety.

    I also pray in aid what the director-general of the IAEA said:
    "Looking beyond 1985 however the situation seems far less satisfactory."
    Dr. Eklund added that the annual rate of construction work on new nuclear plants outside the centrally-planned economies was expected to be less than 5 gigawatts electricity in comparison with more than 10 gigawatts per year in the years 1981 to 1985.

    Will a slow down in the programme have an effect on the profitability of the investment? We are dealing with a concern that in the main is State controlled. In Parliament we are concerned with the granting of moneys. If the country is to be a shareholder in future, it will want to know whether the profits will continue to flow. I am certain that the Atomic Energy Authority and British Nuclear Fuels have taken that into account.

    Recently I visited France and inspected some of the French nuclear establishments. The hon. Member for Merthyr Tydfil (Mr. Rowlands) is frightened by certain safety aspects. I am frightened by what is going on in France. France has the lowest electricity costs in Europe.

    I hope that the hon. Gentleman will remain vigilant while I mention one or two important factors. If we imitate the French, we shall be much more secure. France is the purveyor of electricity to neighbouring States. As we are selling oil to Europe, the French will be selling their electricity to a number of States including, probably, the United Kingdom by means of a new line that will be built across the Channel.

    There is extensive use of combined heat and power on the Continent for district heating, a concept that is not very well known in the United Kingdom. The nuclear industry has a long lead time. France has been able to saturate the market through a continuing series of commissionings. The first United Kingdom PWR is about 10 years away. In France a new unit is coming on to line every two months. When that is compared with progress in the United Kingdom, it is clear that we have been back peddling for years. We have not been getting on with the job.

    Will the hon. Gentleman explain why the French are now back pedalling on their programme?

    The hon. Gentleman is entirely wrong. The French reconsider their programme. Recently the issue was debated in their Parliament. There was an overwhelming majority for their plan. There were nine new reactors in question. It seems that six will be authorised and that only three will be stood down for the time being. The projections remain precisely what they were.

    About 13 per cent. of the United Kingdom's electricity is derived from nuclear power. The percentage may be slightly higher now. We hope to build it up a bit. In France 25 per cent. of electricity was nuclear powered in 1980. By 1984 it will be 50 per cent. and by 1990 it will be over 70 per cent. That will be achieved under their new planning arrangements. They have embarked on new plants and they are getting on with the job.

    Is the hon. Gentleman saying that the main reason why electricity in France is cheaper than that generated in Britain is that 25 per cent. of electricity in France is generated by nuclear power whereas only 13 per cent. is generated by that method in the United Kingdom?

    Nuclear power in France is very much cheaper than in many other countries. The French are using the PWR system and it may be possible to establish the same system in the United Kingdom. Our conditions may be severer than those in France.

    There are two reasons why electricity in France is so cheap. First, nuclear power is very much cheaper than power generated by coal and it is totally cheaper than oil.

    Secondly, the French have extensive hydro-electricity. In 1990, when the French are generating over 70 per cent. of their energy by nuclear power, we shall be crawling. Our electricity costs may be so expensive that we shall be able to keep them down only by importing electricity from France. That seems absurd. I hope that hon. Members in forming a judgment will realise what is going on elsewhere. Belgium in 1981 has only a small electricity capacity. Nevertheless, 25 per cent. is nuclear, but in 1984·85 it will be 50 per cent. Sweden has a high proportion.

    If one wants cheap energy costs, it is no good relying on high cost fuel industries. It is as simple as that. That is why the Government are right to carry on with their programme and I hope accelerate it. On the other hand, in past years we have been able to make a great deal of money out of the fuel cycle. That is where British Nuclear Fuels comes in. Surely, it is a broad industry. There is a company such as British Nuclear Fuels involved completely in the fuel cycle, the CEGB and the SSEB involved in the manufacture of nuclear electricity and there are also all the other manufacturing companies providing the plant and the equipment. That is an enormous employer of labour. That is why we should learn from experience abroad and bear in mind that while the Bill is confined to one corner of what we are talking about, it is important that we should get the matter into the correct perspective.

    I support the Bill and what the Minister has said. He has been frank to the House. I am surprised at what the hon. Member for Merthyr Tydfil said about the safety aspects. No country in the world has been more responsible or scrupulous in those matters than the United Kingdom.

    I was drawing the House's attention to a report on the management of safety by the Health and Safety Executive. If the hon. Gentleman wishes to challenge the professionalism of that report and the executive, I am willing to hear his evidence.

    I appreciate what the hon. Gentleman is doing, but he is placing the wrong interpretation on the report. The Health and Safety Executive is saying that things could be better, but not that life is at great risk. It is saying that more investment is required. That is what the Bill is all about. That is why the House is giving full support to it. I am afraid that the hon. Gentleman does not appreciate the significance of the point that I made earlier. I shall not repeal: it because many other hon. Members wish to speak.

    In the United Kingdom we will highlight the smallest accident, although it may have no danger to human life. It is exposed so that it may be explored. Any possible weakness will be reported. In many other industries that would never occur, but in the nuclear industry it is caution and vigilance all the way.

    9.47 pm

    Unlike the hon. Member for Bedford (Mr. Skeet), and in line with my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands), I have the gravest doubts about the Government's massive nuclear power programme—a series of nuclear reactors that are likely to cost roughly £20 billion by the turn of the century.

    The Government give little consideration to the likely electricity demand, of which I believe we already have substantial overcapacity. They give little consideration to the economic aspects. If we look at the costs of the Magnox, and the AGR, let alone the PWR, we see that none of them has provided the cheap energy that we expected. That was made clear in the Select Committee report, which said:
    "In the past nuclear investments have had exceptionally low productivity. Great resources have been used with little direct return and a serious net loss."
    I now come to the safety aspects of the PWR in which the Government appear to have placed so much confidence in spite of the events at Three Mile Island, Harrisburg, Pennsylvania. If we have no doubt about the safety aspects, I want to know why the CEGB's safety reports have still not been published. They have been available for a long time but have not been made available to the public. The reports should be available so that the public inquiry at Sizewell can conduct its business. The Minister should ensure that they are made available.

    I welcome the assurance that none of the additional funds made available to BNFL will be used to promote the PWR programme before the outcome of next year's public inquiry at Sizewell. There is great concern in Norfolk, Suffolk and Essex about the proposals for Sizewell. The Minister should not underestimate the strength of feeling.

    Secondly, it was suggested in The Guardian on 12 October that
    "The United States has asked Britain to sell her plutonium to back up a planned increase in production to meet the needs of her expanding nuclear weapons programme."
    The report went on to say that it was later
    "confirmed …that the US had approached the British Government about buying plutonium and a spokesman for British Nuclear Fuels Ltd…. added, if the Americans wanted to buy, BNF would examine the possibility 'under the usual safeguards'."
    There is a good deal of concern about the matter. The Financial Times said:
    "For the US Government this scheme has great advantages. But many observers in Europe see immense political dangers for the civil nuclear industry because such a move could unleash once again at nuclear electricity the hostility currently being directed against the new nuclear weapons."
    The director-general of IAEA, Dr. Eklund, was quoted earlier in the debate. The article said that he had already issued a stern warning about the political dangers of the United States scheme. It continued:
    "In Britain, the CEGB—preparing itself for a public inquiry at Sizewell …—is decidedly nervous about British public reaction to the US scheme."
    I am, too. Is there a link between a possible deal between BNFL and the United States and the Bill?

    9.52 pm

    I welcome the debate. My chief criticism of the Government is that we do not spend sufficient time discussing, debating and approving, if need be, massive decisions being made in the nuclear industry.

    The Government wish to build a series of PWR reactors costed, at today's money, at between £10,000 million and £15,000 million—the equivalent of £300 for every man, woman and child in the nation. It is perhaps the largest single capital investment by the State in the history of our economy. It was announced some time ago, and work is being carried out on the assumption that the programmes will be implemented, yet the House has not spent a single second discussing the merits of the proposition. We have never had a motion to vote on. That is an appalling scandal and the greatest derogation of duty of any Government since I have been a Member of the House.

    The Government pride themselves on carrying out thorough and close examination of the way that the State spends its money. I give them credit for an approach that perhaps did not exist in the previous Government. However, all the good work done will be swept aside by the expenditure of between £10,000 million and £15,000 million on this series of nuclear reactors, without discussion, without a motion on the Order Paper, and no way in which I or any other hon. Member can speak or vote for or against it.

    A few yards outside my constituency work has already begun on one of the five sites in the South-West currently being investigated by the CEGB as a possible site for a PWR. People there frequently ask whether I voted against the proposal, and I have to try to convince what is sometimes a fairly large audience that although I am a Member of Parliament and the project was announced 18 months ago, and although holes are already being dug in their fields and they are threatened with a PWR in their area, we have not had one miserable second in the House of Commons to discuss the level of expenditure involved. I find that amazing.

    I cannot understand how the weeks and months are allowed to pass without the Government's having the courage—I say "courage", but I fear that there is a considerable majority in the House in favour of the proposal—to give it some authority in our democracy—for I still believe that that is what we live in—by bringing forward a specific motion seeking the approval of the House. I hope that the various pressures that are building up will eventually persuade them to do so, but it has not happened so far, and I regard that as scandalous.

    I think that the hon. Member for Bedford (Mr. Skeet) and I are now the two oldest hands in the House on these matters, having met at most debates over the years. The hon. Gentleman referred to cheap electricity in France. I do not deny the basic facts that he mentioned. If one wants cheap electricity, however, the real lesson to be learnt from the French is not to build nuclear power stations but to build mountains. I do not know whether that is within the possibilities of modern technology. I suspect that it is not. Nevertheless, the real reason why electricity is so much cheaper in France than almost anywhere else is that a very large proportion of it is generated by hydro-electric power, which the French have intelligently and sensibly exploited. If we had similar natural resources I have no doubt that successive Governments would have done the same in Britain.

    Those who argue the pro-nuclear case often refer to low electricity costs in France and then point out that France has a substantial nuclear programme, as I admit is the case. But to extrapolate from those facts that nuclear power is the reason why electricity is cheaper in France is simply not true. The hon. Gentleman well knows that that is not the primary reason why electricity is cheaper in France than it is here.

    Indeed, if one wished to build a power station in Cornwall to generate the cheapest possible electricity I suspect that at present the solution would be to build a coal-fired power station and to import the coal from one of the various countries that are willing to export it.

    The hon. Gentleman and I have had many arguments about this. The operating costs for an AGR are 1·45p per kWh, as compared with 1·85p per kWh for a coal-fired station and 2·62p per kWh for an oil-fired station. A PWR, which is the type of reactor used in France, is even cheaper. Surely, therefore, I am right to suggest that the French have cheap electricity at present as a result of two factors—I agree that there are two—but that it is due very significantly to nuclear power.

    The hon. Gentleman quoted a figure for nuclear power against coal. That was the cost of generating electricity with British coal. I made the point that if one wanted cheap electricity one could import coal. No one has said that what I say is not true. If electricity in the South-West peninsula can be generated more cheaply by importing coal, why are we building a nuclear power station? If the only argument for building the power station is that it is cheaper than generating electricity with British coal, why is consideration not given to importing coal?

    It being Ten o'clock the debate stood adjourned.

    Business Of The House


    That, at this day's sitting, the Nuclear Industry (Finance) Bill may be proceeded with, though opposed, until any hour. [Mr. Lang.]

    Question again proposed, That the Bill be now read a Second time.

    A Division at this time would have enabled me to write a longer speech. I had not expected to be called so early.

    A source of energy that I would submit is cheaper than any mentioned by the hon. Member for Bedford or myself is a substantial and massive Government-inspired conservation programme. It is just as good to save energy as to produce it. A number of suggestions have been made showing that it may be possible to save energy more cheaply than any currently conceived method of generating that power. These issues deserve discussion on a motion in the House. The Government should table a motion justifying their current PWR programme. Arguments could be made for it and against it.

    There are a number of questions on this long and complicated Bill—it is in fact almost the shortest that I have ever seen—to which I would appreciate an answer. The Minister refused to give way to me when he was speaking but, fortunately, the question that I wished to put has since been pursued. I wish to know how dependent is the programme of British Nuclear Fuels on the future PWR programme. The Minister replied that it was not dependent at all. That was clear, and understood by the House. It is an extremely interesting point. Will the Minister therefore inform the House how much more money he expects BNFL will require to deal with reprocessing that building a substantial string of PWRs will require? I would like more clarification of the way in which BNFL expects to finance and deal with the considerable extra generating of materials required for that series of installations.

    There has been reference to the Government guarantee. One can raise money for anything if one is given a Government guarantee. I suspect that if someone were to give a Government guarantee for building a papier maché bridge from my constituency to New York it would not be all that difficult to go to the market and raise the money. The fact that the company has always been able to raise money against a Government guarantee does not in reality sound surprising. Why is it necessary to give this Government, guarantee if the Government believe that a particular business is financially profitable? I do not know what the truth is. I find the Government reasons given for offering a guarantee against this substantial sum rather inadequate.

    One point is that BNFL will get a far better rate for the money if there is a Government guarantee behind it.

    Of course BNFL will, but again I suspect that that goes for nearly any project. The point was made about the public sector borrowing requirement. If it is all right to raise money for this nationalised industry using a Government guarantee, why cannot we use the same method to raise money for a series of nationalised industries? We could thereby solve the PSBR problem at a stroke. We could raise money for virtually every Government investment programme currently in being. We might be able to achieve a more sensible economic strategy by the single mechanism of raising future money for investment by State corporations from a Government guarantee as opposed to it counting against the PSBR. I do not see why some are put into one category and others are put into another. I hope that we shall hear more details about why the Government have decided to give the guarantee for this industry.

    Let me make the point, in passing, that the industry is nationalised. I am rather pleased about that. My Liberal colleagues and I have supported the Government on the denationalisation of a significant number of industries in the past two and a half years. The only one on which we opposed the Government concerned the Radiochemical Centre. I opposed that. Similarly, we Liberals would oppose the denationalisation of this industry, but even more vigorously because this one is even more sensitive. The Government would severely sap the existing public confidence in the nuclear industry if it were seen to become a plaything of the competitive world. On the whole, I am in favour of the private ownership of companies and enterprises. I see no reason why the Government should be involved in freight, and so on. But in this area the Government would encounter serious opposition from quarters far beyond those who hold Clause Four to them as some tablet given from on high, scores of years ago. They would have opposition from a far broader base if they introduced the possibility of denationalising this company.

    The last topic en which I touch is a substantial one, and I make no apology for doing so. It is an attempt to discover from the Government how far we have gone on the waste disposal programme. I served on the Committee which considered the 1977 Bill. It was revealed during those proceedings that about £43 million of the money being raised, lent or guaranteed at that time was for a vitrification—or, as I prefer to call it, a "glassification"'—programme.

    How far have we got? Are we capable of glassifying the waste from nuclear power stations? Can we do it on a substantial scale? Do the Government expect to glassify the waste that they have already? Do they expect to embark on a programme of glassifying that material in the near future? In other words, what has been done with the last £43 million? I gather that another £200 million is to be devoted to the problem. It will be interesting to know what progress was made with the last £43 million. If we have not beaten the problem yet—we are now in the thirtieth year of trying to find a solution and to convince ourselves that we have a waste disposal programme for some of the by-products of nuclear generation—why do the Government believe that we ever shall?

    Recently I had an exchange of correspondence with the Minister of State in the course of which I asked what was the Government's programme for the disposal of nuclear waste. The Minister appeared to say that there was no fixed programme, that a number of investigations were going on, and that they hoped by 1990 to issue a paper outlining the various options available for the disposal of nuclear waste. That will be nearly 40 years on, but all that the Government hope to do is to produce a paper outlining various options for waste disposal.

    I am an engineer by training. I recognise that there are substantial problems in this area. There are arguments to be made for putting off the final disposal of waste because it tends to become simpler to handle as time passes. But for all that, 40 years have passed since the first waste was produced and we still do not have even a blueprint for waste disposal—not even one for examination—let alone testing to discover whether, in the final analysis, it is credible. What progress has been made since the debates on this subject in 1977 on glassification and waste disposal?

    Will the Government now indicate their policy with regard to the treatment and disposal of waste created by treating other people's nuclear materials? Reference has been made to the amount of business obtained from Japan. I believe that it is hoped that there will be some business from Brazil. We understand that that material will come to Britain, that the useful materials will be taken out of it, and that it will be recycled. What will happen to the various waste materials and by-products of that process? Are we to keep them in Britain? Who will be keeping Japan's rubbish or Brazil's rubbish? Will those countries have it back, or have the British Government agreed to keep it here?

    Rather than save my comments for my winding-up speech, I feel that I ought to intervene at this point in the hon. Gentleman's speech. Before he makes his sweeping observations he should study these matters with a little more care than he obviously does. He should know that since 1976 every contract signed by BNFL with overseas countries has involved a crucial clause to the effect that the waste, once reprocessed, shall be taken back. That is covered by an exchange of notes at Government level. Before the hon. Gentleman continues in the disgraceful way in which he has done tonight he should study the facts and not waste the time of the House.

    How much material has come to Britain for reprocessing and how much has been returned?

    If the hon. Gentleman asks the question in the proper form he will get the information. However, his almost pathetic ignorance of the basis on which the company that we are debating conducts its business is almost contemptuous of the House.

    The Minister could not even answer the basic question of how much of this material has been returned, yet he claims to have great knowledge of the way in which this company carries out its business. I leave the House to make its own judgment. I suspect that the Bill will have a Committee stage. Given the shortness of the Bill, that will give us a rather limited opportunity to return to this point.

    The Minister spoke about contempt of the House. The Minister's Government are planning to spend the sum of £15,000 million, and not one second of this Parliament's time has been given to discussing that sum. The Minister wants to build 10 PWRs, all over the country, and not a second of the time of the House has been spent in giving approval to that announcement.

    Has the hon. Gentleman read the White Paper? It does not say anything about a commitment to build all those power stations. It says that if a public inquiry permits the construction of one PWR we shall see what the requirements then are, and if necessary we shall build another, and so on. There is no commitment to a sweeping programme of 10 stations all at one go. Once again I must tell the hon. Gentleman to read the basic material before going on in the way that he does.

    The Minister knows that the w hole energy scenario of the present Government is based on the hope or, perhaps, the assumption—I do not put words in the Government's mouth—that in the end we shall be able to build this number of reactors. The sum involved in building them has been specifically mentioned. It has been specifically brought to the House, at least in one statement about it. The Minister cannot pretend that this decision has not been made. If the public inquiry should have the unlikely result of the PWR being condemned as unsafe—I do not believe that many hon. Members believe that that is the conclusion that will be reached—no doubt the Government would rethink the matter and we would go down another path. But there is no denying the fact that the Government have announced the programme, and no doubt they will stick to it.

    What the Minister said is a contradiction of what was recently announced. The hon. Member for Truro (Mr. Penhaligon) is quite right, because the original announcement was that we were to have a massive 10 gigawatt programme costing £25 billion or so. The Government are now back-tracking on that, just as the French back-tracked on their programme.

    I thought that the costs were originally rather less than £25 billion, but what are £8 billion or £10 billion between friends, especially if the point has been made in order to help me?

    I hope to have a detailed reply from the Minister about the progress that has been made on waste disposal. I should also like to know why the company has been given a guarantee when such guarantees are not given to other nationalised industries. If the debate were to produce answers only to those two questions we would be able to go away a little happier and a little wiser than we came. With regard to the macro-economic effect, the Minister would appear to have hit upon a solution to the PSBR problem, if only it could be applied to the financing of the rest of our nationalised industries.

    10.16 pm

    There has been a brief reference from time to time during the debate to BNFL at Capenhurst. I should like to put to the House the very serious concern and worry of 500 employees of BNFL at Capenhurst about their employment next year. It is intended that 500 or more men and women should lose their jobs. Of that number, about 100 are from my constituency. I have received some very worried letters from 50 or 60 constituents asking me what I can do to help them.

    The House may know that in my constituency we have very serious rates of unemployment. In the Deeside travel-to-work area the unemployment rate is now bordering on 18 per cent., and in the town of Flint male unemployment has reached 40 per cent.

    Some of my constituents who have written to me or come to see me it my surgery first lost their jobs in the textile industry and then in the steel industry. Now they are to lose their jobs at Capenhurst.

    I ask the Minister to give some reassurance that there will be no more than the proposed 500 redundancies at Capenhurst. I also ask him to consider whether it is necessary for the proposed redundancies to take place. Finally, will he consider enabling me to bring a group of men who are likely to lose their jobs to see him in order to discuss the matter?

    10.17 pm

    With the leave of the House, Mr. Deputy Speaker, I should like to reply.

    This has been art interesting debate, although it would be right to say that some contributions have been more interesting than others. I hope that the House will excuse me if I am unable to refer to every point that has been raised. I have to keep one eye on the clock, but I shall try to deal with as many as I can.

    I thank the hon. Member for Merthyr Tydfil (Mr. Rowlands) for accepting the Bill. I had hoped that he would do so, because the Bill marks a continuation of a bipartisan policy of offering guarantees to the company. He may recall that when the statutory instrument to increase the borrowing to £500 million was considered by the Committee in March the right hon. Member for Leeds, South (Mr. Rees) called for such a Bill as the one that we are bringing forward today, so I am grateful to the hon. Gentleman for accenting it.

    I am anxious not to get involved in party controversy with the hon. Gentleman about the PSBR, but it is right to say that the company has not been within the PSBR at any time in its life. Its life has continued throughout the period of this Government, the Labour Government and the previous Conservative Government. What is within the public sector borrowing requirement is a matter for the Treasury, but Governments of both parties have managed to run the economy with the company remaining outside the public sector borrowing requirement.

    The hon. Member for Merthyr Tydfil was unfair to my hon. Friend the Minister on the subject of the gas-gathering pipeline. I should point out to my hon. Friend the Member for Bedford (Mr. Skeet) that successive Governments decided that there was a need for a guarantee because of the particular nature of the industry. Potential political problems are involved in the nuclear power industry. From their standpoint—we do not agree with them—many hon. Members reasonably believe that we should not have a civil nuclear power programme. Obviously, those who lend money will take such points into account. By the same token, Britain has the most rigorous safety standards and it would be wrong of anyone to think that we would ever rule out the possibility that a nuclear plant would have to be closed temporarily or completely. Such risks make this type of operation different. That is why a guarantee is needed.

    My hon. Friend the Member for Huntingdonshire (Mr. Major) always makes pertinent observations. He said that it was right that BNFL should not be prejudiced in its borrowing and have to pay a high rate for money because of its particular situation, when it does work of great national and international significance. In that spirit, I commend the matter to the House. The situation is different from that of the gas-gathering pipeline The Government contend that, just as North Sea oil has been brought ashore by separate pipelines from separate fields, gas can be brought ashore. Therefore, there is no comparison to be drawn.

    The hon. Member for Merthyr Tydfil said that there was something fishy about the way in which a statutory instrument had been accepted which transferred shares to my right hon. Friend the Secretary of State, but he will know that the power to do that was contained in the 1971 Act, which survived the previous Labour Government. BNFL has grown to such a size that under successive Governments the Secretary of State for Energy's proper influence has been exercised on a day-to-day basis. It is right to recognise—as the original draftsmen always thought would be done—the reality of the intimate relationship between the Department and BNFL. Therefore, it it right that the Secretary of State should he the principal shareholder.

    I understand the Minister's position, but the company was with the Atomic Energy Authority for many years and could have been left there. Were not the shares handed over to the Secretary of State so that he could dispose of them? Is that not part of the privatisation arrangement?

    That is not the reason that my right hon. Friend the Secretary of State would give for the measure. There is no present intention to invite the public to subscribe for any shares in BNFL. I avoid the pejorative term "selling off', because in other fields we are inviting subscriptions for shares and there is nothing disreputable about that. In that context, the idea of selling off does not apply.

    Why did the Minister say that there was no "present intention"? Does he mean that the matter is under consideration?

    There is no present intention to invite the public to subscribe for shares. The hon. Gentleman knows that "no present intention" means that, as I stand here now, there is no intention of doing so. There are plenty of hon. Members who say "Never", meaning "Not today", although one cannot rely on the fact that they do not merely mean "Not this morning". I am saying that there is no present intention, but it would be wrong to rule out such an intention in future. I do not say anything that does so. I am interested to note that the hosts of the Social Democratic Party are quick to leap to their feet on the old trick of defending nationalised industries.

    I understand what the words "present intention" mean. Can the Under-Secretary of State make it clear that the transfer of shares to the Department of Energy was not meant to clear the decks or prepare the way for such privatisation?

    I have given the hon. Gentleman the reason for that. The enthusiasm of my hon. Friend the Member for Bedford for privatisation is entirely acceptable to me, but that was not the motive for bringing forward the statutory instrument. It is possible, had a Labour Government been returned in 1979, that they would have felt it proper to take the steps that we did. After all, that legislation was acceptable to the previous Government. I do not believe that it is a central issue on privatisation.

    I turn to what has been said about the PWR. I stress to the House, as I did to the hon. Member for Truro (Mr. Penhaligon), that there is no present intention for a huge expansion in a PWR building programme. We are committed to a wide-ranging public inquiry. The right hon. Member for Norwich, North (Mr. Ennals) is not at present in his place, but he asked me about the CEGB. He can read the answer in Hansard. The CEGB will be publishing a report on the safety aspects of the PWR in plenty of time for the inquiry. We shall look at the results of the inquiry. Even if the decision is to go ahead with the PWR, each power station project will be considered on its merits.

    The question of safety has been very much under consideration, and one or two things have been said that may give a false impression. I must emphasise that during nearly 20 years of commercial operation of nuclear power stations in Britain no accident has occurred that has given rise to significant public hazard. That is because successive Governments and the nuclear industry have attached paramount importance to safety from the earliest days of nuclear power. We intend to maintain that excellent record. Not many enterprises, public or private, have the enviable safety record of our nuclear industry. I believe that that proposition would command the support of most hon. Members.

    The hon. Member for West Lothian (Mr. Dalyell), who is intimately concerned with those matters, asked me two specific questions. I can assist him briefly with those. If there are other matters on which he would like clarification I shall respond to any letter that he may write. He asked first of all about the Khan affair. As he will know, there was an investigation into that breach of security by the Dutch Government. A report will be made to the Dutch Parliament, which we shall obtain. I shall ensure that the hon. Member knows about it as soon as we do. I can assure him that as a result of the Khan affair the three partners reviewed security arrangements, as it was only right that they should.

    The hon. Gentleman also asked how much money was devoted to BNFL's vitrification programme, and on what time scale. A total of £220 million, at best estimate, will be spent on the programme over the next 10 years. Design work is proceeding and construction will commence within the next two years. Again, if the hon. Gentleman requires further information I can assist him.

    I say to the hon. Member for Flint, East (Mr. Jones), who mentioned redundancies, that of course I shall meet him and anyone else that he wishes. The main factor in the recent redundancies at Capenhurst is that it is a diffusion plant. It is old, and no longer economic. The company has done its best to minimise redundancies by natural wastage and transferring workers to the centrifuge project, which is an update of the process being carried out in the hon. Gentleman's constituency. However, that has been difficult because the slack enrichment market has slowed down the expansion of the centrifuge capacity and natural wastage has been at a minimum.

    Most work on a Ministry of Defence project for naval fuel using the centrifuge has been deferred. I point out to the hon. Gentleman that the intimate connection of that plant with the defence industries is typical of many factories in Britain that may suffer if some of the cuts in defence that are promised by certain hon. and right hon. Members of the Opposition are ever effected.

    The hon. Member for Truro spoke as though he had had no opportunity to speak on the subject in the House. However, this is the third time this year that he has entertained the House with his prejudices about nuclear power. In his introduction to one speech he said:
    "I must confess that when I see a Bill with the words 'atomic energy' written across the top I am likely to be against it."—[Official Report, 10 February 1981; Vol. 998, c. 763.]
    I am glad to see proof of the unprejudiced way in which members of the Alliance approach the crucial matter of nuclear power.

    The hon. Gentleman said that there was no chance to vote against the measure. He is welcome to divide the House tonight. He has voted twice with the Labour Party on previous occasions when nuclear matters have been discussed this year. I do not wish to inhibit him from doing so a third time.

    The hon. Member for Truro raised a constituency point. He referred to the Cornish site investigation. Under section 35 of the Electricity Act the CEGB has power to survey land for possible sites for future stations. If a site is suitable the CEGB has to submit an application for consent to the Secretary of State for Energy, who would order a public inquiry before making his decision. He has to hold a public inquiry if the local planning authority objects to the application. Successive Governments have accepted that such a procedure is a proper exercise in a sophisticated society. I regret that the hon. Gentleman chose to make cavalier remarks about public inquiries as if to suggest that the whole procedure was a confidence trick. That is disgraceful. I hope that no other hon. Members will associate themselves with that suggestion.

    If the hon. Member for Truro (Mr. Penhaligon) wishes to divide the House, he has the hon. Member for Caithness and Sutherland (Mr. Maclennan) to stand with him.

    I am glad that the hon. Member for Newcastle-under-Lyme (Mr. Golding) has raised that matter. The hon. Member for Caithness and Sutherland (Mr. Maclennan) knows too much about atomic power to have much truck with what the hon. Member for Truro says, because Dounreay is in his constituency. He knows of the great safety record and achievement of the nuclear industry. He is also on record as favouring the fast breeder reactor. A great alliance dominates British politics. I wonder how the views of the hon. Members for Truro and Caithness and Sutherland equate.

    I can say with confidence that the fast breeder reactor programme would enjoy much greater favour if there were an alliance in Government than if the right hon. Member for Bristol, South-East (Mr. Benn) were by some misfortune ever again to have charge of our nuclear affairs.

    To say that an alliance is better than an Administration presided over by the right hon. Member for Bristol, South-East (Mr. Benn) is no commendation in a sensible discussion. We are talking about a choice between this Government and the threat posed by the Alliance. The hon. Member for Truro is the energy spokesman for the Alliance. The Liberal Party has fascinating views on atomic energy. Its members were once in the lunatic position that while they supported the use of nuclear power for military mean: they opposed its use for civil means. They decided to rectify that, not by common sense and approving nuclear power for civil use, but by coming out in favour of disarmament at their last conference. They went further. It was said at the conference that all atomic power stations should be shut.

    I do not know whether the hon. Member for Truro reads Liberal News. it is not my regular bedtime reading, but I was fascinated to read a letter by a man who lives in Leiston—a fascinating place to live in relation to nuclear policy. He said that the cost to the CEGB of shutting down existing nuclear power stations would be £250 million in extra fuel charges and that by the year 1990 this would rise to £1 billion at current day values. He said that he had no intention of going to the electorate with such a policy but was anxious to learn what others would do. He went on to say that if the party was not to be accused of irresponsibility—that is passing resolutions in the full knowledge that they will not be implemented—it must answer the questions. I give way to the hon. Member for Truro in the hope that he will answer them.

    We all have problems with our parties if they are given real and meaningful motions to discuss—a temptation that the Conservative Party never allows to its members.

    I am the Liberal spokesman on energy and I have never argued in the House in favour of the closing down of existing nuclear power stations. There are disagreements between the Liberal Party and the SDP, but I have no doubt that the tremendous good will between the parties will allow those differences to be resolved.

    The Minister has still not answered my question. When has the House had the opportunity to discuss, on a Government motion, our current programme of building nuclear power stations? The Minister knows that we have had no such opportunity.

    The hon. Member knows that there is a Select Committee report on the matter, and it will be debated in the House in due course. I will not be deflected on to that aspect. The hon. Gentleman apparently favours elderly nuclear power stations continuing in use, but he opposes the construction of new power stations, which could be built with the advantages of modern technology. What a lunatic policy!

    In commending the Bill I stress that BNFL is a world leader and an important employer in the North-West, employing about 16,000 people. If the expansion programme goes forward it will provide additional, safe employment in an industry of the future.

    Question put and agreed to.

    Bill accordingly read a Second time.

    Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

    Nuclear Industry (Finance) Money

    Queen's Recommendation having been signified—


    That, for the purposes of any Act of the present Session to alter the financial limit imposed by section 2(1) of the Nuclear Industry (Finance) Act 1977 in relation to British Nuclear Fuels Limited, it is expedient to authorise any increase in the sums payable under any other enactment out of money provided by Parliament or out of the National Loans Fund or into that Fund or the Consolidated Fund, being an increase attributable to any provision of the said Act of the present Session substituting references to £1,000 million and £1,500 million for the references in the said section 2(1) to £300 million and £500 million—[Mr. Berry.]

    Employment Subsidies

    10.36 pm

    I beg to move,

    That this House authorises the Secretary of State to set up, in accordance with section 1(1) of the Employment Subsidies Act 1978, a scheme (the expected cost of which will be more than f10 million between 1 April 1982 and 31 March 1983) for making payments to employers of young people whose earnings are below a specified limit.
    The motion authorises the Secretary of State to set up the young workers scheme, which was announced by the Prime Minister on 27 July. The Employment Subsidies Act 1978 empowers the Secretary of State to set up schemes to give financial assistance to employers, to enable them to take on new employees and to maintain or enlarge their labour force. That is the aim of the young workers scheme.

    The Act states that a resolution of the House is necessary if the scheme is expected to cost more than £10 million. The Prime Minister announced that the scheme is expected to cost about £60 million in 1982–83 and it is therefore necessary to pass the motion that we are debating. A similar scheme will be run in Northern Ireland.

    The other requirements of the Act—that the Secretary of State should consult those organisations as are considered appropriate, which in this case have included the TUC and CBI, and lay a statement before the House explaining the proposal—have been fulfilled.

    The background to this scheme is the deep concern about the continuing high levels of unemployment among young people, particularly school leavers, which all of us share wherever we sit in the House. As might be expected at this time of year, the number of school leavers out of work has been decreasing over the past few months. There were 216,000 unemployed school leavers at the end of October compared with 285,000 in July. However, the figures are higher than they were a year ago. In October, despite the increase in the number of places offered on the youth opportunities programme, 70,000 more school leavers were unemployed than in October 1980.

    Unemployment is a terrible experience for anyone of whatever age; and I do not wish to give the impression that the Government regard any one group of people as necessarily deserving job opportunities more than any other. Indeed, the very fact that our special employment measures as a whole help, for example, the long-term unemployed and older workers shows that the Government are determined to do everything possible to overcome the worst effects of unemployment.

    Nevertheless, it needs to be recognised that there is a grave risk that youth unemployment can create a vicious circle—young people finding that they have no job because they have no experience and no experience because they cannot find a job. And if young people fail to gain experience, and so fail to get jobs and working skills we shall find ourselves in the end with insufficient skilled manpower to face the nation's industrial and commercial future. This is quite separate from the personal effect on individual youngsters of prolonged periods of unemployment at the beginning of their working life.

    It is to try to break into this vicious circle that the Government are providing over £400 million this year and propose to spend over £700 million next year on the youth opportunities programme. About half a million young people will benefit from the training and work experience provided by the programme in the current year, 1981–82. The Government have undertaken that unemployed 1981 school leavers will be offered a place on the programme by Christmas and that young people under 18 years who have been registered unemployed for three months will be offered a place on the programme within three months. These are very ambitious undertakings and I know that the MSC and the careers service are doing their utmost to help to meet them.

    The Government are considering also a new training scheme for young people that will eventually replace the YOP. We intend to place increasing emphasis on the training of young people, whether unemployed or in work. That is the basis of the so-called new training initiative.

    Valuable though the YOP is in preparing young people for work, it is essential that the experience and working skills that are acquired in the course of the YOP scheme should be put to good use as soon as possible. In other words, we need to train young people for jobs and then help them find jobs in spite of their handicap—there is no doubt that it is one—of youthful lack of experience.

    There is increasing concern, which is based on unmistakable evidence, that one major contributing factor to the high level of youth unemployment is that the relative wage levels of young people are too high. For example, a recent study commissioned by the Confederation of British Industry is reported as concluding that many employers have decided to stop recruiting young people between 16 and 18 years because they are considered to be "poor value for money".

    My hon. Friend was saying that the Government were thinking in terms of replacing the YOP or moving on to a new stage or a new phase. I wonder whether he could, even at this stage, expand slightly what he means. Are we to understand that the work experience on employers' premises, for example, should have rather more training sewn into it? If so, what are we to understand would happen to the community service aspect of the YOP? Does he envisage any changes in that?

    The broad drift of the YOP scheme will be in the direction of more training. That will not exclude valuable community schemes such as those that my hon. Friend has in mind.

    Will the Minister explain whether the Government accept the judgment that employers think that 16 to 18-year-olds are poor value for money? How on earth will we ever train youngsters for work if that is the attitude of the Government?

    I shall elaborate the thesis. It is true that the phrase "poor value for money" is an unpleasant one. No one cares to think of his son or daughter in that way. However, if employers do not regard young people as value for money in terms of their output, young people will remain unemployed, however much we might wish that it were otherwise.

    Over the eight years to 1976—the latest date for which the relevant statistics were collected—basic weekly rates in national agreements for manual workers rose by 200 per cent. for adult workers, but by 270 per cent. for youths and boys. This narrowing of differentials, which was most marked in the early 1970s, is clearly likely to have its greatest effect when employers are cutting costs to preserve competitiveness. If the gap between the wage levels of adults and young people is too narrow, young people will be squeezed out of the labour market. Many employers who are keen to help young people cannot afford to employ them.

    Surely the figures that the Minister has just quoted show the impact of market forces on the labour market. I thought that his Government were, in favour of market forces.

    They may or may not be the result of market forces. They may be the result of trade union monopoly power. That is one of the interpretations that can be placed on them.

    The young workers scheme is designed precisely to tackle the problem. It will encourage employers to take on more young people at wage rates which more properly reflect "value for money". The scheme will provide £15 a week to employers of eligible young people earning less than £40 a week and £7·50 if earnings are £40 but less than £45 a week.

    To be eligible, young people must be under 18 and in their first year of work within one year of the start of their first full-time permanent job. Payments can be made for up to one year in respect of each young person.

    The scheme will come into full operation on 4 January 1982. That means that employers will be able to claim payments in respect of young people who are eligible on or after that date. Payments will be made quarterly in arrears to minimise the administrative burden both on employers and on the Department when dealing with claims. Employers will be able to make claims for people who have been taken on before 4 January 1982, provided that the young people are eligible on that date. Of course, only periods of employment after 4 January will qualify for payments. To make it easier for employers to establish the eligibility of young people as quickly as possible, we shall start to accept applications from employers on 7 December this year.

    The basic details of the scheme will be advertised in the national press at the end of this month and full details of the scheme will be described in a leaflet that will be available in jobcentres, employment offices, careers offices and my Department's regional offices, again by the end of this month,.

    The scheme will be open to all employers except domestic households and public services, such as the Civil Service, the Health Service and local authorities. However, nationalised industries and public corporations may apply.

    The Government consider that to encourage public services to take on more staff, even young people, would be inconsistent with our policy of reducing the size of the Civil Service and constraining administrative expenditure generally, of of which is designed to help firms in productive industry to expand their output and employment.

    Our objective, which is to create more job opportunities for young people, will be achieved in two ways. First, the payments themselves will encourage employers to create new jobs for young people. Secondly, the design of the scheme will encourage employers to adjust wages so that the general wage levels of young people will properly reflect their inexperience. That adjustment of wages might occur through a change in the rates offered to new recruits or perhaps the deferral or limiting of wage increases that might otherwise be offered.

    It is inevitable that such a scheme will result, in the short term at least, in payments being made to employers who would have taken on young people anyway. That is particularly so as it works partly by influencing wages, including those of young people already in work. However, in the longer term as the full effects work through we would expect more new jobs for young people to be created.

    Overall, our operating assumption is that the number of young people attracting payments for their employers will build up to between 50,000 and 100,000 in the first few months of the scheme.

    How does the Minister work that out? Wage scales are set out for a boy leaving school and taking work at the age of 15 or 15½, increasing every six months until he reaches adult age. Apprenticeships used to be counted as being between the ages of 14 and 21, when wages were low, before the apprentice became fully productive. The adult rate now starts at 18 and not 21. If the scheme interferes with the pay of 15 and l6-year-olds by enticing employers to pay under the rate, rates in many industries will be upset and a lot of trouble will be caused.

    That may or may not be the case. The scheme aims to exert a downward pressure on rates for youngsters, to make it possible for more youngsters to be drawn into work. We make no bones about the fact. The estimate that I gave of the number affected is the best that we can make at present. We shall have to watch to see whether the estimate is fulfilled.

    Since the scheme was announced, it has attracted considerable interest and comment. For example, some argue that the Government should insist that employers offer training to qualify for payments. The Government have fully demonstrated their commitment to securing an improvement in the quantity and quality of training offered to young people. I have already mentioned the new training initiative. Our concern to improve the quality of the youth opportunities programme also demonstrates that concern. As I said, my right hon. Friend the Secretary of State hopes shortly to announce a major new initiative to assist in the training of young people.

    We concluded that it would not be right to make it a formal requirement of the young workers scheme that training should be given. First, it would mean that training programmes would have to be discussed and agreed with each employer, which could require many staff and which would slow down the processing of applications. It would be much more bureaucratic and time-consuming. I imagine that most employers would like a quick decision on their application for a grant.

    Secondly, an extra condition would inevitably put off some employers and thus reduce the effectiveness of the scheme in creating job opportunities for young people. Thirdly, and most importantly, I am convinced that schemes with many different objectives lumped together in one project often fail to meet any of the objectives through sheer diffusion. To be effective a scheme must be simple and straightforward and concentrate on one clearly identifiable objective.

    Although there is no formal training requirement, I have no doubt that the scheme will encourage more training. By reducing the wage levels of boys and girls it will enable more employers to offer proper training and perhaps to retain training staff who might otherwise be at risk because of financial constraints. To assist in that we have ensured that Government schemes to support apprentices—and the unified vocational preparation programme—are compatible with payments under the young workers scheme. We are also considering ways to bring the administration of the scheme closer to that of the unified vocational preparation programme.

    The Minister would be the last to deny that there have been abuses of the youth opportunities programme. How will he monitor the new scheme to ensure that it is not abused? An employer can employ a young person and pay him less than a skilled worker.

    The youth opportunities programme is a separate issue. The scope, aims and technicalities of the schemes are different. Abuse of the new scheme is more likely to be in false declaration—deceit over age, the date of a programme starting or whether another employer has claimed under the scheme. There is a variety of possible fraudulent uses of the scheme, but it is difficult to see ways in which there could be abuse in the sense of exploitation of the youngsters as is alleged to occur in certain YOP schemes. I appreciate the hon. Gentleman's anxiety, although it is perhaps based upon a failure totally to appraise the details of how the scheme will work. I certainly agree that the scheme needs to be monitored, and we shall indeed monitor its effects very closely. We shall wish to look particularly closely at the effects upon training.

    I am convinced that the approach that we have adopted will avoid complicating the young workers scheme unnecessarily, while allowing employers to offer sufficient and proper training.

    One of the possible abuses levelled at some of the opportunities opened up under the YOP scheme is the idea of substitution. Some anxiety has been expressed that the young workers scheme will simply give jobs to young people at the expense, not necessarily of skilled, trained adult workers, as the hon. Gentleman suggested—I think that a different kind of employee is involved here, as we are dealing in the main with very inexperienced, untrained, unskilled youngsters—but of older workers with a comparable degree of skill but perhaps a little more experience.

    One of the purposes of the scheme is to correct a distortion in the labour market that is causing high unemployment specifically among young people. It follows, of course, that if the scheme is successful it will encourage employers to recruit eligible young people in preference to others and to redress an unsatisfactory and indeed pernicious balance. The central advantage of the young workers scheme over previous schemes designed to encourage youth employment, however, is that it is designed to encourage new jobs both while the payments are made and in the longer term. By bringing about realistic wage levels for young people the scheme will enable employers to be more competitive and to create new jobs even afer the payments have stopped in any particular case.

    It is, therefore, our view and expectation that the scheme will create new jobs as well as giving preference to young people in the filling of those jobs. Again, we shall certainly monitor this very closely.

    I am grateful to the Minister. He has been very good about giving way. I have listened to his reasoning and have formed the impression that the scheme could, in effect, pave the way for some kind of minimum wage for young people, because in many respects it drives a coach and four through traditional collective bargaining arrangements.

    I think that it will have exactly the opposite effect to that of a minimum wage scheme. It will free the market, which is already regulated to some extent by minima set by wages orders, and introduce simply an unpredictable, certainly not a final, minimum wage in any statutory or fixed and rigid sense. It may set a floor or a ceiling, a set of parameters as it were, for young people's earnings, but this will be through the effect of choice in the market.

    On the day on which the scheme starts, many employers may well be prevented from paying wages within the scheme's limits because of contractual obligations, collective agreements or statutory wages orders. I must make it clear that nothing in the scheme releases employers from those obligations. However, the scheme will create new jobs, partly by influencing wage levels. It would be self-defeating if we set such limits that even unrealistically high wages enabled employers to qualify.

    If the hon. Gentleman will forgive me, I must try to complete my speech. Perhaps he will make his point during his own speech. In fairness to other hon. Members, as we have only an hour and a half, I must give those who have been silent but who wish to speak in the debate a chance to do so.

    I hope that in the longer term all those who are party to wage agreements or sit on wages councils and boards will see the sense of the scheme and ensure that more and more employers can qualify.

    The wage limits I have outlined today will be reviewed next summer so that employers who, for understandable reasons, might be unwilling to cut wages, can hold wages to a reasonable level which could give them the opportunity to qualify for the scheme next year.

    Over the past few years we have had considerable experience of running special employment measures. Opposition Members have also taken part in such schemes. In many ways this scheme is unique. In others it follows the experience of previous schemes. Unlike measures that were employment subsidy schemes, the young workers scheme not only provides payments to employers who recruit young people but seeks to act directly on a cause of youth unemployment, namely, unrealistic wages. Like the temporary short-time working compensation scheme, it seeks to influence employers' behaviour in a way that will enhance our ability to respond to economic recovery.

    Because of its novel features, the effects of the scheme are inevitably difficult to quantify. Nevertheless, I am certain that it offers real hope to unemployed young people. I commend it to the House and I urge the House to approve the motion.

    11.1 pm

    The youth of Britain are paying a terrible price for the Government's failure to run the economy successfully. Last month, nearly 205,000 school leavers joined the dole queue. That was 49 per cent. more than in October 1980. Those young men and women who left school at Easter and still have no job total over 7,000. For every job vacancy, 39 unemployed school leavers must fight against each other, while 39,000 under18-year olds have been unemployed for more than six months this year. Early next year, without special employment measures for the under-18s, unemployment can be expected to top the figure of half a million young men and women. This year 10,000 fewer apprenticeships have been available to school leavers.

    No criticism can be too harsh of a Government who savage the hopes of tens of thousands of young men and women. Monetarism has already laid waste large tracts of British manufacturing industry. Its newest and latest victims are the youngest citizens and their deeply worried and increasingly anxious parents. Schoolteachers, parents and harassed careers officers know that there is a frightening upward trend in youth unemployment in Britain today.

    I have quite a lot of respect for the hon. Gentleman. I would, however, have rather more respect for him if, instead of attacking the Government over unemployment, which he knows is world-wide—it is happening in Europe and in North America—he would put forward positive proposals to help the young people for whom he effects much concern. The hon. Gentleman hammers away, blaming the Government for unemployment that is currently world-wide. That helps no one.

    I was about to say that the town of Flint, in my constituency, now has a male unemployment rate of 40 per cent. Many young men and women in the town face a grim future on all current assessments. The hopes of Britain's army of young unemployed must rest on a number of factors. First, there should be a clear statement from the Government that the new training initiative for young people will be financed adequately by the Government. Hon. Members would have liked to hear a strong guarantee tonight from the Minister. Why did the Minister's Department inspire the recent press speculation that to fund the new training initiative the Minister was considering a training tax on employers?

    Secondly, there must be a fundamental alteration in the Government's economic strategy. There must be a speedy reflation and expansion. We should certainly aim to create new jobs for our young people. Hon. Members will perhaps agree that youth unemployment at its existing levels is both a social and a political time bomb. If today's youth believe that the Government have no useful role for them to play in modern society they will surely turn to violence and crime.

    Before dealing in a little detail with what the Minister outlined, I mention a third matter. The Government are surely bound to say that they intend a speedy upgrading of the youth opportunities programme allowance of £23·50. I remind the Minister that inflation has reduced the real value of the allowance by at least £5, that the TUC proposes a £30-a-week payment, and that the MSC has proposed a minimum of £28 a week.

    I draw attention to the Prime Minister's statement on 27 July, in which there were some key phrases. The right hon. Lady said:
    "the wages of young people are often too high … That situation has come about because of unrealistic pay bargaining … trade unions and employers will have to take this factor into account in their bargaining … take on more young people at realistic wage levels."—[Official Report, 27 July 1981; Vol. 9, c. 835–6.]
    On 28 July, there was the pregnant statement:
    "We have no immediate plans for legislation on wages councils."—[Official Report, 28 July 1981; Vol. 9, c 979.]
    These must be regarded as a very disturbing set of remarks, because we know that the most enthusiastic proponent of the scheme is Professor Alan Walters, the Prime Minister's special economic adviser. We suspect that Professor Walters bested the then Secretary of State—the right hon. Member for Lowestoft (Mr. Prior)—in the late summer consideration of how to fund the new training initiative. Trade union leaders are not alone in believing that the scheme has been launched in a confused, contradictory and potentially contentious manner. It is clear from what he said tonight that the Minister does not have in mind a very flexible scheme.

    I understand that there are 33 wages councils. Only three paid more than £45 a week. One was the making of coffin furniture, and perhaps it is only right that that pastime should earn a minimum wage of £47·20. But of those wages councils that paid less than £40 a week, I find from my researches that young people training in the fur industry have a minimum wage of only £21 a week, and those in hairdressing only £30 a week. It is clear that three wages councils industries are technically outside the scope of the scheme outlined by the Minister. But the question is how ambiguous and meaningful are a series of Prime Ministerial remarks made in the House on 27 and 28 July?

    Problems may arise if an employer covered by a wages council order lowers a young person's wage below the statutory minimum or offers a wage below the minimum to be able to take advantage of the scheme. Should it be brought to the attention of the wages inspectorate, the underpayments will have to be investigated, and the employer may have to decide whether to pay the statutory minimum and presumably lose his benefits under the scheme or to refuse to pay the statutory minimum, leaving himself open to possible prosecution and a fine of up to £100.

    I am not sure from what the Minister said what effect this last would have on the employer's continued eligibility for the scheme's assistance, because, in making an application for the young workers scheme assistance, an employer will have to sign a statement showing, inter alia, that he is aware of statutory minimum rates. If an employer starts by receiving the scheme's assistance and then suddenly loses it, it may affect his willingness to continue to employ the young person in respect of whom he receives assistance.

    From a study of Hansard, it seems that the Prime Minister is evidently aware of the discrepancy between the young workers scheme wage limits and certain wages council minima. Witness the following remarks, reported in Hansard for 28 July, when the hon. Member for Hereford (Mr. Shepherd) asked the Prime Minister to confirm that the Government were carrying out a review of all wages councils. The Minister of State should tell us "Yes" or "No" on that matter. I shall refresh his memory. The Prime Minister's answer was:
    "We have no immediate plans for legislation on wages councils."—[Official Report, 28 July 1981; Vol. 9, c. 979.]
    If there are any plans, the Minister of State should tell us bluntly what the Government are up to.

    Tonight the Minister should have announced the scheme and said that jobs will not be pegged to specified earnings levels. He should have gone on to say that the subsidy should be conditional upon an additional job being created and that applications should be granted only where a recognised union has been fully involved. Such a scheme would then have been more tightly controlled and less likely to be manipulated.

    What astonished me was that tonight the Minister said that there could be no guarantee that those who enter employment under the aegis of this scheme would receive training. If that were to be so, it would be a disgraceful consequence. It would be unjust treatment of some very young and very vulnerable people entering work. It may well be described justly by Opposition Members as Tory laissez-faire at its very worst.

    A number of informed sources believe that the scheme has some potentially objectionable implications. First, from what the Minister said the scheme's rationale appears to be based on the presumption that juvenile wages were too high and were primarily the cause of school leaver and youth unemployment. We reject that. We say that the root cause is the deepening recession that has been created largely by the practice of monetarism by the present Government.

    Secondly, trade union leaders fear that the basic purpose of the scheme is to give employers a financial incentive to pay young people less than £40 a week in order to qualify for the subsidy. The same union leaders felt that the scheme raised questions on the operation and enforcement of orders by wages councils which covered juvenile workers. The scope for the unions to build on these legal minima through collective bargaining might, therefore, be at risk.

    With no little concern, the TUC has stated that the scheme is not simply about encouraging employers to recruit the young unemployed; it is also about encouraging a reduction in the existing juvenile wage rates. If that is so—and it appears to be so—we face a very serious situation.

    In trying to assess how the scheme came forward to its present state, I think that the House would be interested to know of a comment in the Financial Times of 26 January this year by the now famous Samuel Brittan. With Professor Walters, he may well have much to do with the scheme. He said in his article:
    "Of course the writ of the councils should immediately cease to apply for young people and should be phased out for workers in general."
    Those are very worrying remarks.

    In the same newspaper on 7 August, the secretary of the Institute of Directors, Mr. Walter Goldsmith—a man who might make Ghengis Khan appear to be a leading wet—said
    "wages councils must be made compatible with the employment subsidy scheme for young workers".
    On 28 August in The Times the labour correspondent was reporting, without contradiction:
    "Ministers do not deny that one purpose of the scheme is to bring down rates of pay for school-leavers."
    To his credit, however, that correspondent also included a comment by Len Murray, the general secretary of the TUC, who said that the scheme's purpose was to
    "encourage employers to undermine union rates of pay."
    As there is no requirement in the scheme that the young people recruited by employers have to be additional to the normal staff complement, or that a new job has been created by the employer, employers will be able to use the subsidy to fill existing jobs. In those circumstances, the scheme is clearly open to abuse by employers by, for example, making older workers and young adult workers aged between 19 and 24 redundant so that they can be substituted by unemployed school leavers taken on under the scheme. The overall net effect could simply be to redistribute existing jobs at the expense of adult workers.

    The TUC feels that there is also the strong prospect of abuse—as has often been the case in the past—by employers sacking a young person, taken on under the scheme, just before he has done a year in employment, so as to avoid the consequences of a claim for unfair dismissal, and then proceeding to take on another young person, and repeating the process indefinitely. There are clearly grounds for concern, and I know that the TUC made known its concern to the Secretary of State less than a week ago.

    The scheme that is before the House is yet another indicator of the Government's monumental economic incompetence. The unemployment crisis has now assumed the status of a national emergency. The Opposition believe that Britain's manufacturing industry has been undermined by the application of monetarist economic theory. Before us now is a nightmarish vision of our young people growing old on the dole. From sheer weight of numbers, the youth opportunities programme is buckling under the strain, and throughout Britain major companies are ceasing to invest in apprenticeships, in training schemes, and in industrial research projects.

    Our education service has been subject to a series of brutal cuts and closures, and the Manpower Services Commission has predicted a truly horrendous scale of youth unemployment—unless special measures are taken—with 550,000 people unemployed by 1983. That is 68 per cent. of young people under the age of 18. The scale of our problems requires a more comprehensive approach than this controversial scheme.

    I remind the House that the debate has to end at 12.6 am.

    11 19 pm

    If Gilbert and Sullivan were alive today a political commentator would conclude that they had been active in the House this evening, because here we have a Conservative Government—committed to cutting bureaucracy, and cutting State spending—introducing a Socialist measure.

    If the result of the last general election had been different and a Labour Government were proposing this measure, Conservatives Members on the Opposition Benches would be bitterly opposing it. A Conservative Government committed to cutting the Civil Service are introducing a new scheme the effect of which, if it does not involve taking on more civil servants, will be that there will be more civil servants who will have to be replaced than there would have been without such a scheme.

    Equally, we have a Conservative Government committed to cutting State spending, introducing a new scheme that they say, with tongue in cheek—they admit that they do not know—will cost an estimated £60 million in the first year. Like all State spending schemes, we can be assured that that is an underestimate.

    We have a Conservative Government who are committed to cutting bureaucracy and to getting the Government off the people's backs but who are introducing a scheme that will involve filling in forms, putting through returns and providing inspectors to ensure that the scheme is not being abused. It is right, when State money is involved, that inspectors should do that, but the proposal comes from a Conservative Government. If we were sitting on the Opposition Benches, we would oppose this measure.

    This Conservative Government said that they would introduce a method whereby the State took less of the gross national product. Three years ago the State was spending about 40 per cent. of gross national product. Today that figure is 44·5 per cent., and rising. This measure will increase State spending once again.

    We are told that the scheme will last for 12 months per employee and that there are ceilings of £40 and £45. However, we can be sure of one thing. At the end of 12 months there will be pressure to raise or index-link those rates and to extend the scheme beyond the 12-month period.

    This is a Gilbertian measure for a Conservative Government to propose. However, let us return to fundamentals. The problem is youth unemployment. However, it is more than that. Unemployment among youths and school leavers is proportionately worse compared with unemployment for other age groups. Why? The reasons have already been mentioned. Youth wage rates have, for several reasons, been raised proportionately faster and higher in percentage terms than have the wage rates of adults.

    The problem is that apprenticeship schemes that used to continue until the age of 24 terminate at the age of 18. There are only three stages on wage rates, from 15 to 18. The same is true of wages councils. The full adult rate is reached at the age of 19. As a result, youths have been priced out of jobs. It is no good denying that.

    In my constituency, Star Aluminium in Bridgnorth used to run an apprenticeship scheme with 18 youths. It has closed that scheme. It says that it cannot afford to train apprentices in addition to the wage rates that it is forced to pay.

    In other words, the trade unions have priced those youths out of a job.

    It is not rubbish. As has been said, many apprenticeships have been stopped because of the cost.

    They have been closed, not because of the Government, but because of the cost of the schemes.

    I come from Merseyside, and many youths who leave school at the age of 15 would jump at the opportunity of a job at £30 a week. However, it is illegal for an employer to take on a school leaver at that wage. It is below the wages council rate. Youths would willingly leave school and accept £30 per week, free of tax and the opportunity thereby provided, but wages councils are pricing them out of jobs. The solution is not to subsidise or introduce more bureaucracy, but to allow those youths to work. We should not think that we can solve the problem by throwing money at it.

    When it comes to adult unemployment, a Conservative Government say that they cannot solve the problem by increasing the public sector borrowing requirement or by throwing money at it. They say that the problem must be solved by providing real jobs at competitive wage rates. However, that same Government openly state that they can solve the problem of youth unemployment by subsidy and by throwing money at it. That is an anachronism and it is Gilbertian. I ask the Government to think again.

    11.25 pm

    The unemployment situation facing young people is the grimmest ever. The blackness of the situation was clearly seen in September, a month which in earlier years has shown a big drop in the number of school leavers unemployed. That has not been the case this year, when a very small drop occurred.

    The number of vacancies notified to careers officers in September was only 5,200, which was one-sixth of those notified in September 1979. Those 5,200 vacancies were chased by 265,000 unemployed school leavers and about 350,000 others under the age of 20. That means over 600,000 wanting work and only 5,200 vacancies notified. That is the crisis created by the Government.

    No wonder that the youngsters and the careers officers—who work so hard and conscientiously in the front line—are in despair. Of course, there are other vacancies in jobcentres or elsewhere. Of course, the Government's mean-minded decision to stop youngsters having financial assistance before September has affected the figures. On the other hand, the general unemployment rate would be higher if it were not for the special measures, including the increase in the youth opportunities programme. Were it not for those special measures, there would be another 345,000 people unemployed.

    I welcome the increase in the youth opportunities programme. I support YOP strongly, and that is one reason why I oppose the new scheme. It will hinder the development of the youth opportunities programme. Already YOP is in difficulty, and it is clear that Government guarantees will not be met. The new scheme will waste money and foster local trade union opposition. The youth opportunites programme—a scheme put forward by the TUC in 1976—has always had to be sold to unions at local level. It is becoming more difficult to do so.

    Why is that? First, the Government have pegged the allowance at £23·50. It increasingly is seen as a cheap labour scheme. The allowance should be raised to £30. If the Minister will not listen to any other argument, the word "incentive" should move him.

    Secondly, it is believed that in too many places youngsters are being used in a productive capacity. I say "believed", because the truth is hard to find. We must reassure adult workers that the original aim of YOP will be implemented to move youngsters from one job to another, giving them experience and training and not using them as cheap labour.

    Thirdly, unions are increasingly worried that YOP is coming to be seen as an alternative to regular apprentice arrangements. It must not be used to replace apprenticeships or to undermine existing arrangements. We need an expansion in apprenticeships, an improvement in quality and a development of the youth opportunities programme. Despite the massive collapse in apprentice recruitment, the Government are helping many thousand fewer apprentices than did the Labour Government. That in my view is shameful.

    Fourthly, the number of youngsters being placed in regular employment from schemes has slumped from over 70 per cent. to an estimated 30 per cent. now.

    How should we tackle the problem of lack of jobs? First, of course, we must change the economic policy of the Government. The simple proposal is to get rid of the Treasury Bench and introduce alternative policies. I shall leave those arguments to others.

    I agree with the Institute of Careers Officers that we need a youth employment subsidy scheme but not the one that the Minister is introducing tonight. It should not be linked to maximum pay. My view, which might be unpopular on the Opposition Benches, is that changes in pay relativities since 1945 have adversely affected the employment prospects of some manual unskilled young workers, but not those on rates on a below wages council level.

    That, also, was the view of a Minister of State in the Department, at the time the scheme was devised. The Earl of Gowrie, speaking in the other place in March, said:
    "I do not think that, particularly where the young are concerned, there are some job opportunity losses as a result of any statutory minimum."—[Official Report, House of Lords, 31 March 1981; Vol. 419 c. 112.]
    The previous Minister of State was speaking of wages councils. He clearly does not believe that wages council minimum rates have led to the loss of jobs for the young.

    What has happened in the Department since? Professor Walters' ideological subsidy, which I cannot believe the right hon. Member for Lowestoft (Mr. Prior) wanted when he was the Secretary of State, is the wrong way to tackle the problem. The problem that will face the wages councils industries has already been highlighted. It is to be regretted that payment will be made to employers who do not need the inducement. The Labour Government made that mistake with the recruitment subsidy for school leavers. They paid employers to recruit bright youngsters with a stack of qualifications. The scheme was unnecessary, and we were told that unreservedly by employers.

    We rectified that mistake when we replaced the scheme with the youth employment subsidy, which helped only the long-term unemployed, those who were least likely to get work. That is the sort of subsidy that we now want—one that applies only to the long-term unemployed among our young people.

    We wound up the youth employment subsidy when we introduced the youth opportunities programme, but before we left office I asked that we reconsider that decision. The youth employment subsidy, linked to a period on YOP and to a period of unemployment, is the sort of subsidy that we should be paying employers, a subsidy that will help those youngsters who have not a cat-in-hell's chance of getting work. Those are the young people that we should be helping under this scheme.

    Professor Walters' subsidy will waste money. How cost-effective did civil servants tell Ministers the scheme would be? What figures did they present to Ministers on that score? In addition to wasting money, it will increase the prejudice and discrimination against youngsters from adults who, rightly, do not like to see anyone under-cutting the rate for the job. I was dismayed during my time at the Department of Employment to discover how much discrimination existed against the employment of the young on the shop floor, except as apprentices. There were so many barriers to the employment of the young unskilled. Employers did not notify vacancies for the unskilled to careers offices. Increased shift working in some industries squeezed youngsters out because of the law.

    The most significant factor, however, was and still is the system of wage payments. Bonus systems so often depend upon a whole group being fully effective from the start. That is why we see so few young people working on the shop floor in so many firms. Workers demand that no one under the age of 20 or so is recruited. The workers talk of discipline, of regular attendance, and of safety. But those who exclude the youngsters from operative positions are really thinking only of their own pay packets.

    Now the Government are compounding their folly of pegging the YOP allowance by introducing what they brag of as a cheap labour scheme. It will make more difficult the job of those of us who support special measures to help the young. It will make it more difficult for us to persuade adults to remove prejudice against the employment of the young.

    I hope that the Government will abandon this scheme as quickly as they decently can. There are better ways of spending £60 million to help the young unemployed.

    11.35 pm

    My right hon. Friend the Minister of State expressed concern about the high level of unemployment among school leavers. As I said in the House less than a week ago, being 16, 17 or 18 years of age is a confusing time in the best of conditions. At that age young people are coming to terms with themselves; they are uncertain about their role in society and their relations with other people. To reach that stage and have nothing worth while to do must be miserable and dispiriting.

    Is my right hon. Friend's definition right? Should his concern be about unemployment among school leavers or about the lack of anything positive or worth while for school leavers to do?

    We have come to believe that young people, at the age of 16, if they are not going on to higher education, should go straight into employment. But in a way the rest of the world has left us behind. In many countries—Germany, in particular—there are many more schemes, other than employment, for young people to go into when they leave school.

    Many of the young unemployed have older brothers and sisters who went straight from school into work and achieved relatively high earnings. That is attractive to them. Now is the time for us to think afresh. We hope that the economy will improve and that facilities will be available for those who want employment. We hope that plans will develop to satisfy those who want industrial training, vocational training and apprenticeships. We also hope that the right programmes will be available for those who want to go on to further and higher education. But there are those who do not want to continue their education, who do not know what training they want, who do not know what sort of employment they want, and for whom perhaps no employment is available. We must devise still further schemes to satisfy their needs.

    The scheme outlined by my right hon. Friend can be looked at in two ways. First, there will be a tendency to price young people into work which, from the point of view of young people who want jobs, is wholly beneficial. It may go even further. It may encourage some employers to set up special activities that will employ large numbers of young people who, by pricing themselves into jobs, will allow employers to run operations that otherwise would not be commercial or profitable. To that extent, more jobs could and should be created.

    On the other hand, some of those jobs will probably be taken by young people at the expense of mature workers. It is desperately important to find worthwhile things for the young to do, but it is equally important, if not more important, to find something worthwhile and remunerative for the mature worker to do. He has not only himself dependent on his well-being and employment; he probably has a wife and young family to support.

    The extent to which the young, with their reduced wage levels, will take jobs from mature workers will increase the cost to the Government. The supplementary benefit unemployment pay of a 40-year-old may be £40 or £50 per week more than that of a young worker. If my right hon. Friend says that the take-up could be 100,000, I accept that there will not be anything like the level of substitution of 100,000. But were it 100,0(10, at £40 per week net difference, that would be another £250 million on top of the £60 million. As I said, I accept that that is not the figure, but I should be interested to hear my right hon. Friend's views on the matter.

    Finally, the Government, rightly, are pursuing vigorously their ideas for a new training initiative. Hon. Members on both sides of the House are concerned that the new range of opportunities should be as wide-ranging as possible. Suggestions have been made about various schemes of national community service, national service and voluntary community service of one sort or another. I implore my hon. Friend, as he pursues and revises his programme, excellent though it may be, to leave the door open for the development of a sensible and sensitive community service, which I think many right hon. and hon. Members would support.

    11.40 pm

    About three years ago I had the pleasure and privilege of visiting Japan. Wherever I went, in factories and in offices, I saw only young employees. I did not see anyone from the older generation. I asked why and was told, with a smile and sensibly, "We have to look at our seed corn. We are trying to get the older generation to retire, if possible with a golden handshake, so that every one of our youngsters is fixed up with a job."

    I am therefore delighted that the Government, despite all the criticisms, are making a positive attempt to improve the prospects for young people.

    I was pleased when the Prime Minister announced on 27 July 1981 that the Government proposed to set up a new scheme to provide encouragement to employers to employ young people at realistic wage levels. Having listened to tonight's debate, I put a question mark after the word "realistic", because there is a difference of opinion about realistic wage levels. However, the new scheme will start on 4 January 1982 and be set up under power granted in section 1 of the Employment Subsidies Act 1978.

    Support will be made available to employers in respect of young people under 18 whose gross earnings are below £45 a week and who are in their first year of employment. I note that all employers in Great Britain except—and I stress this—those in the public services or domestic households may apply under the scheme for payment of £15 a week for each employee earning under £40 a week and £7.50 a week for each eligible employee earning over £40 but under £45 a week. I am led to believe that the maximum period of payment for one individual will be one year and that it is assumed that the operating cost will be about £60 million in 1983.

    I am pleased that it is proposed to assist employers to retain persons in employment who would otherwise become unemployed or to take on new employees and generally to maintain or enlarge their labour force. However, I ask the Minister to examine the proposals, which excludes local authorities from receiving the financial assistance which would enable them to pay extra wages to low-paid youths on youth opportunities programmes sponsored by them.

    I have in mind the wonderful work done by the go-ahead Rochdale borough council, which, through its borough engineering and planning depths, has sponsored many youth opportunity schemes, which provide skills and jobs for the youth of the area and improve the environment, to the delight and joy of all who live there.

    In the last two weeks I have visited one of the work schemes involving the restoration of the Rochdale canal. The scheme employs 28 youth opportunity trainees, working along the canal with 32 others aged 19 and over who were taken on under the community enterprise programme. Under the YOP, the 16-year-olds working on the scheme are paid the princely sum of £23·50 a week—and we heard earlier that the Government are thinking of reducing that wage. Admittedly they are learning skills in making and repairing stone walls, repairing and restoring wooden lock gates, repairing and replacing towpaths, and all under expert tuition. I have seen the work at first hand and I know that they are doing a marvellous job.

    Nevertheless, if one considers the unemployment benefit that they would receive for doing nothing and idling away their time—and perhaps getting into difficulties with the police—they are effectively doing hard physical labour in dreadful weather for 40 hours a week for the princely sum of £10 a week extra.

    That applies to a lot of family men on full wages, if they are on relatively low wages. It is a common problem throughout the economy.

    I challenge the hon. Member, who earns a princely sum as an hon. Member, to work with those youngsters on the Rochdale towpath for £10 a week. It is little more than slave labour dressed up as a youth opportunities programme. Those youngsters are doing a marvellous job for the community, and the community must recognise that fact.

    If young people are not trained in skills, there will be no future for Britain. As the Japanese say, we must look to the seed corn. If we compare the wages of apprentices doing similar jobs in the private sector, we find that they earn about £44 a week. I should like the Minister to look at the differentials.

    One of the CEP workers, Stephen Jackson of Furness Road, Middleton, who is a cabinet maker by trade, said that before being made redundant he earned £107 a week. Now he earns £44 a week, doing heavy work in dreadful weather.

    Work on the canal is in its fourth year, and Mr. John Brinton, the assistant borough engineer, is pleased with what the youngsters are achieving, but he said:
    "They are worth a lot more than £23·50 a week."
    I echo those sentiments, as did Councillor O'Brien, who accompanied me on the trip. He said that the scheme was enabling youngsters to get jobs in the private sector later, because they got good work experience in skills connected with walling, concrete and macadam work.

    When I visited the site on a wet afternoon, I noted that there were no toilet or washing facilities for the youngsters. How many hon. Members would work under those conditions for £23·50 a week? Some of the youngsters felt bitter that other YOP schemes involved working in much more pleasant surroundings—some schemes cover decorating old people's homes—yet there was no difference in the allowances.

    Accordingly, because of what I have seen on the Rochdale scheme, I ask the Minister to review the decision not to assist local authorities with extra financial aid. Youngsters working on YOP schemes organised by local authorities have not had a rise in pay for more than two years.

    I call on the Minister to end the exploitation of YOP trainees as cheap sources of labour and to bring in a scheme of nationally integrated training and apprenticeship linked to permanent jobs.

    11.50 pm

    It is well known that the scheme is a professor's device. No doubt a professor will offer to undertake a research project for the Government next year to monitor the success of the scheme over 12 months. I am doubtful whether the scheme will generate the new job opportunities that are required for young people. It is more likely to help pay employers for existing jobs, create more tension in the work place and increase the sense of friction between younger and older workers.

    If wage levels are regarded by the Government as being too high they should remember that wages are only one element in the cost to an employer of engaging a young person. There is also the employers' national insurance and the cost of training. If the Government addressed themselves more to the uplifting of the employers' national insurance contribution for the 16 to 18-year-olds and took over more of the funding of the training courses presently borne by employers for that age group, it would be more helpful and more constructive in the employment of young people.

    I do not think that the scheme in itself will overcome the disinclination of employers to recruit young people. It seems that it is designed—I am always willing to applaud constructive schemes—to ease the Government's battered conscience over the high level of youth unemployment. Moreover, the scheme will shake the very fabric of free collective bargaining between employers and trade unions. It will have implications for adult workers. As the hon. Member for Ludlow (Mr. Cockeram) said, it will involve its fair share of paper work and extra civil servants.

    I sounded out half a dozen employers in my constituency. I asked them how many youngsters they recruited last year and how many they had taken on this year. I outlined the proposed scheme and asked whether it would encourage them to take on additional young people. With one exception they said that it would make no difference to them. Sadly they had all recruited fewer young people this year than they were able to take on last year. One employer replied "We are not the sort of company that would prefer to take on young people as cheap labour". Two engineering companies said that the rate for a 16-year-old was £46·55, and so the scheme was of no real relevance to them. However, they all said that it would be of enormous assistance if the Government were to give way on the question of the employers' national insurance surcharge. They claimed that that would assist them to meet training costs. They observed that the Government would do better to introduce meaningful proposals for a much long-awaited new training initiative. I have a feeling that it will be like "Waiting for Godot" and that we shall not appreciate what is coming when the great announcement is made before Christmas.

    In the longer term if we are to benefit young people, assist employers and, moreover, assist the community generally, the Government must introduce a scheme that is more positive and rather less arbitrary.

    11.54 pm

    I congratulate my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) on covering the subject matter so briefly. I also congratulate him on initiating a debate on 21 October on the youth opportunities scheme. That debate covered the whole issue of unemployment, particularly youth unemployment.

    The figures, facts and details given by my hon. Friend just now and in that debate on that issue cover the whole problem. About 300,000 young people are having to cope with the difficulties of unemployment. The only solution that the Government have come up with is a scheme that I believe will give unscrupulous employers the opportunity to employ people at under £40 a week. Unless they employ them at under £40 a week they will lose the subsidy of £15 that the Government are offering. How many employers will take on young people and pay them £41 and have £7.50 when they could induce young people to start work and pay them appreciably less than £40 a week?

    The Minister suggested that £40 was a substantial figure. How many young people would earn £40 and say that that was a reasonable wage to live on? The Opposition are complaining that the £23·50 paid for YOP participants is insufficient for young people to live on.

    In item 2 of the document, in the penultimate sentence, the Secretary of State said:
    "I have consulted the CBI and TUC, thus meeting the requirement in Section 1(3) to consult such organisations as are considered appropriate."
    What were the reactions of those organisations? Were they in full agreement? Did they offer any alternatives? Are they satisfied that the measures will help to alleviate youth unemployment? Were they convinced that the scheme will provide encouragement to employers to employ more young people at realistic wage levels?

    In conclusion, I should like to mention unemployment in Wales and the desperate youth unemployment problem, although 17,000 young people are on the MSC schemes. Unemployment has escalated by nearly 100 per cent. since the Government cook office. About 100 men and women join the dole queue daily. The CBI predicted that the figure of 170,000 will reach over 200,000 before the end of the year.

    Why does unemployment in Norway and Sweden stand at 1 or 2 per cent., while in Wales there is 20 per cent. unemployment? n Mid-Glamorgan there are 56 persons out of work for every vacancy. What hope is there for our young, our children and our children's children?

    We must find a solution. I call on the Government immediately to abandon their economic measures and to introduce real and positive solutions to the problems, or resign. Let us save that calculated waste of a generation.

    11.58 pm

    Now that the hon. Member for Northampton, North (Mr. Marlow) has resumed his place, I shall draw some of his remarks to the Minister's attention, because I would not want the hon. Gentleman to go away unanswered.

    Will the Minister accept that it is dangerous for us to consider some of the measures that the hon. Gentleman put to him earlier on the basis that we should be diverting his Department's attention from solving what my hon. Friend the Member for Flint, East (Mr. Jones) rightly described as a national emergency, to hare-brained, loosely thought-out schemes about national resource something or other?—I do nor know what the hon. Gentleman was trying to convey to us. In an attempt to give young people something to do. the Department would be involved in community work, national service and other schemes that are not its prerogative.

    Young people want to work. They want a job. They do not want schemes such as those suggested by the hon. Member for Northampton, North. They want to go into society, involve themselves in meaningful work and take home a fair wage for the job that they do.

    In many households in my constituency the only earned income comes from a young worker. When we talk about the demands on society for young people to have jobs, we should remember that fact. Young people must be given every opportunity to take meaningful work for which they get a salary.

    12.1 am

    I shall follow the precedent of the hon. Member for Newcastle-under-Lyme (Mr. Golding) when he was in Government and promise to write to hon. Members about the points that I cannot cover because of a lack of time.

    I repudiate the sweeping accusations against the Government of insensitive and misleading economic dogma. I reiterate two general points of background to the scheme. First, I beg hon. Members to bear in mind that the purpose of the scheme is to create new jobs for young people. Our systematic and deliberate estimate of the number of employers who will draw the benefit for young workers is between 50,000 and 100,000 in the first few months of the scheme. That is a positive contribution to job creation.

    Secondly, there is no doubt that the differential between wages for adults and young people in Britain is dramatically out of line, certainly with other EEC countries. For instance, the rate for 17-year-old workers covered by the wages council order in the laundry industry is 90 per cent. of that for adult workers. With such a narrow differential there is no hope that youngsters who lack experience will be taken on. We aim to widen the differential and to create new jobs for youngsters. I believe that we shall succeed.

    The hon. Member for Flint, East asked about the new training initiative. My right hon. Friend the Prime Minister has said that my right hon. Friend the Secretary of State will shortly make a statement on the new training initiative. That will be about the turn of the year. The hon. Gentleman also touched on the increase in the YOP allowance. Again, an announcement is imminent. About 14,000 young people are joining the scheme each week, so the present level is hardly a disincentive. I willingly concede that some wages councils pay more than the £45 upper limit.

    I hope that I made the position of the wages council orders clear. Nothing in the scheme releases employers from their obligations under the orders.

    The hon. Gentleman mentioned abuses of the scheme, such as the substition of younger workers and sacking older workers. It will not be as easy for an employer to abuse the scheme as he makes out. He could not dismiss an older worker as redundant if he attempted to recruit a younger one to take his place. Older workers therefore have, I think, the protection of the Employment Protection Act against unfair dismissal, but we shall certainly keep a very close eye on this from the point of view of potential abuse.

    My hon. Friend the Member for Ludlow (Mr. Cockeram) criticised the scheme because of the potential increase in the number of civil servants. I remind him that the number of civil servants has increased quite rapidly as a result of unemployment. The unemployment benefit service, for example, has had to recruit a large number of extra civil servants to deal with unemployment. We hope that by increasing the number of job opportunities for youngsters we shall, on balance, be able to make a saving in civil servants.

    My hon. Friend will bear in mind that in schemes to assist small businesses, for example, it is perfectly reasonable—indeed, Conservatives would expect this—that the Government should be prepared to introduce some further administration and to lay out taxpayers' money to encourage small businesses to start up. If the scheme is productive, therefore, it is worth doing in terms of extra resources and extra civil servants. We believe that the scheme will be productive. I very much agree with my hon. Friend's analysis of the increasingly narrow differential between young and older workers.

    The hon. Member for Newcastle-under-Lyme criticised the scheme because of what he regarded as the sinister and unsatisfactory interaction with the existing YOP scheme——

    It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business).

    Question agreed to.


    That this House authorises the Secretary of State to set up, in accordance with section 1(1) of the Employment Subsidies Act 1978, a scheme (the expected cost of which will be more than £10 million between 1 April 1982 and 31 March 1983) for making payments to employers of young people whose earnings are below a specified limit.

    M66 Motorway

    Motion made and Question proposed, That this House do now adjourn.— [Mr. Cope.]

    12.6 am

    I wish to express, not for the first time, my disquiet and that of many of my colleagues and thousands of my constituents at the Government's continued determination to press ahead as a priority with the construction of the M66. That determination is being displayed at a time when there is great and passionate opposition to the scheme from huge numbers of the public and, almost incredibly, at a time when the Government are seeking to cut public expenditure by a further staggering £5 billion.

    If the Government make those cuts in items of public welfare, which in my view constitute a far greater and more real public need, and at the same time proceed with the M66 motorway at a cost to the taxpayer, at today's prices, of probably more than £120 million, it will be an extraordinary perversion of public priorities for which I believe the Government will pay a heavy price in South-East Lancashire in the next general election.

    I wish to deal with both strategic and technical aspects of the M66 proposal. The fundamental issue is the need for the motorway in the first place. Several questions arise here.

    Is the motorway justified as a component of the new North-South trunk route from Burnley to Crewe, as recommended in the strategic plan for the North-West? If so, is the whole route being evaluated? Or is it to achieve the structure plan for land use and socio-economic objectives of reversing decentralisation, and so on? If so, why are the traffic forecasts based on the assumption that these trends are inevitable, or even desirable? Or is it, rather more simply—I suspect that this is the real reason—to solve local traffic problems, or to cope with the traffic growth that is expected? If so, what alternatives to the massive disruption that a motorway would involve have been or are being considered? Surely specific expected problems of congestion should be pinpointed rather than aggregate statistics for overall traffic growth being postulated. The specific problems should then be examined within a framework of detailed comprehensive transport planning which goes much wider than merely expected road use.

    No doubt the Government's basic justification for the scheme, as shown in the 1980 White Paper on policy for roads, is the overriding need in the North-West to help the region's industrial and economic regeneration by improving communications both with the rest of the country and within the region with heavy industrial traffic also being removed from unsuitable urban roads. If that is the rationale—I do not think I have been unfair in stating it that way—trunk road schemes should be compared in costs, as well as benefits, with other and rather surer ways of achieving these aims, such as building industrial estates, modernising old industrial buildings, implementing different traffic measures and improving public transport.

    It is difficult to see how industry in the area would benefit from the construction of new motorways except to the relatively small extent of minor savings in journey times. The environment can hardly be improved by motorways constructed in river valleys——

    Will my hon. Friend accept that in the Daisy Nook area of Failsworth, in my constituency, the building of a motorway in a sole remaining area of beauty to which people in north Manchester have access will mar and ravage the countryside?

    Myright hon. Friend makes the point exactly about the effect of motorways in green belt areas provided by river valleys. The area to which he refers adjoins my constituency.

    The effect of the role of road construction units is, in my view, to ensure, juggernaut-like, that priority is given to investment in new trunk roads at the expense of more cost-effective expenditure on local transport. One cannot help thinking that if the budget earmarked for trunk roads was made over to county councils they would make better use of it, considering all the options to improve the local economy and environment.

    Without a vested interest in trunk road construction the regional offices of the Department of Transport and the Department of the Environment, when vetting structure plans, transport policies and programmes, would be able impartially to ensure that all the options were examined, so that a more genuine cost-benefit calculus could be created than under the present arrangements. More particularly, the Government have sought to justify the M66 in terms of forecasts of traffic growth. However, in his letter to me of 11 November—I thank the hon. and learned Gentleman for his voluminous correspondence and detailed answers to my many letters—the Minister stated:
    "We are still revising the detailed traffic forecasts which we released at the time of public consultation."
    If the rationale depends on traffic growth, yet the detailed forecasts are still subject to revision, I do not see how there can be such dogmatism that the motorway is justified. To be fair, the Minister added:
    "We shall continue to require to be satisfied that the motorway is needed."
    I should like an assurance from the Minister that his Department really has an open mind on this issue. I understand that the first step towards a public inquiry, which will probably not be held before 1984—the Minister will correct me if I am wrong—will be the publication of detailed proposals under the Highways Act, probably in 1983.

    I am grateful that there is a promise to make the updated forecasts available to hon. Members and all interested parties before a public inquiry. Previously, the procedure has been to announce the decision, to hold a public inquiry and then, and only then, to provide objectors, on request, with a copy of the Department's explanation and justification of the scheme. I should nevertheless like an assurance that the forecasts will be made available for comment before the Minister decides to hold a public inquiry, so that there is ample time for the county and district councils to consider them and to draw up their plans in the light of the most up-to-date evidence.

    Given that this is the desirable procedure, I have to ask why it was not followed in the past. Why, for example, were the draft orders for the M63–M66 Portwood-Denton scheme published on the basis of outdated traffic forecasts and before an economic evaluation had been carried out? Presumably the Government do not expect even informed members of the public to draw their attention to defects of methodology or choice of assumptions, or matters of that kind. It gives the impression that the Government intend to go ahead whatever the cost and benefit.

    I should also like to know why no before-and-after studies, as recommended by the Leitch committee, have been carried out in the Greater Manchester area to test traffic forecasting methods before appoving the use of discredited methods.

    What discredited methods does the hon. Gentleman say we have approved the use of?

    Those which underlay the forecasts for these schemes.

    In reality, the M63–M66 schemes will cost far beyond £100 million at today's prices, and it seems essential to check the accuracy of the forecasting method before accepting its continued use. I know from letters from the hon. and learned Gentleman that the Greater Manchester transportation model is being used to produce the forecasts, and the information given me by the Greater Manchester transport action group, which has been a very effective representer of the public's views in this matter, suggests that although the model is reasonably accurate in predicting overall traffic growth it is highly inaccurate in forecasting growth on specific routes. That is why I am far from satisfied about the status and quality of the current forecasts. I hope that the hon. and learned Gentleman will be able to say more to satisfy us.

    The memorandum on national road traffic forecasts says, in para 4, that the Government should give firmer guidance about the application of the forecasts, given the uncertainty about traffic growth and the factors affecting its growth. It stresses that as a rule the assessment of each scheme should proceed on the basis of higher and lower forecasts as well as, in some cases, forecasts of intermediate value. Instead, the Department of Transport has produced high and extremely high forecasts and called them "low" and "high" forecasts. I also think that the Minister could profitably seek the advice of his own standing committee on the revised national forecast for car ownership and use.

    I make a final point about the purchase of blighted properties. I know that it worries many of my constituents. I understand that owner-occupiers of houses needed for a new road can sometimes, if certain conditions are satisfied, oblige the Department to buy in advance by securing a blight notice. I am told that this applies when a proposed road is shown on a town map or when a preferred route has been chosen after public consultation. In addition, the Minister has said that in cases of personal hardship the Department can sometimes agree to buy houses that may be needed for a route under investigation.

    On the Denton-to-Middleton section about 180 houses have been bought under these provisions, but I am still concerned about the fact that these arrangements are not yet well understood amongst the affected public, and I should therefore be pleased if the Minister could undertake to ensure that they are very much better and more systematically publicised in the local media throughout the area.

    I want again to thank the Minister personally for his very detailed explanations and answers to my many letters. Having said that, I must tell him that the fight against what I and many of my constituents regard as an unnecessary and extremely expensive folly will be a bitter and determined one, which in the end, I believe we shall win.

    12.19 am