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Lords Chamber

Volume 413: debated on Thursday 16 October 1980

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House Of Lords

Thursday, 16th October, 1980.

The House met at three of the clock: The LORD CHANCELLOR On the Woolsack.

Prayers—Read by the Lord Bishop of Salisbury.

Coach Service To Heathrow

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether it is correct that consideration of any alternative coach service between Heathrow and Central London was not possible in the past because of the refusal by London Transport to allow any such licence to be granted; and, if so, what steps have been taken by the Department of Trade, British Airways and London Transport to safeguard the consumer interest.

My Lords, various proposals have been put forward in the past for alternative coach services between Heathrow and Central London, and London Transport have had to consider each case. The Transport Act 1980 now provides prospective operators of any London bus service with the right of appeal to the Minister of Transport against a refusal by London Transport to agree to the operation of the service. The Department of Trade encouraged British Airways to ensure that there would be continuity of a coach service between Victoria and Heathrow following their withdrawal from the route on 14th November.

My Lords, I did not want to go into the past but is the Minister aware that on 4th August (at col. 1260 of Hansard) his noble friend Lord Mowbray and Stourton assured me:

"…whereas up until now London Transport has stopped them,"
"them" being the people who made applications to run these services. We were all rather shocked to hear that and I think it should be on the record. May I move on from that to Tuesday's Question? The noble Lord may recall that he omitted to answer one of my questions. Could he assure me that on the new bus service to start on 15th November there will be assistance for people to put their luggage on the buses?

My Lords, that would be a question of crewing the bus concerned and that would be a matter for London Transport.

My Lords, does the noble Lord consider it right that any public service that has a monopoly over its service should have the legal right, in the light of consumer interest, to forbid other services to encroach upon it?

Yes, my Lords, that was a shortcoming of the previous arrangements. Happily, the Transport Act 1980 has now provided for an appeal to the Minister.

My Lords, if we are all going to have to use the Underground or are more or less forced to do so, would the noble Lord look again to see whether some express trains could be provided instead of one that stops at every station between the East End and Heathrow?

My Lords, the noble Lord is not compelled to use the Underground service if he does not want it. As I said on Tuesday, when I answered the noble Baroness, two new bus services are shortly to start which may suit the noble Lord better.

My Lords, would the noble Lord answer my question about express trains on the Underground?

My Lords, would it not also be a matter of a miracle to get an express train through an underground tube?

My Lords, I did not hear every word that my noble friend said; but it sounded to be another matter for London Transport.

Gibraltar: Spanish Restrictions

3.10 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether the Spanish Government has yet implemented the undertaking given by the Spanish Foreign Minister in London on 10th April to re-open the Spanish border with Gibraltar and to withdraw interference with the operation of aircraft into Gibraltar Airport.

My Lords, I regret that the Lisbon agreement has not yet been implemented. The matter was raised when my noble friend the Foreign Secretary met the new Spanish Foreign Minister in New York on 25th September; he reaffirmed his commitment to early implementation of the agreement.

My Lords, may I thank my noble friend for that reply? Will he say whether Her Majesty's Government are not deeply disappointed at this delay? Also, is he able to give any indication as to when in particular the restriction on air navigation is going to be removed?

My Lords, I can confirm that we are very disappointed that the Spaniards have not been able to move more quickly in this matter. We were certainly ready to implement our side of the arrangements by 1st June and we had indeed originally hoped that the Spaniards would also be in that position. However, it is fair to say that the Spanish Foreign Minister has only very recently taken up his post—some four weeks ago—and we hope that he will be able to make further progress in this matter very soon.

My Lords, while very much welcoming what the Minister has said, and also looking forward to Spain joining the European Economic Community, may I take it that the new Foreign Minister is in no doubt in his mind that the Spanish conduct—especially over aircraft and the border restrictions—is wholly at variance with that expected from any member of the European Economic Community, and these things must be cleared up long before that hoped-for event comes about?

My Lords, I have no doubt that this matter will be resolved long before Spanish accession to the European Community.

International Development Strategy

3.12 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Queston was as follows:

To ask Her Majesty's Government what policy they adopted at the recent special session of the United Nations on development issues.

My Lords, we made a constructive contribution to the formulation of an international development strategy for the 1980s. We worked for agreement on an agenda and procedures for the global negotiations on economic co-operation for development. We regret that agreement did not prove possible. However, we will continue to work during the current General Assembly for the successful launch of the global negotiations on a generally acceptable basis.

My Lords, would the Minister agree with the President of the World Bank, Mr. McNamara, when he says that a major re-examination of the function of the Bretton Woods institutions is essential? Secondly, is it the case that the British Government, the United States Government and the West German Government blocked this re-examination at the special session despite the fact that the other seven members of the EEC and Japan all supported the compromise resolution which was produced before the end of that conference?

My Lords, I am not sure that that is an entirely accurate representation of what occurred. What actually happened was that the other European members felt, although they had the same reservations in principle as we had, that the resolutions met the point. We felt that they did not. As for the views of Mr. McNamara, one of the other things he was suggesting was that our aid programme was not growing at the rate he would wish. For that purpose he considered our contribution in 1985 to be inadequate. We find this a bit puzzling, because we have certainly not decided, much less announced, our programme for that year.

My Lords, is the Minister aware how much ill feeling is being engendered about the attitude of the British Government at this special assembly? Is he also aware that the new economic order, with or without capital letters, is no longer a matter of rhetoric, but of burning necessity? What are the Government proposing to do about it?

The new economic order, my Lords, is one of those things which has been talked about for a very long time, as the noble Lord knows; but the fact remains that if we are to adhere to these very fine sentiments—and they are indeed that—we have first to find the money to do it with.

My Lords, may I ask the Minister, despite what he said, whether he would not agree that a deep deadlock still remains between the richer and the poorer nations? Will Her Majesty's Government give authoritative and consultative consideration before the Summit conference to finding some means of ending this deadlock, which would not only end the hunger of millions in the world, but would help unemployment in this country by increasing the demand for goods?

My Lords, that last assertion, if I may say so, is unproven. It is not necessarily the case that increased aid to Third World countries would improve the industrial situation here at home. For example, the Third World countries might choose to purchase their goods elsewhere. I would say again, however, that the solution to these grave problems does not lie in beggaring ourselves.

My Lords, I am really disappointed by the reply of the Government. After all, this is really one of the great burning issues in the world. I am not just thinking of the Brandt plan; the United Nations also is concerned about this, and I hope that the noble Lord will be a bit more sympathetic than he has shown himself today.

My Lords, I am sorry if the noble Lord thinks that I am unsympathetic over these matters, because that is not the case; but we must look at them realistically.

My Lords, the Minister referred to aid, but aid is not the means of solving this problem. Is not the means of solving this problem a new economic order which would correct the balance on behalf of the great industrial powers against the Third World?

My Lords, is it a question of solving it on our own, or of taking an initiative—which the United Kingdom, with its proud history, ought to take, as a previous very substantial colonial power? Is it not a fact that what the Minister has been saying this afternoon is really rendering all the investigations of the Brandt Commission and all the advocacy of his own right honourable friend Mr. Edward Heath completely nugatory?

I think not, my Lords. The Brandt Commission report, which was a very lengthy and comprehensive document, as the noble Lord will know, and one which your Lordships have discussed at length on at least two occasions, had a number of very good things in it which we are pursuing.

Can we understand, my Lords, that the Brandt Report will be high on the agenda for consideration at the next meeting of the Select Committee on Foreign Affairs of the House of Commons?

My Lords, I believe that Committee is already considering the Brandt Report.

My Lords, the Minister really cannot get away with this. He knows perfectly well that when—

Is the Minister aware that when Mr. McNamara was speaking in critical terms of our aid programme he was talking about the 14 per cent. reduction that this Government have brought in?—and whether it is 1985 or 1983 makes no difference at all to that issue. Could I ask him: does he agree and do the Government agree that in the present chaos of the world economic situation the use of the IMF's conditions for the developing countries is quite inappropriate and is not only hindering their development but, as my noble friend Lord Brockway has pointed out, is also hindering the recovery of this country by denying them purchasing power which they could use to buy our goods, particularly when 75 per cent. of our aid is tied to British goods?

No, my Lords. I would not agree to that. The fact is that the IMF have recently loosened their arrangements and now, for example, allow drawings up to 600 per cent. of annual quotas.

Postage Rates For Christmas Cards

3.20 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they will state the reasons advanced by the Post Office unions for turning down the "cheap stamps for early posting of Christmas cards" scheme.

My Lords, this is a matter for the Post Office and the Union of Communications Workers, but I understand that the UCW did not feel that it was adequately consulted when the proposal was put forward in 1978.

My Lords, is the Minister aware that that Answer is almost as unsatisfactory as his Answer of last week? Would he not agree that this proposal combines both service to the public and the efficiency of operation of the Post Office, and that, therefore, the Government should have an attitude towards the kind of lack of co-operation which we see in this case in the Post Office union?

My Lords, I am sorry that the noble Lord feels that it is unsatisfactory, but it is nevertheless true. So far as service and the efficiency of the Post Office are concerned, those are entirely matters for the management of the Post Office itself.

My Lords, is it known whether, when the unions poured cold water on this scheme, they were bearing in mind that a very large number of Christmas cards are sold on behalf of charities who rely upon Christmas cards for a very considerable proportion of their income?

My Lords, I hope the House will agree that the Government are not responsible for the attitude, nor indeed for the ideas, of the Union of Communications Workers. But no doubt the noble Lord will recall everything that was said in regard to charitable Christmas cards in my last answer.

My Lords, may I ask the Minister whether I misheard him? Did he say in answer to the Question that the unions felt they were not adequately consulted in 1978?—because we are now in 1980. Was nothing done last year and have they not been consulted again this year?

My Lords, I think the noble Baroness will be aware that today's Question is a result of the Question which she asked last week. The consultations which took place, and which, I think, are the subject of the Question that is on today's Order Paper, took place in 1978.

My Lords, would the Government propose to suggest to the Post Office that they should consult with the unions concerned to get an up-to-date point of view from the unions?

My Lords, any consultations between management and unions are entirely matters for the management of the Post Office.

My Lords, is the Minister really saying that the Government have no attitude on this kind of thing, because he cannot rely on monetary policy to solve problems in the nationalised industries which are damaging to the public and to their own efficiency? Surely, the noble Lord must agree that the Government should, at least, state where they stand.

My Lords, the Government do not state where they stand, so far as the management of the Post Office is concerned. Whatever the noble Lord may feel, this is a matter for the management of the Post Office.

My Lords, does the noble Lord not realise that his Government could do with a little popularity, and this is what we are trying to help him with?

My Lords, we are very grateful, as well as thrilled and delighted, for help from all around the House. But, alas! as I have said all through these two Questions, both last week and today, even in this sector the Government do not influence the management of the Post Office. No doubt the noble Lord could get in touch directly with the Post Office himself. I even have the postcode.

Opening Of Parliament: Postponement

3.24 p.m.

My Lords, with the leave of the House I shall make a short statement on business. The Government have given careful consideration to the legislative programme, both in this House and in another place, for the remainder of the current Session of Parliament. They have taken note of the need for full consideration of the Bills which are currently before this House. I am sure that the House will wish to know that, in the light of this consideration, we have recommended to Her Majesty the Queen that the new Session of Parliament should be opened not on Thursday, 13th November, but on Thursday, 20th November. Her Majesty has graciously agreed to this request.

My Lords, the whole House will be grateful to the noble Lord for his Statement. As he knows, the last weeks have been a great strain on all sides of the House. We know how serious it is to postpone the opening of Parliament, and we understand what a difficult decision it must have been for the noble Lord. At this moment, speaking for the Opposition, I do not want to be ungenerous in any way. I believe all sides of the House have felt the need to discuss important Bills, and it is essential that we carry out our revising functions properly. This we shall now be able to do. May we ask the noble Lord to convey our thanks to Her Majesty the Queen for Her gracious agreement to the change of programme?

My Lords, we on these Benches are glad, too, that the Government have recognised the extent of the pressure on this House, which has been very considerable, and that they have taken this important step to relieve it. We remain of the opinion that too much legislation is going through Parliament under this Government, as under the last.

My Lords, I am grateful for the remarks of both the noble Lord, Lord Peart, and the noble Lord, Lord Banks. The Government were always aware that we were setting a rather ambitious timetable in trying to get our programme through in time. It was, of course, in the interests not just of getting the Government's business this Session, but also of next Session as well. The 20th November is late for the beginning of the new Session of Parliament. But we knew it was ambitious at the time and we always knew there was a possibility that, in order to have this very important local government measure properly considered in this House, together with the order measures—the Civil Aviation Bill and the Broadcasting Bill—which are also in the spill-over, it might be necessary to put back the State Opening of Parliament. I am grateful to noble Lords for what they have said and, of course, I will see that the message is conveyed.

My Lords, may I also say that it seems a very sensible decision to do this, despite the dislocation that it no doubt will cause in administrative arrangements, and that it indicates the proper seriousness with which the Government are treating the scrutiny activities of this House on Government legislation. For that reason, I welcome it a great deal.

My Lords, the noble Lord has given us the date on which the new Session will open. Can he tell us how long this Session will continue and when it will end?

My Lords, we are now talking about the next Session. The noble Lord is asking rather a lot. Does he mean this Session?

I am so sorry, my Lords. I thought the noble Lord was asking when the next Session would end.

No, my Lords. The new Session will begin on 20th November. When will this present Session, in which we are now living, coming to its close?

My Lords, that will depend. We cannot yet say exactly on what day Prorogation will take place. What we have done is to leave plenty of time, both for this House and for another place, to give proper scrutiny to the affairs before them.

My Lords, will the noble Lord ask Her Majesty to keep 27th November free, just in case?

My Lords, if we were not in this House, I would answer in unparliamentary language.


My Lords, it may be for the convenience of your Lordships if I announce that dinner will be available this evening at the usual time. Depending on progress this afternoon, it is suggested that the Committee stage of the Civil Aviation Bill should be adjourned at approximately 7 o'clock for about 40 minutes. I say "approximately 7 o'clock", because there is sometimes a little difficulty in getting the time exact. If, for instance, one is embarking on a rather important amendment, it is a question of either rising at ten minutes to the suggested time or, possibly, at a quarter past. So I hope noble Lords will appreciate that "approximately" means approximately.

United Reformed Church Lion Walk Colchester Bill

3.30 p.m.

Read 3a .

My Lords, I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—( Lord Aberdare.)

My Lords, before the House passes this Bill, I think it would be right to say that I am certain the congregation of the United Reformed Church in Lion Walk in Colchester are grateful to your Lordships for facilitating the passing of this Bill on a matter which is of very great importance to the future of their congregation.

On Question, Bill passed.

Civil Aviation Bill

3.31 p.m.

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, that the House do now resolve itself into Committee.—( Lord Trefgarne.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 1 [ Reduction of public dividend capital of British Airways Board.]

On Question, Whether Clause 1 shall stand part of the Bill?

I have put down an amendment to leave out Clause 1 for the purposes of securing a general debate on Part I of this Bill. When we were discussing over the past seven days the Local Government, Planning and Land (No. 2) Bill, for the better order of business we found it of considerable advantage to discuss the general principles of a section of the Bill before proceeding with detailed amendments. I have done this particularly today because we are now in a rather different situation on the first part of the Bill from what we thought when we were debating it at Second Reading at the tail end of this summer. It then appeared to the Government that they needed this legislation in the current Session of Parliament to enable them to proceed with the business of selling British Airways. That is no longer so. In the Second Reading debate it was made clear that the Government were retaining flexibility as to when they would market the shares in British Airways and it was also clear that one of the major issues was that that flotation should be successful. That flexibility has been extended, as the Government announced on Monday that they would no longer be in a position to market the shares in 1981. The earliest date that they can be marketed is in 1982. For those purposes the Government would not need to have this legislation on the statute book in the current Session of Parliament.

As I have said, for a successful flotation a good profit record is necessary, and it is ironic that the "Open Skies" policy of the present Government has been partly responsible—there are many other factors involved here—for the slightly sickly state in which the international aviation industry finds itself at the present time. We have never hidden our dislike of this part of the Bill. The Governemnt have pursued their denationalisation policy in the face of logical reason against it. This particular idea of denationalising British Airways was pulled out of the hat by the Government shortly before the 1979 Conservative Party conference, no doubt to impress that conference with the virility of the Government and their determination to take strides in denationalising sections of the economy.

The truth is that this Bill does nothing to help British Airways. Indeed, the effect of the passage of this Bill at the present time is to impose additional anxiety on British Airways—anxiety which is quite unnecessary because the Government do not need to have this Bill. My view is that the Government's right policy in this new situation would be not to proceed with the first half of this Bill. Therefore I have put down this amendment, which in a sense is a technical amendment, to delete Clause 1. If this proposal found favour with the Committee I should quickly proceed to move the deletion of all subsequent clauses in Part I of the Bill.

Throughout all stages of the consideration of this Bill, I and my honourable and right honourable colleagues have made it clear that we wish to preserve the fullest flexibility on the timing of the flotation and that we are free to choose the best possible time, bearing in mind the interests of all concerned. In any case, the timing of the legislation and the subsequent procedures for vesting would have meant that the earliest but not the only time for sale was the summer of 1981. Our announcement shows only that as circumstances have developed our judgment is that the appropriate time will not now be during 1981. Whether it will be in 1982 or 1983, or what the precise date will be, is still completely open, and decisions will be taken in the light of trends both in the aviation industry and in the stock market.

The present situation in the aviation industry and in the affairs of British Airways illustrates that this is a highly competitive industry. British Airways is no monopoly nationalised industry which can exploit consumers by putting up prices freely to cover increasing costs and possible inefficiencies. It has to compete with all the great airlines in the world on its international routes and it also has to compete with a number of highly competitive British airlines. It is right that it should be able to compete as a private sector company, subject to the disciplines of market forces. At present all its considerable borrowings fall within the public sector borrowing requirement and are subject to the constraints of the Government's economic policy. When it has been turned into a private sector company with a substantial private shareholding then it will be free to take purely commercial decisions, for example, on the number of aircraft it should buy on the basis of their expected profitability. And it will be free to raise as much money as it likes by borrowing from private sources, provided that those sources are satisfied that it will be a profitable investment for their money.

I know that noble Lords opposite disagree with this policy, but I think they would disagree all the more if the aviation industry were now booming and British Airways was making high profits, on the grounds that those profits should be returned to the state. It is natural, of course, that they should grasp any handy stick for beating down the Government's policy, but I confess that I am not particularly impressed with this one. The main arguments about our policy were rightly deployed during the Second Reading debate in August. These clauses are essential to our policy and therefore I hope that your Lordships will not choose to delete them. Clause 1 in particular is perhaps the most inappropriate clause to exclude because it is the one clause in Part I with which the Opposition are said to agree. The provision to write down British Airways' capital contained in Clause 1 was first laid down by my right honourable friend Mr. Nott's predecessor as Secretary of State for Trade, Mr. John Smith. It was he who initiated that policy and now it seems that the noble Lord, Lord Ponsonby, proposes to delete it. I hope your Lordships will not accept his proposal.

We on these Benches would like to support very strongly what the noble Lord, Lord Ponsonby of Shulbrede, has said. We said at Second Reading that we did not think that this was an appropriate moment to denationalise British Airways. As the noble Lord, Lord Trefgarne, has said, British Airways are in the middle of re-fleeting themselves and reorganising their business, and they are involved in a considerable amount of internal upset. This is not the time to go ahead and denationalise. The situation is further complicated by the fact that we now hear that there cannot be a public issue of these shares before 1982, or possibly 1983. On that basis alone, I support the noble Lord.

As we are having a general debate on the first few clauses of the Bill, I wonder whether my noble friend could take this opportunity to clear up a point which was not wholly clear to me in his statement the other day. He was perfectly clear that for very obvious reasons the flotation of the shares would have to be deferred, but I was less clear as to whether the Government's intention in the light of that is that the transformation of the present airways corporation into a Companies Act company is also going to be deferred. I am wondering whether he can give any indication as to when that transition is likely to take place. It would be helpful to know, and I should be most grateful if my noble friend could clear up that point.

May I add that under whatever structure British Airways operate, I am perfectly certain, having been at one time quite close to them, that those who run the company will run it well and courageously. Through no fault of their own, or of the Government's, but as a result of world conditions, they are standing up at the moment to a very difficult situation indeed on the airways of the world. The world depression has diminished traffic, and OPEC's demands have increased the cost of aviation fuel which is a very large element in their costs. The position for all airlines, either publicly or privately owned, is about as difficult as I can remember.

I, and I think all of us who have been in close touch from time to time with British Airways, acknowledge the really splendid job that they are doing. I should like in particular to pay tribute to the outgoing chairman, Mr. Ross Stainton, and his chief executive, Mr. Roy Watts, who have done a splendid job which I hope the Government and the public will very much recognise.

As I am on my legs, may I make something in the nature of a personal statement. In the second line of col. 1675 of the report of our Second Reading debate, I am reported—your Lordships will remember that we were sitting in the acoustic horrors of the Royal Gallery at that time—as having said that I drew on my vast experience. The word I was trying to use was "past".

I should like to take up the noble Lord on the first part of his remarks about the situation regarding the transfer of assets to a nominee company. When I put this point before, the noble Lord answered me, I thought quite sensibly at one point and then had to correct himself on advice from the box. I venture to suggest that his first response to my question was probably more understandable; namely, that there was absolutely no reason why there should not be a transfer of assets to a new company, even though the flotation on the market had to be held up.

With that in mind, I wonder whether I could go a little further. The noble Lord said just now that after the flotation, when the company is a partly privately owned company, the board would make decisions—and I made a note of what he said—" on a purely commercial basis". I hope the noble Lord is not suggesting that the present board make decisions on anything but a purely commercial basis. Of course they do. Of course they take into account the necessary investments in new equipment. Of course they intend to service that new investment. But they do so on the basis of borrowing powers in the 1977 Act which we are going to amend, on the invitation of the noble Lord, in the next amendment.

Under the 1977 Act, the Government guarantee the borrowing, although British Airways may well go to the City or, as recently, they may go abroad for their money. Borrowing under that dispensation can justify one commercial decision. Borrowing at another rate, without the Government guarantee, can mean a different financial result to an investment. I wonder whether the noble Lord realises the difficulties that he is now creating if he leaves both the transfer of assets and the flotation to the undetermined future. How can the British Airways Board—I support everything which the noble Lord, Lord Boyd-Carpenter, has said about their competence—go ahead with their very expensive re-equipment programme unless they know the conditions under which they will be financing such an investment? I should have thought, with the chances of these powers of flotation ever being utilised in the lifetime of the present Government being absolutely minimal, that it would be better to scrap this part of the Bill and to accept what has been put forward by my noble friend.

I am obliged, first, to my noble friend Lord Boyd-Carpenter for the good and wise things that he said about the directors and staff of British Airways, with which I wholly agree. Regarding the point which my noble friend and the noble Lord, Lord Beswick, raised about the transfer of the assets to the new company, it has been decided that this should not be done for the time being and, indeed, that it will take place much nearer the date that we eventually decide upon for the flotation. But the commercial disabilities to which the noble Lord referred are precisely the reason why it is that we wish to proceed with this legislation. We believe that the commercial inhibitions upon British Airways—for example, upon the amount of money which they may borrow to purchase new aircraft—are not decisions which in the future the Government wish to be concerned with. That is why we wish British Airways to be substantially a privately owned company as soon as may be.

My noble friend Lord Boyd-Carpenter echoed what I had said about the difficulties in the aviation industry which make it impossible to proceed with this flotation quite so quickly as we had earlier thought we might be able to do. None the less, the cornerstone of our policy and the main thrust of what we have in mind remains valid, and I hope that your Lordships will agree to these clauses remaining in the Bill.

3.48 p.m.

On Question, Whether Clause 1 shall stand part of the Bill?

Their Lordships divided: Contents, 91; Not-Contents, 74.


Alexander of Tunis, E.Falkland, V.Moyne, L.
Alport, L.Ferrers, E.Murton of Lindisfarne, L.
Ampthill, L.Fortescue, E.Newall, L.
Auckland, L.Fraser of Kilmorack, L.Northchurch, B.
Avon, E.Freyberg, L.Northesk, E.
Balerno, L.Gage, V.O'Neill of the Maine, L.
Barnby, L.Garner, L.Porritt, L.
Belstead, L.Gisborough, L.Robbins, L.
Berkeley, B.Gormanston, V.Romney, E.
Bessborough, E.Hailsham of Saint Marylebone, L. (L. Chancellor.)Rugby, L.
Bolton, L.St. Aldwyn, E.
Boyd-Carpenter, L.Halsbury, E.St. Davids, V.
Brentford, V.Hanworth, V.Saint Oswald, L.
Bridgeman, V.Harvington, L.Sandys, L. [Teller.]
Chalfont, L.Holderness, L.Selkirk, E.
Clancarty, E.Hylton-Foster, B.Sempill, Ly.
Clwyd, L.Ilchester, E.Soames, L. (L. President.)
Cockfield, L.Inglewood, L.Somers, L.
Cork and Orrery, E.Kings Norton, L.Spens, L.
Craigmyle, L.Kinloss, Ly.Stamp, L.
Crathorne, L.Lauderdale, E.Strathclyde, L.
Crawshaw, L.Long, V.Strathspey, L.
Cullen of Ashbourne, L.Loudoun, C.Sudeley, L.
De Freyne, L.Lyell, L.Trefgarne, L.
Denham, L. [Teller.]Mackay of Clashfern, L.Trumpington, B.
Derwent, L.Mancroft, L.Vaux of Harrowden, L.
Drumalbyn, L.Mansfield, E.Vickers, B.
Duncan-Sandys, L.Marley, L.Vivian, L.
Effingham, E.Milverton, L.Westbury, L.
Ellenborough, L.Monson, L.Zouche of Haryngworth, L.
Evans of Hungershall, L.Morris, L.


Airedale, L.Gladwyn, L.Meston, L.
Amherst, E.Gordon-Walker, L.Mishcon, L.
Ardwick, L.Gore-Booth, L.Oram, L.
Avebury, L.Greenwood of Rossendale, L.Paget of Northampton, L.
Aylestone, L.Grey, E.Pargiter, L.
Balogh, L,Hale, L.Peart, L.
Banks, L.Hampton, L.Ponsonby of Shulbrede, L.
Beswick, L.Hankey, L.Rathcreedan, L.
Birk, B.Hatch of Lusby, L.Ritchie-Calder, L.
Boston of Faversham, L.Henderson, L.Rochester, L.
Brockway, L.Houghton of Sowerby, L.Sainsbury, L.
Burton of Coventry, B.Irving of Dartford, L.Segal, L.
Cledwyn of Penrhos, L.Jacques, L.Stedman, B.
Collison, L.Janner, L.Stewart of Alvechurch, B.
Cooper of Stockton Heath, L.Jeger, B.Stewart of Fulham, L.
Crook, L.Kilbracken, L.Stone, L.
Cudlipp, L.Kilmarnock, L.Strabolgi, L.
David, B. [Teller.]Leatherland, L.Taylor of Blackburn, L.
Davies of Leek, L.Listowel, E.Taylor of Gryfe, L.
Donaldson of Kingsbridge, L.Llewelyn-Davies of Hastoe, B. [Teller.]Underhill, L.
Elwyn-Jones, L.Wallace of Coslany, L.
Fisher of Rednal, B.Lloyd of Kilgerran, L.Whaddon, L.
Foot, L.Lovell-Davis, L.White, B.
Gaitskell, B.Mackie of Benshie, L.Wigg, L.
Galpern, L.McNair, L.Wootton of Abinger, B.

Resolved in the affirmative, and Clause 1 agreed to accordingly.

3.56 p.m.

moved Amendment No. 1:

After Clause 1, insert the following new clause:

(" Borrowing powers of the Board

. In section 9(1) of the British Airways Board Act 1977 (limit on borrowing powers of the Board) for the words from "shall not" to the end there shall be substituted the words "shall not exceed £1,000 million".").

The noble Lord said: Throughout the debates both here and in another place one recurring theme from the noble Lords opposite—which I hasten to add is shared by the Government—has been the need to look to the interests of British Airways in formulating and implementing the policy of a change of status for the airline and the subsequent sale of shares. Various speakers have referred to the danger of hurried decisions and the need to ensure the stability of the airline's business. I am confident therefore that this amendment will receive your Lordships' support since it seeks to ensure such stability and is evidence of our intention that we shall only move to implement the privatisation policy when the time is ripe.

We announced on 13th October that in view of present difficulties in the civil aviation market, which had adversely affected the financial performance of all airlines including British Airways, it would not be possible to launch a successful flotation in 1981. The current difficulties are no secret. They began in 1979 with oil price rises far higher than any of the airlines had anticipated. British Airways' own fuel bill rose 72 per cent. in that year but they still managed to make a profit, more than could be said for many of their competitors. More recently, the general economic downturn has reduced airline traffic throughout the world and this has inevitably hit operators' profits, again throughout the industry worldwide. These problems have been well publicised as have the particular measures being taken by British Airways to meet them and return to a more satisfactory financial performance as soon as possible. But the recovery will take a little time and the Government recognise that, unfortunately, this will preclude a successful sale of shares next year.

Meanwhile, at the same time as making every effort to respond positively to present difficult trading conditions, British Airways has to continue with its large investment programme. This is mainly aimed at replacing those aircraft in the fleet which are becoming increasingly inefficient in terms of fuel and other operating costs, which will not meet new noise regulations due for implementation in 1986 and which are generally reaching the end of their useful life. Their replacement with the most modern and fuel-efficient, and incidentally quieter, aircraft types is an essential element of British Airway's strategy to reduce costs throughout the whole airline and thus compete effectively and successfully in an international market where intense competition and a move towards lower fares in real terms are now the established pattern.

This investment programme cannot be met from self-generated funds alone and will require further external borrowings. Such borrowings are subject to a statutory limit under the British Airways Board Act. The decision not to proceed with a flotation in 1981 means that British Airways will remain a nationalised industry for the time being and that the necessary borrowings for the investment programme must therefore be catered for in the statutory limit. This amendment increases that limit from the present £850 million to £1,000 million accordingly. I should perhaps make it quite clear that British Airways' future borrowing requirements have already been included in published Government forecasts of nationalised industries' financing so there is no question of the increase in the borrowing limit representing an addition to public expenditure.

In the statement earlier this week and with this amendment to the Bill, the Government have removed any uncertainties there may have been as regards our immediate intentions for the future of British Airways and reinforced the airline's financial stability so that the investment programme can continue. I feel sure that these actions will be welcomed in most quarters of the Committee and I hope your Lordships will agree to this amendment. I beg to move.

I am sure that the Committee will agree to this amendment, but will the noble Lord make it absolutely clear that what he is asking us to do now will be undone if the remaining clauses come into operation?—undone in the sense that under the new dispensation in 1983, or whatever date, the guarantees on these borrowing limits will be removed. Will the noble Lord make that quite clear so that we can understand the contradictions behind the Government policy?

I wonder whether he would also take the opportunity that I gave him on the previous amendment of clarifying, or at any rate reversing, the statement which he appeared to make, to the effect that the board of British Airways can only make commercial decisions when they are partly privately owned. I hope he will emphasise that in fact any decisions made under the present dispensation will be equally rigorously considered and decisions will be commercial decisions.

The only inhibition upon the commercial judgment of British Airways, in which I have total confidence, is the obligation upon the Government sometimes to restrict the amount of money which they may borrow, and when they become a company in the private sector that inhibition of course will be removed.

With regard to the earlier remarks made by the noble Lord, I did not quite follow what he said about undoing the effect of this amendment with the implementation of later clauses in this Part of the Bill, but certainly the increase in the borrowing power which I am now asking your Lordships to authorise, is for the immediate purpose of financing their acquisition programme.

As my noble friend Lord Beswick has indicated, we accept the necessity for this amendment. All I wish to say at this stage is that I hope the Government will have as relaxed an attitude to borrowing limits for the British Airports Authority when we come to later amendments in the Committee stage this afternoon.

I should like to ask my noble friend a question as to the operation of these borrowing powers, as it is proposed by his amendment to extend them. It is my recollection that in the past when British Airways, or BOAC and BEA before that, wished to purchase particular aircraft, well within the capital limits laid down in respect of their borrowing powers, they none the less had to get the agreement of the Department of Trade to the particular purchases which they contemplated. Does that somewhat restrictive inhibition still continue?

I am speaking without a note on this matter, but my recollection is that every capital purchase by British Airways—I think in excess of £1 million—requires ministerial approval.

And of course once the British Airways Board has become a company then presumably detailed control over its investment will go?

On Question, amendment agreed to.

Clause 2 [ Vesting of property, etc., of British Airways Board in a company nominated by the Secretary of State]:

4.5 p.m.

moved Amendment No. 2:

Page 2, line 30, after second ("company") insert ("the directors of which shall be nominated by the Secretary of State from the Board of British Airways and").

The noble Lord said: I am bound to confess that I had some difficulty in deciding where I should propose to insert the words contained in this amendment. I will take the opportunity of saying that as an example of efficient legislation this Bill has little to commend it. Complaints have already been made from all sides of the Committee of the awkward, untidy and unhelpful interrelation with the 1971 Act, and then this afternoon we have inserted a cross-reference to the 1977 Act. It makes it difficult to follow the policy that is inherent in the proposed legislation that we have before us.

There have also been justifiable complaints—again not confined to the Opposition—that the future shape of the proposed British Airways Company is not dealt with at all in the Bill and only by ministerial statements—and not all of them have been consistent one with the other. It is this factor of the absence of reference to the structure and shape of the proposed new company that makes it difficult for me to put in the words that I have put down on the Marshalled List and to seek the powers to change the constitution of British Airways in the way I am suggesting.

Since I am on my feet I cannot refrain from adding again to what my noble friend Lord Ponsonby of Shulbrede has said. After the Government statement earlier this week it seems highly unlikely that on the Government's own showing the provisions in this part of the Bill, at any rate, will ever be used. It seems that they will go into outer orbit and will be in some sort of holding pattern which may not be changed—as I have already said—within the lifetime of this Parliament.

However, if we are conscientiously trying to improve the Bill, then something should be put in about the undoubted responsibility of the Secretary of State in establishing the composition of the new board. Ministers have tried to disclaim any responsibility at all. The noble Lord, Lord Boyd-Carpenter, said that he was puzzled at this. As he put it, they cannot divorce themselves from this responsibility. Since the Second Reading debate I have spoken to a number of people about this—persons of experience and authority—and without exception they have said that this idea of leaving the composition of the board to some minority influence is an absolute nonsense.

In his Second Reading speech the noble Lord, Lord Trefgarne, said that the Government wish British Airways to be—and I quote:

"A perfectly ordinary British company".

For myself, I would have said that I wish them to be a perfectly marvellous British company, in fact an extraordinary British company, but I think I know what he means, and knowing what he means I think he should accept that as a major shareholder—and at the outset, certainly, a majority shareholder—they must accept the responsibilities that go with that shareholding. Therefore, I am proposing that they should be seen in the Bill to have the responsibility for nominating directors for the new board.

As to that aspect of the amendment, I hope that the noble Lord will have absolutely no difficulty in accepting what I am proposing. But I also go on to say that the appointments should be made from the present board. The reason for that is that I believe something should be put into the Bill to confirm assurances which must have been given to those who are serving on the present British Airways Board. I cannot believe these assurances have not been given, but they should be in a more binding form.

Of the present full-time board, I understand there will be two retirements. It will not be my opinion alone when I say that it is sad to think that two of the most experienced men in the world's airline business will be retiring—Mr. Ross Stainton, to whom reference has been made and Dr. Ken Wilkinson. I hope and I hope the Minister can say something—that their experience will still be available in one form or another to British Airways in the future.

However, apart from those two, it seems to me that there should be a sense of continuity and proper security for those now serving who will be expected to serve during this very difficult interregnum between now and any possible time when the Government may choose to invoke the powers they are seeking. This amendment I am suggesting will go some way to ensure that continuity, and I hope very much the Committee will find it possible to agree. I beg to move.

As I understand the noble Lord, Lord Beswick, this amendment is basically more of a probing character than one intended as a major amendment to the Bill. The noble Lord in his speech was good enough to refer to the fact that at Second Reading I had indicated a degree of puzzlement as to what my noble friend had meant as to the intentions of the Government over the appointment of the new board. As I understand it, there are three phases we are concerned with; the phase during which the present set-up of a state corporation continues, the stage at which it is transformed into a Companies Act company but the Government retaining all the shares, and the final phase in which the Government retains some shares, perhaps a majority, but there is a substantial private shareholding. Obviously, all those three situations are different, and I think it would be very helpful to the Committee, and indeed to people outside, if my noble friend could share with us a little the Government's ideas on how they propose to man the board during those three phases.

The remark which I understood my noble friend to make on Second Reading, which rather alarmed me, was when he indicated that in the third phase, when the Government were a substantial, perhaps majority, shareholder, the Government would not concern themselves with the appointment of directors. If I understood my noble friend aright—and I may not have done, for I think he will not mind my saying that this part of his speech lacked the normal blinding clarity of his performances at the Dispatch Box—he did seem to indicate that the Government might not interest themselves in the appointment of the board. If so, I am bound to say I would think that a pity. With the modern development of companies structure and of the free enterprise system in which British Airways will then be, it is terribly important that shareholders, particularly large shareholders, should interest themselves very much in the appointment of directors and should not just leave directors to nominate each other.

Indeed, there is strong opinion in the City of London that major shareholders should make their views on the election or re-election or appointment of directors known, and exercise influence in trying to provide those companies with the strongest possible board. Certainly, in phase two, when the Government are the sole shareholder, the Government have really no option; indeed I really do not see how legally anybody else could appoint the board other than with the acquiescence of the Government and therefore their consent. But even in the third phase if they are remaining a majority shareholder they really do have a responsibility, not as Government, but as shareholders under the ordinary capitalist free enterprise system, to see that proper people are appointed to the board. I would be most grateful if my noble friend could illuminate the Government's thinking a little on this.

I also pick up what the noble Lord, Lord Beswick, said. There are certainly quite a number of people on the present British Airways Board—I think it would be invidious to name names, but my noble friend, happily, knows them all whose qualities it would be very useful to have still at the disposal of the board. Unlike the noble Lord, Lord Beswick, I hope the Government will not confine themselves to those people alone; as the board becomes a public company, I think it would be a good idea to add, as non-executive directors, additional directors of commercial, industrial or financial experience who could contribute to the discussions on the board in exactly the same way as such non-executive directors of ordinary industrial companies. I would hope, therefore, that my noble friend would be able to tell us that the Government will exercise their interest as a shareholder to secure both the continuance of very valuable members of the present board, and the addition of the type of people whom general experience has shown can contribute very well to the work of boards of this important character.

I recognise the concern of the noble Lord, Lord Beswick, and indeed my noble friend Lord Boyd-Carpenter in tabling this amendment, and it reflects the interests of security of appointment of members of the board of British Airways as constituted immediately before the appointed day. I hope I can set his mind at rest by an explanation of what will happen as regards board appointments between now and then. So long as British Airways remains a nationalised industry appointments to the Board will be made in the usual way by my right honourable friend the Secretary of State. In making, renewing or terminating appointments during this period, my right honourable friend will have in mind the make-up of the board which he, as promoter of the company, wishes to see heading the successor company on the appointed day. His intention as the appointed day approaches will be to have a British Airways board which will become the board of the successor company on the appointed day.

It is, however, just conceivable that he may wish to change an appointment so that a member of the board of the corporation does not appear as a board member of the successor company on the appointed day. I do not say that that event is likely or even probable, I say it is just conceivable. Furthermore, I would not expect it to be in respect of any of the full-time executive members but in the ranks of the part-time non-executive directors, if at all.

In order that such a remote eventuality is catered for, I must, I fear, resist this amendment, but I should add that the Government fully support the spirit which led the noble Lord, Lord Beswick, to table it, and, indeed, my noble friend Lord Boyd-Carpenter to support him. We appreciate the need to keep a good team together and the desirability of all board members having confidence about their future with British Airways. It is for those reasons that it will be our objective, in dealing with board appointments between now and the appointed day, to ensure that the board of the successor company on that day is the same as the board of the airline as a nationalised industry on the day immediately preceding.

If I can move on to what will happen after the company becomes significantly privately owned, initiatives for changes at board level will then come from the board itself, as is the normal case in such another company. But like other shareholders, the Government will have the ability of exercising their voting powers when these appointments come up for confirmation or approval at shareholders meetings.

I am grateful for the spirit in which the noble Lord has endeavoured to meet the points that I have made. I readily accept that there is a difference here as between the non-executive and the executive members of the board. I still think that something further ought to be said to give security to the executive members of the board, although I quite agree that there is a possibility—indeed, may be a probability—that there would be changes so far as the part-time non-executives are concerned.

I shall consider what the noble Lord has said. But I think that this is a matter to which we ought to return at the Report stage, because I am still of the view that, although various assurances have been given at various times, in fairness to those whose livelihoods are affected—as well as considering the future of British Airways—something much more definite ought to go into the statute. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.21 p.m.

moved Amendment No. 3:

Page 2, line 31, at end insert ("and in respect of which two non-executive directors have been nominated by the Secretary of State").

The noble Lord said: I beg to move Amendment No. 3. This amendment calls for there to be two non-executive directors on the board who would be nominated by the Secretary of State. The Government propose to sell up to 49 per cent. of the value of British Airways to the private sector. We do not yet know what proportion they will actually sell and what proportion they will retain. This proposal is that at least two of the directors of the successor company shall be appointed by the Government. I think that this particular amendment may not necessarily be tabled at absolutely the right place in the Bill, but its purpose is to ensure that during the years following the establishment of the new corporation, there will always, at all times, be at least two directors who have been appointed by the Government. I accept, of course, that all the initial directors will effectively have been appointed by the Government.

The proposition, without this amendment included in the Bill, is that the Government will be retaining up to 51 per cent. of the ownership, but plan to have no directors on the board which will run the company. The Government's general thesis here has been that they do not wish to interfere with the running of the company, although they will be the majority owners of the company. I think that that is rather a startling proposal and indeed, in the private sector, if a majority shareholder were to say that it did not wish to have anything to do with the appointment of directors, it would be thought to be rather extraordinary.

If the successor company runs the new board, one would expect that the British public would want to have a say on that new board and to be represented. I and the noble Lord opposite have been concerned with this Bill and, previously, with the British Aerospace Bill. However, the curious point as regards British Aerospace—in which the Government are adopting a very similar policy for the selling off of shares—is that there were proposals in the British Aerospace Act for two Government directors to sit on the board. But a distinction is made between British Aerospace and British Airways. The difference appears to be that the Government take the view that British Aerospace is a major Government defence contractor and that justifies having two Government-appointed directors on the board. But, although British Airways is the national carrier that same justification does not appear to exist. Indeed, there might be something to be said, perhaps, for the Secretary of State for Industry—who thought with regard to British Aerospace that it was a good idea to have two outside directors on the board—to have explained to the Secretary of State for Trade that he felt that this was something of value.

I should have thought that the view that there should be two nominee directors on the board at all times, is one which should receive consideration by the Government. As I have said, we realise that in the initial stages all the directors would be appointed by the Government; but we are thinking about the time in the future when the shareholders themselves will be electing the directors, and we think that the Government should continue to ensure that the British public, through its shareholding, is represented by specific directors on the board, as I have said happens with British Aerospace, British Petroleum and maybe other corporations as well. I beg to move.

The proposals that the Secretary of State should nominate two non-executive directors to the board of the successor company have already been debated at very considerable length in another place. The amendment as tabled would not have the effect which I believe the noble Lord, Lord Ponsonby of Shulbrede, intends. It would only require the Secretary of State to appoint two non-executive members to the initial board and there would be no continuing arrangements.

Dealing first with the appointment of non-executive directors to the initial board, I agree that they can play a positive role by bringing to bear a point of view which is more detached than that of the executive directors who are closely involved with the running of the company and might therefore, on some occasions, fail to see the wood for the trees. It is for this reason that the present board of British Airways contains part-time, non-executive directors, and we have provided in the draft articles of association that the board of the successor company may also include both executive and non-executive directors. Therefore, we fully accept in principle the arguments in favour of non-executive directors and will reflect this in arranging the make-up of the board of the new company.

In fact, the whole board of the successor company on the appointed day will be appointed by the Secretary of State as promoter of the company. I know that the noble Lord, Lord Ponsonby of Shulbrede, recognises that. This will include non-executive directors of which we envisage there will be at least two. I am, therefore, happy to be able to assure the noble Lord that we intend to act in accordance with this amendment as regards non-executive directors at the time of the appointed day. The effect of the amendment as drafted will, therefore, be met in practice.

However, I believe that what the noble Lord, Lord Ponsonby, may also be suggesting is that a perpetual arrangement should exist whereby two non-executive directors will be nominated by the Secretary of State. As I have said, unfortunately the amendment as drafted would not achieve that effect, but in a spirit of helpfulness perhaps I can reply to the point. I think it is clear from a number of remarks made during debates in the other place, and indeed in your Lordships' House, that there are some who would like to see a Government role in the successor company similar in many respects to the Government's present relationship with British Airways in its status as a nationalised industry. I must, however, make it perfectly clear that British Airways is intended to be a normal private sector company and, as with all such companies, there will be no place on the board for any directors who are there to act as agents of Government policy or in any interest other than that of the company.

As I have said, the initial board of British Airways as it will appear in the prospectus for the sale of shares, will be one to which all the members, both executive and non-executive, have been specifically appointed by the Government as promoters of the company. These directors will not be chosen as the agents of the Government, but as individuals who are considered best able to run the airline successfully as a fully commercial enterprise. It will be the duty of those directors to act towards that end rather than to promote any extraneous interest, be it that of the Government or anybody else.

Thereafter, the initiative as regards changes in board membership will be primarily with the board itself—as is the case in any normal company—but such changes will be subject to confirmation by the shareholders. The essential point is that the company will be run by directors in whom the shareholders, including the Government, have confidence. The Government will not interfere in any way in the day-to-day management of the airline by the directors, and thus there is no role for specifically appointed Government directors to play. Therefore, I hope that the noble Lord will see fit to withdraw his amendment.

There seems to be a profound inability on the part of the Government to understand the thinking of some of my friends. The noble Lord has just said that apparently what is wanted here is the same relationship between the Government and the new company as exists at present between the Government and the present corporation. That certainly is not my view. It is no good the noble Lord shaking his head; that is what he has just said.

In his Second Reading speech the noble Lord said:
"We do not want the existing paraphernalia of controls over the airline's capital expenditure".
I quite agree. I do not want it either, and I know what I am talking about. The noble Lord went on to say:
"… we do not want their borrowings to be governed by cash limits".
Again, I think that cash limits which tend, by the Treasury, to have a one-year or two-year term, are quite inappropriate when one is dealing with an industry which has to invest over a period of probably six or seven years. Therefore; I quite agree with the noble Lord about that.

The noble Lord then said:
"… we do not want power to guarantee those borrowings or to make loans to the company".
I am not so sure about the guarantee, although I am quite sure that it would be advisable for British Airways, whether as partly privately-owned or fully Government-owned, to have the opportunity of going out in the market and seeking money. I think that that facility ought to be ex-tended to other nationalised corporations.

The noble Lord went on to say:
"… we do not wish to take any action that might lay the Government open to allegations of influencing the commercial decisions of the company".—[Official Report, 7/8/80; col. 1646.]
Of course, I agree with that. However, that does not mean to say that if one appoints or nominates a director, if one approves a director at a board meeting, one will go back on all those principles, all those criteria, which the noble Lord lists there. Of course not.

My idea of running a company is to appoint someone and let him get on with it. That is what the Government have to learn and that is what previous Governments have not quite learnt. To the extent that some changes are involved, I, for one, favour them. Nevertheless, the fact remains that there must be a relationship between a company of this kind and the British Government. As a major shareholder, the British Government must accept the responsibility for seeing who goes on to the board of the company. When they are on the board, let them get on with the business; I absolutely agree with the noble Lord about that.

I have said what I wanted to say about my amendment, but it shows the difficulties we are in when it comes to this very modest proposition that at least two of the board members should be nominated by the Government. If the noble Lord, Lord Ponsonby, presses this amendment, I shall support him. However, I must add that it is my very strongly held view that it ought not to be a question of two board members; it ought to be a question of the board as a whole. If the Committee is interested in my reminiscences, I argued very strongly against the idea of there being two special nominees for the board of British Aerospace. I think that it is wrong to have two people who have a special relationship with the Secretary of State. The liaison between the company or the corporation and the Secretary of State should be through the chairman, not through two special members.

However, at the same time as regards the legislation, if the Government refuse to have anything in the Bill about their responsibilities, I think that the Opposition has the duty to press a suitable amendment and I, for one, shall support my noble friend if he presses this amendment.

Having considered the response by the noble Lord, Lord Trefgarne, I think that my right course of action would be to return to this amendment at the Report stage. We feel very strongly that the Government should exercise their responsibilities as the major shareholder. However, as the amendment is perhaps not framed in such a way as would achieve the objectives that we have in mind, I think that the best course of action would be not to press it at this stage, but to return to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Clause 3 [ Initial Government shareholding in the successor company]:

4.35 p.m.

moved Amendment No. 4:

Page 3, line 43, at end insert ("save that the Secretary of State shall retain at least fifty-one per cent. of the issued shares at all times").

The noble Lord said: This amendment writes into the Bill the need for the Secretary of State to retain at least 51 per cent. of the issued shares at all times. I beg to move.

I apologise for intervening, but would the noble Lord agree that he is also speaking to Amendment No. 7?

Yes. As the noble Lord, Lord Trefgarne, has said, Amendment No. 7 covers very much the same point. Amendment No. 4 would write into the Bill the necessity for the Secretary of State to retain 51 per cent. of the issued shares at all times. We know that this is the Government's general policy at the present time. We have had statements from the Minister saying, that "we still have sufficient confidence to maintain our 51 per cent. shareholding".

Then again:
"As far as I can see ahead, at the moment it will be desirable for the Government to retain a majority shareholding".
But those opinions expressed by the Minister are not written into the Bill. If the Government would write into the Bill their desire to retain this majority shareholding, it would show the Government's continuing confidence in British Airways, that it represented a good investment and that they had confidence in that investment.

I think that it is useful to note that other European airlines have a majority Government shareholding. Alitalia has a 90 per cent. Government shareholding; KLM has a 70 per cent. Government shareholding; Lufthansa about an 80 per cent. Government shareholding, and SAS about a 50 per cent. Government shareholding. Admittedly, some airlines have under a 50 per cent. Government shareholding. But those four very important airlines have a very substantial Government shareholding.

A reason why the Government might object to this amendment is that the Secretary of State does not wish to bind his successor to retain a 51 per cent. Government shareholding in British Airways. This is precisely the purpose of the amendment—to ensure that the national carrier remains in majority ownership by the Secretary of State. I beg to move.

I hope that my noble friend will not accept this amendment. It seems to me almost a paradoxical argument to that advanced by the noble Lord, Lord Ponsonby of Shulbrede, that by insisting on retaining a 51 per cent. share at least, the Government would be showing confidence in British Airways. It seems to me that the argument falls the other way; that it would show a lack of confidence in the management of the new company if the Government wished to insist for all time and in all circumstances on retaining control.

I think that there would be further difficulties about this, and I am looking at the matter in the long and not necessarily only in the short term. It could be that a permanent Government majority holding could be a discouragement to the marketing of the rest of the shares. Let me take one very practical situation. There have been Governments in the past, and there may be in the future, which take a rather sour view of generous dividend distributions. I do not want to open up the entertaining subject as to whether they were right or wrong, but if one is looking at the matter from the point of view of the marketing of a substantial package of shares on the market, that possibility could well be a discouragement to potential investors who might be interested in taking up the remaining shares. I should have thought that, so far from being helpful, a statutory provision of this sort might indeed be harmful.

I was discouraged too by the examples which the noble Lord gave of certain foreign airlines. The noble Lord will recall that he played a distinguished and active part on a sub-committee of the European Select Committee of this House which investigated European air fares. He may recall the mass of evidence before that sub-committee that the obstructive attitude of foreign governments in allowing free competition from British or other foreign airlines, or in agreeing to concessionary or lower rate fares, was attributed by a number of the witnesses—and all this has been reported, so I am not saying anything that I should not—to the fact that the civil aviation administrations of those Governments were closely tied up with their national airlines.

What the noble Lord's amendment seeks to do is to perpetuate that situation in this country. I agree that this broadens the debate a little, but it is relevant; if it is desired, as our sub-committee did, to promote freer competition on international airlines for the benefit of the consumer or the customer, then one of the worst things you can do is to make sure that a major airline is tied up for the end of time with the Government of this country or any other. So far as I am concerned I would regard the noble Lord's amendment as being an unfortunate one and one which I hope my noble friend will resist.

4.42 p.m.

In support of the amendment I want to raise the issue that I raised on Second Reading; that is, that a 51 per cent. holding protects a company against infiltration of undesirables, or perhaps foreign interests. The noble Lord, Lord Trefgarne, was good enough to write to me on that issue and point out that this situation could be protected by conditions of the articles of association. But we all know that articles of association can be amended by a decision of the board at any time, so there is no permanent protection there. The noble Lord also told me that the Government have the right in the event of any such thing happening to purchase a sufficient number of shares to give it a 51 per cent. holding to protect it.

Would the noble Earl give way for a moment? Surely it is most unusual in any company for a mere decision of the board to be able to effect an amendment of the articles. Almost always a special general meeting is required. In that situation, of course, the large British Government shareholding would be of significance.

Even so, I go on to the fact about the long-stop. The noble Lord, Lord Trefgarne, pointed out that the Government can take up the shares; but what happens if the time comes—which I hope it never will—that they want to take up these shares and these shares are owned by those who do not want to sell? Do the Government then order them to be sold, or make a new issue, or what? What is the position then?

Unless we have the 51 per cent. holding by the Government, is there not a risk that foreign interests might through the ordinary operations of the market accumulate a majority holding in the shares of the company, which might not be to our advantage?

These amendments are, I confess, somewhat similar, like the previous ones, to amendments proposed and debated at considerable length in the Standing Committee in another place. I am advised that, as drafted, they would not achieve what I believe to be their intended effect, which I recognise is to require the Secretary of State to retain a majority shareholding at all times. May I therefore address my remarks to that proposition which, I must say at the outset, in common with the amendments, I cannot accept.

I think that I should make perfectly clear the Government's intentions towards the new company in two crucial respects. First, we do not intend to control the company as we do the existing British Airways Board or to interfere in its commercial administration. Second, the company will stand on its own feet with no recourse to Government. In both these crucial respects, British Airways Limited will be a private sector company like any other company. The Government's holding and its size must be seen in this context.

It follows from what I have said that the Government's relations with the new company will be unaffected by whether or not they retain a majority stake in the company. Their attitude will be the same; they will neither exercise administrative control nor interfere in the successor company's commercial administration. As we have already said on a number of occasions, it is the Government's intention to offer a substantial minority of the shares for sale in the initial flotation. Thus the Government will retain the majority of the shares at that time, but it would be wrong, and we do not wish, to commit ourselves or our successors on the proportion which could eventually be sold. We believe that, in the initial stages, the retention by Government of a majority shareholding will help to promote stability, and will be an earnest of the Government's faith in the company's future. But those—not control, not responsibility for the successor company's liabilities—are the reasons for the initial shareholding.

There is in addition a quite specific reason why we feel it would not be appropriate to have a statutory requirement that the Government's majority shareholding should be maintained. Such a requirement would mean that every time the successor company made a rights issue or issued further shares, both of which are quite possible, the Government would effectively be forced by statute to make a further investment in the company to maintain their majority holding. We do not think that it would be right to bind our successors in this way to spend money acquiring further shares in the company when they may not wish to do so. That is a clear and cogent reason why we should not write in such a requirement. I hope that with that explanation the noble Lord will not press his amendment.

4.48 p.m.

I am sorry that the noble Lord has had recourse to this argument again about not intending to control the company. I hope it can be made clear from this side of the Committee as well as that side of the Committee that there is no intention of any arrangement under which the Government would control the company in the manner which the noble Lord has suggested. I have said before, and I say again, as I see the operation of these publicly-owned companies you institute them, you appoint the directors, and then you let them get on with it and no one wants to control them in any day-to-day matter. But there is an advantage in knowing what is the Government's commitment so far as the shareholding is concerned.

The noble Lord said that British Airways will remain the premier airline in the country. Government after Government in the past have said that we should have a national flag carrier. The advantage of a national flag carrier has been diminished a little by the present Conservative Administration. Nevertheless, there is still an advantage in having an airline which is known to be the national airline. If for no other reason, I think that the morale of the employees, of the workforce, should be considered in this respect.

There has been something said by the noble Lord, Lord Boyd-Carpenter, and I think someone else, that the ease or otherwise of floating the company would be affected if there was a 51 per cent. holding. The noble Earl, Lord Amherst, said that the flotation would be facilitated, and the noble Lord, Lord Boyd-Carpenter, said that it would be hampered if there was a 51 per cent. Government control. I think it is a matter of judgment.

Leaving aside the question of the City of London, I think more importantly than their view is the feeling within the company, the corporation, among the workforce. The workforce has grown up with the idea that British Airways is the national flag carrier, the national airline, and that is something we should not undermine. And if we are not undermining it, there seems to be absolutely no reason why there should not be in the Bill a requirement that the holding of the British Government should not fall below 51 per cent., and I therefore hope my noble friend will press the amendment.

I do not quite understand why the national airline, which I agree has an important part to play in the aviation industry, should actually be owned by the Government. That is, if I may say so, a non sequitur.

The noble Lord would not wish to exaggerate. We are talking about a 51 per cent. holding, not a wholly-owned company.

Controlled by the Government, if not wholly owned by them. Before the noble Lord, Lord Ponsonby, decides how to proceed with the amendment, I will deal with the question of foreign ownership, which I did not deal with when I spoke earlier, and the safeguards against foreign takeovers, a point raised by the noble Lord, Lord Leatherland, and the noble Earl, Lord Amherst. Although I consider that such a possibility is remote, there are a number of measures which could be taken should such a situation arise. The first of these is incorporated into the articles of association of the successor company. This provides that foreign-held shares carry only a 10 per cent. vote per share and this is coupled with a "transparency provision" which enables the company to determine the beneficial owner of the shares and, in the case of any doubt, treat the shares as foreign-held—that is, with reduced voting powers—unless and until the shareholder proves otherwise. The 10 per cent. vote per share effectively means that foreigners would have to own 91 per cent. of the issued shares to outvote the remaining 9 per cent.

The second safeguard is contained in Clauses 5 and 6 of the Bill. This allows the Government to acquire British Airways Ltd. shares in the market if it


Airedale, L.Greenwood of Rossendale, L.Oram, L.
Amherst, E. [Teller.]Grey, E.Peart, L.
Ardwick, L.Hale, L.Phillips, B.
Avebury, L.Hanworth, V.Ponsonby of Shulbrede, L.
Aylestone, L.Hatch of Lusby, L.Ritchie-Calder, L.
Balogh, L.Henderson, L.Rochester, L.
Beswick, L.Hooson, L.Rugby, L.
Birk, B.Houghton of Sowerby, L.Sainsbury, L.
Boston of Faversham, L.Howie of Troon, L.Segal, L.
Brockway, L.Hylton-Foster, B.Simon, V.
Collison, L.Jacques, L.Stamp, L.
Cooper of Stockton Heath, L.Janner, L.Stedman, B.
David, B. [Teller.]Jeger, B.Stewart of Alvechurch, B.
Davies of Leek, L.Kilbracken, L.Stewart of Fulham, L.
Donaldson of Kingsbridge, L.Kings Norton, L.Stone, L.
Elwyn-Jones, L.Kinloss, Ly.Strabolgi, L.
Foot, L.Leatherland, L.Underhill, L.
Gaitskell, B.Listowel, E.Wallace of Coslany, L.
Galpern, L.Llewelyn-Davies of Hastoe, B.Whaddon, L.
Garner, L.Lloyd of Kilgerran, L.White, B.
Gladwyn, L.Lovell-Davis, L.Wootton of Abinger, B.
Glenamara, L.Morris of Kenwood, L.Wynne-Jones, L.
Gordon-Walker, L.

should ever prove desirable or necessary after the initial sale of shares to restore the level of the Government's holding to the level which they held immediately after the initial sale of shares. Since I have already made it clear that we will sell a substantial minority of shares on the initial flotation, it follows that this provision enables the Government to buy back to the level of a majority shareholding if they wish to do so. I hope the Committee will agree that the amendment should not be incorporated in the Bill.

The problem with the articles of association with any company is that they can always be altered. I know the Government have tried hard to ensure that these particular articles of association, which are not before your Lordships today, are foolproof in that respect. However, our view is that it would be a more satisfactory situation on that point, and on the other points which have been mentioned in the debate, if there should be written into the Bill a majority shareholding or a 51 per cent. shareholding, and therefore I wish to press the amendment.

4.53 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 67; I Not-Contents, 74.


Allen of Abbeydale, L.Ferrers, E.Newall, L.
Alport, L.Fortescue, E.Northchurch, B.
Ampthill, L.Gage, V.Northesk, E.
Avon, E.Gisborough, L.Porritt, L.
Belstead, L.Gore-Booth, L.Romney, E.
Berkeley, B.Gormanston, V.St. Aldwyn, E.
Bessborough, E.Hailsham of Saint Marylebone, L. (L. Chancellor.)St. Davids, V.
Bolton, L.Saint Oswald, L.
Boyd-Carpenter, L.Halsbury, E.Sandys, L. [Teller.]
Bridgeman, V.Hankey, L.Selkirk, E.
Caithness, E.Holderness, L.Sempill, Ly.
Campbell of Croy, L.Kinnoull, E.Soames, L. (L. President.)
Chalfont, L.Lauderdale, E.Somers, L.
Clwyd, L.Long, V.Spens, L.
Cockfield, L.Lucas of Chilworth, L.Strathclyde, L.
Colville of Culross, V.Lyell, L.Strathspey, L.
Cork and Orrery, E.Mackay of Clashfern, L.Sudeley, L.
Cottesloe, L.Mancroft, L.Swansea, L.
Craigmyle, L.Mansfield, E.Swinfen, L.
Cullen of Ashbourne, L.Marley, L.Trefgarne, L. [Teller.]
De L'Isle, V.Melville, V.Trumpington, B.
Denham, L.Milverton, L.Vaux of Harrowden, L.
Dormer, L.Monson, L.Vickers, B.
Drumalbyn, L.Morris, L.Vivian, L.
Falkland, V.Murton of Lindisfarne, L.Westbury, L.
Resolved in the negative, and amendment disagreed to accordingly.

5.1 p.m.

moved Amendment No. 5:

Page 4, line 21, at end insert ("and the Secretary of State shall obtain the best possible price for such shares at all times").

The noble Lord said: This amendment seeks to ensure that the Secretary of State shall obtain the best possible price for such shares at all times. As we have already said, British Airways is one of the nation's assets, and this asset should not be squandered for any political or ideological reason. Earlier this week the Government accepted that the flotation next year would be unwise, and my view is that it could take a number of years before the Government could regard a flotation as wise. Financial circles currently regard investment in airlines as an investment in dead money. British Airways need a healthy profit record behind them before the Government can proceed to a flotation. They need to be able to write a prospectus that describes a strong business, confident of healthy financial results in a favourable international environment. Consideration of the timing will also need to take into account the climate of the Stock Exchange at that particular time. Not only potential shareholders but also international money markets, in which British Airways must borrow to fund its capital equipment programme, must be confident of the airline's continued stability and success.

What I am concerned about here is that we should have assurances from the Government that any decisions about flotation are based on financial, not political, considerations. There is a very great danger here, particularly in view of the long future timetable which could stretch further and further ahead, that, seeing a general election on the horizon, the Government, in order to achieve their objective of selling off British Airways in the lifetime of this Parliament, will, for political reasons, decide to sell British Airways at a time when economically and for financial reasons that would be the wrong decision to take. I hope that the noble Lord will be able to reassure the Committee on this point. I beg to move.

As I see it, this amendment is unnecessary in that it is nothing other than a splendid declaration of pious hope. May I ask the noble Lord, Lord Ponsonby of Shulbrede, how he would advise the Secretary of State to obtain this very desirable end?

The noble Lord has raised a point of difficulty, but my view is that any decision for a flotation should be based on economic advice, not political advice.

This amendment would impose a statutory duty on the Secretary of State to obtain the best price when selling shares that he has acquired under Clause 3. But what is the best price? These two essential words are not defined. That, I confess, does not surprise me, because I doubt that they could be satisfactorily defined, and the concept of the amendment is, I fear, therefore unworkable. The only effect that it would have would be to cause an acrimonious and totally inconclusive argument after any sale of shares as to whether or not the best price had been secured. How is the Secretary of State to know in advance that if he sold a day sooner or a day later than the one he chooses, he might get a penny or two more for each share? The only possible definition of the best price is the price that investors are prepared to pay on the day chosen for the share sale.

In setting the price and the day the Secretary of State will obviously have in mind the Government's desire to maximise their receipts, but there is an element of judgment in this which can be proved only by events. In our private lives we could all wish for the gift of perfect judgment, to sell at the top of the market and buy at the bottom, and then become millionaires. But sadly few of us manage it. In this case the Secretary of State will seek the best advice that he can get, and then act quickly—

Yes, certainly, the best professional advice that he can get, and then act quickly. The recent announcement that we will not proceed with a flotation in 1981, because of present difficulties in the airline market, is I suggest firm evidence that the Government will proceed only when we consider that the time is right; and that I think refutes the assertion from the noble Lord, Lord Ponsonby, that we would be acting for political, rather than financial, reasons.

I can assure the Committee that the Secretary of State will sell all shares at the best price that he can get; that, after all, is in the interests of both the Government and the airline. In considering what that price might be my right honour- able friend will be able to draw on the expertise of professional financial advisers, who are thoroughly experienced in company flotations and share sales, and who will advise him, taking into account all the relevant considerations. I hope that that explanation will persuade the noble Lord to withdraw the amendment.

The noble Lord has been provided with a highly sophisticated argument in reply to my noble friend, but I do not think that he has quite answered the sort of fears that there are on this point. The noble Lord himself said that there are two elements in a decision: the price and the day; and he is absolutely right. Of course, I agree with him that on a certain day the Government will seek to secure the best possible price. It would be absolutely inconceivable that they should propose to sell at a less than best possible price.

But the difficulty arises in the question of fixing the day, and here there are fears. If the present Government, with their political view that there should be a sale, fix a day, on political grounds, on which they want to see the sale go through, it could be that they fix a day on which it is quite impossible to get a reasonable price. I will not say that they will not get the best possible price on that day, but I am saying that they will fix a day on which it is impossible to get a genuinely fair price for the assets that will be behind the offer.

What I think is needed here is some assurance that, with the end of 1980, with the end of 1981, when we come to the summer or the autumn of 1982 the Government will not make a decision to float on political grounds rather than on genuinely economic grounds. You could always sell British Airways; of course you could—at a price. They could float the company this year or next year if they were just giving the organisation away. I accept what the noble Lord has said about the good intentions of Her Majesty's Government not to do this in 1980 or 1981, but the fear arises that in 1982 or 1983, just prior to the election, they may well be tempted to seek the transfer of ownership at a price which would not be fair to the British taxpayer.

Perhaps I may say a last word on that. We would wish to be judged by our actions in this matter. If we were going to follow along the path that some noble Lords fear, then we would not have gone to the trouble of making the statement that we did earlier this week about the fact that we were not proposing to make the flotation in 1981. But, having said that, noble Lords will recognise that within a particular year there are in fact some restrictions on when the flotation can be arranged. For example, it is necessary that the accounts available with the prospectus are fairly recent accounts, and there are other regulations, which are issued by the Stock Exchange, which will of course have to be complied with. But I can of course assure the noble Lord and the Committee that there is no question of timing this flotation just for political reasons.

In view of the remarks made by the noble Lord, and particularly in view of his final assurance, I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 4 agreed to.

5.12 p.m.

(" Employees on Board

. The Secretary of State shall ensure that a proportion of the ordinary voting shares shall be offered to employees on terms to be arranged and the right to make one nomination to the Board of British Airways shall be reserved for the elected trustees acting for the employee shareholders.").

The noble Lord said: We have an amendment here which I hope will command wider support; and I hope that even those noble Lords who are following the debate so closely in other parts of your Lordships' House, when they come along to your Lordships' Chamber will feel able to agree with the words on the Marshalled List in my name and that of the noble Earl, Lord Amherst. In all that has been said and written about this part of the Bill by Government spokesmen and supporters, they have always emphasised their intention to make available a proportion of shares to employees. Yet, strangely enough, there is nothing in the Bill to this effect. It is not an unimportant part of the proposed changes, and I hope that the Committee will agree that there should be a reference in the legislation.

Of course, the amendment goes further than merely making shares available to employees, and that is not because I am seeking to oppose or frustrate in any way the principle that has been warmly supported by noble Lords on the Government side of your Lordships' House at Second Reading and also, and especially, by noble Lords on the Liberal Benches. But I want to make this principle as meaningful and as beneficial as possible. We now have a fairly wide experience of share ownership by employees, and over the past 30 years or more I have watched, if not been personally involved in, the development of this concept. There is now a range of organisations, from the co-operative productive federations, in which at any rate a majority of the shares are owned by the employees, ranging through to those limited liability companies which make shares available on what some unions rather disparagingly call a bonus basis.

The experience has not been universally successful, but that does not mean to say that we should not persevere with it and it does not mean to say that we should not try to develop it. However, I must add that I have yet to see convincing evidence that the mere ownership of a share has led, for example, to an abatement of a wage claim or a direct increase in productivity. Just because there is the ownership of a share, it has not created, certainly not in all cases, that change in the sense of participation of the employee. The noble Lord, Lord Boyd-Carpenter, told of the happy experience which his own company has enjoyed, and I can well understand, judging by the half-yearly figures that were produced the other day, that his employees feel that they have a good investment when they are given a share as part of their conditions of employment—and especially is it an advantage to them if there are certain tax advantages that go with it. But do we not want share ownership (or co-ownership, as the Liberals call it) to be something more than a passive investment? Do we not want it to be a more positive thing? Do we not want it to stimulate a more constructive sense of participation? If the employee shareholders can show interest and exert influence other than as individuals at the annual general meeting, then, I would have thought, that would be wholly beneficial to the wellbeing of the new company.

The Minister will agree, I think, that there will need to be, for tax reasons, trustees for this category of shareholders. We have had some experience in the British Aircraft Corporation and in British Aerospace of the election of trustees for the company's or the corporation's pension fund, and the required mechanism here is quite practicable. I will not go into details, but I think it can be claimed that it has worked entirely satisfactorily. The amendment I am now moving proposes that the trustees acting on behalf of the employee shareholders, and obviously after consultation with them, will be able to nominate one part-time member to the board of the new company. It is an experiment which I suggest is eminently worth trying; and I beg to move.

As there is no occupant at present of the Bishops' Bench, I can I think with impunity refer to this amendment as being something of a curate's egg—good in parts. With the first part—that which suggests that action should be taken to forward employee shareholding in the new British Airways set-up—I am wholly in agreement. The noble Lord was good enough to point out that, as chairman of a company which has, I think, one of the best employee shareholding schemes in the country, I have some direct experience of its operation. While I wholly agree with him that such a system is not a specific against all the ills which can afflict any company, it contributes very strongly to the feeling of comradeship, of all being on the same side, which is so valuable inside an industrial organisation today. Therefore, I yield to no-one—not even to the occupants of the Liberal Benches—in my enthusiasm for employee shareholding.

Where I am bound to say I differ from the noble Lord—and this is the bad part of the egg—is with his rather curious proposal that a trustee of the employee shareholding scheme (and I agree with him that for technical and tax reasons there have to be such trustees) should be automatically put on the board. During our earlier debate about the composition of the board, one or two noble Lords expressed, I thought rightly, the view that it was a mistake to put on a board people representing a special or separate interest. The view was expressed, which I happen to share, that if you are on a board you have joint responsibility with your colleagues to the whole company, all its shareholders and all its workforce. I think it would be a mistake to add to the admirable provisions about employee shareholding—which otherwise I should feel inclined to support—this unfortunate addition, as it seems to me, about one specialist additional board member.

Therefore, I hope my noble friend will be able to say something encouraging about the Government's intentions on employee shareholding. I can imagine no better area for it than a company like British Airways where you have, apart from the great concentrations of staff in Heathrow and in London, packets of staff spread through literally every part of the world. To do something which makes them feel that they have a common interest not just in respect of their jobs but in respect of their common ownership of the company, would be immensely valuable and worth taking a great deal of trouble to bring about. I join with the noble Lord, Lord Beswick, in urging on my noble friend that employee shareholding should be actively propagated in the new set-up in British Airways; but I beg him not to drag on the tame director.

As has been said before, we on these Benches always have been interested in the promotion of schemes whereby employees participate in the companies for which they work. This Bill gives a very good opportunity for that to happen. This particular amendment goes a little further in that it gives the opportunity for the voices of those shareholders to be heard at board level. The ordinary shareholders can express their opinions through the directors. Why should not this special lot of shareholders have the opportunity to make their voices heard on the board through the way that this amendment suggests? Consequently, I hope that the Government will agree to accept this amendment.

May I add a word from these Benches in support of what my noble friend has said? In this matter of employee participation I am very much what might be called a "voluntarist". I was glad of the degree of support that the noble Lord, Lord Boyd-Carpenter, was able to give to the first part of the clause. I think I understand and have some sympathy in part with what he was saying in relation to the second part of of the clause, at least in so far as we should all like to feel that directors, however elected or appointed, will have in mind the interests of the organisation as a whole. But I was also a little disappointed in the somewhat negative overall approach that he seemed to be taking.

There are many individuals and bodies who speak in favour of greater employee participation. There is, as the noble Lord, Lord Boyd-Carpenter, knows, the president of the CBI who has called for greater involvement in these matters. I am open to correction, but I think that the Secretary of State for Employment has sought to obtain from within industry as a whole much greater support for the principle of employee participation not excluding the possibility of experiments which might go so far as to enable employees to have representatives elected to boards. I myself moved an amendment to the Industry Bill which commanded a great deal of support not only from the Labour Benches but from some distinguished Cross-Benchers. The aim of that amendment was to place on the National Enterprise Board an obligation to encourage greater involvement of employees in influencing the making of decisions which affect them. My fear is that if the noble Lord who is about to reply were to take the same view as was taken by his noble friend Lord Trenchard on that amendment to the Industry Bill—that we could not afford in statutes of this kind to make references to this subject—then I should be sorry.

If he does not feel able to accept the amendment, I hope that—and it remains to be seen what Lord Beswick will wish to do about the amendment—the Minister will find it possible to give some assurance that at the very least, in the light of what has been said from all parts of the Committee, and in view particularly of the degree of support given by the noble Lord, Lord Boyd-Carpenter, to part of the clause, he will give further consideration to this matter and perhaps arrange for consultations to be held with British Airways so that we can come back to it at Report stage. I hope that before the Bill becomes an Act it will be possible to incorporate within it some-thing at least of what lies within this clause.

May I say a brief word on this amendment. I apologise to my noble friend that I was called to the telephone as he was moving it. As one who has been interested in industrial relations for many more years than I like to think about, I have always had two strong convictions. The first is that joint consultation is of vital importance and, secondly, that to enable workpeople to participate on the board of industries is going to make it possible for a greater understanding to take place between what have been called the two sides. I hate this expression, "the two sides of industry", and the misunderstandings which that creates. I am convinced that misunderstandings, suspicions and some-times even deeper feelings are generated because too often workpeople are not taken into account and not taken into the confidence of the employers and the boards; that they do not act as a team but as people going their separate ways with separate interests when the basic interests are the same both for the particular firm and, I hope, for the country.

Therefore I hope the Minister will pay due regard to what has been said. If there is anything lacking in our industrial set-up, it is this failure to provide proper machinery for participation and consultation to remove all misunderstanding. I believe in people, whether they happen to be employers or workmen. I am satisfied that where you get dissatisfaction and where you find the attitudes on both sides of industry which are often found, it is due to lack of understanding generated because consultation and participation do not take place. I hope the Minister will take careful account of what has been said this afternoon.

Most of us agree that to make industry work it must be a partnership between shareholders, management and the workers. Although shareholding is not the complete answer by any means, it is at least one of the measures that can be taken, and it is at least a start. I hope that the Government will take this matter seriously.

5.30 p.m.

I am afraid that this amendment is unacceptable, but I am happy to be able to respond positively to the first part of it which deals with opportunities for employee shareholdings. The Government have pledged firmly on a number of occasions, and I repeat now, that there will be suitable opportunities for British Airways' employees to acquire shares on favourable terms. We believe it is important that they should be able to have a tangible stake in the successor company if they so wish.

Although the details of a scheme have yet to be worked out, there are a number of possibilities. First, we could have a system of priority allotment for employees who wish to subscribe for shares at the full price. That would be one example of favourable treatment but we should like to go further. Therefore, we also have in mind that there should be a modest free offer of shares to all eligible employees regardless of whether they subscribe for other shares with their own money under other schemes. We shall work out nearer the time how much might be made available in this respect although I would not wish to give the impression that large holdings will be given away to employees in this way.

In addition, we hope to make another offer which I might describe as "two shares for the price of one"; that is, for every share an employee is willing to buy at the full price, another share will be given to him free provided that both shares are held by trustees. The value of the new share will not then be subject to income tax and, under the latest Finance Act, the shares need be held by the trustees only for a minimum of two years as opposed to five years as previously. Should the employee choose to withdraw his shares during the following five years the tax concession is wholly or partially withdrawn. Such a scheme is already operated by BP, among others, in the private sector.

I should also mention that the 1980 Finance Act raised from £500 to £1,000 the maximum value of shares which can be given to an employee in any one year. It also contains provisions for savings-related share option schemes, and we are looking at the possibility of an offer which would take advantage of those provisions as well. So our intention is clear, and we are pledged to offer shares to employees on favourable terms. That undertaking is firmly on record and we see no need for it to be enshrined in the legislation. I hope the Committee will therefore be assured that suitable schemes will be put into effect at the time of the flotation.

I fear, however, that I have to part company with the noble Lord, Lord Beswick, and the noble Earl, Lord Amherst, on the principle underlying the second part of this amendment. This would place on the Secretary of State a statutory duty to ensure that the trustees holding shares on behalf of employees of the successor company have the right to nominate one director to the board.

It has been stressed repeatedly by the Government during the passage of this Bill that our wish is for the successor company to be a normal private sector company governed by the provisions of the Companies Acts. But acceptance of the proposal in this amendment for the specific appointment of one director acting on behalf of employee shareholders would be quite contrary to that desire. It would bestow upon a particular group of shareholders a privilege enjoyed by no other shareholders, whereas it is our intention that all board appointments should be made in the normal way and subject to the will of all the shareholders. The directors of any private sector company must act in the interests of the company as a company, and not in the interests of a particular group of shareholders. I would remind the Committee that this point was made quite clear in debate earlier about the appointment of Government directors to the successor company.

The position will be that employees' shares will have voting rights like any other shares. However, while those shares are held in trust, the exercise of those rights will be a matter for the trustees and a procedure will have to be established as the to manner in which trustees are mandated by employee shareholders in this respect. That will be a matter to be covered in the trust deed when it is drawn up. When the shares are released from the trustees to individual employees, those employees will be free to decide whether, and in which way, they wish to exercise the voting power which attaches to the holding. So whether in trust or held by individuals, the procedure for voting on matters such as board appointments will be similar to those which govern the votes of all other shareholders in the company, and that is the way we wish it to be.

I am not aware that any existing schemes for employee shareholdings in private sector companies carry a right for the trustees to appoint a director, so there is no precedent for such a proposal. But more important than that is the fact that such an arrangement would detract from our intention of creating a successor company which is, and is generally seen to be, organised and run along the normal lines of quoted private sector companies. I regret therefore that I cannot commend this amendment to the Committee.

I am very disappointed at the reaction of the noble Lord and the lack of imagination which is apparently displayed by his honourable and right honourable friends. I am particularly sorry that the noble Lord, Lord Boyd-Carpenter, should have referred to this proposed director as a "tame" director. Why should he be tame? Why should he be more tame than any of the others? Just because he represents a point of view of those lives whose are dedicated to the company, why should he be described as "tame"? I can imagine that he will be much more lively and much more constructive than some of the others. Their interests will be much more affected than some of the others. Of course, anyone serving on a board owes first loyalty to the board of that company. I aggree with that. That does not mean to say that if a person comes from the work force, has experienced the day-to-day problems of the company and consults with fellows in the company and then goes into the board room he becomes tame. Such a person might be extremely constructive.

If the noble Lord will allow me, if the word "tame"—which I agree was intended rather lightheartedly—offends him, I will happily substitute the word, "specialist" or the words, "of limited interest". The point I am trying to make—and it is a serious one—is that board members should be appointed for their general qualities in serving the board not on any specialised basis such as this.

I absolutely agree that they should be appointed for their general qualities. I hope that employees, knowing the quality of their colleagues, can appoint to the board someone for whose general qualities they have respect. Of course, one has to consider the capability and competence of a person when he is put on a board. That does not mean to say that he should not come from a particular sphere. The noble Lords, Lord Boyd-Carpenter and Lord Trefgarne, know perfectly well that if we have a situation in which some financial institutions take a block of shares in British Airways Limited, it is only too likely that in the course of the discussions that take place they will suggest that a certain person should go on the board. That takes place now. But because such people come from a certain part of the City, or have certain interests outside, that does not mean that they are any less valuable on the board.

I made a note of the word "specialist". The noble Lord, Lord Boyd-Carpenter, will excuse me if I refer to him like this. He and I have known each other over many years and we are privileged to speak to each other like this. He has no right to refer in an almost contemptuous way to a specialist. What a wide field of specialisation it is! If you live in and work for a company, that is not narrow; that is not something derogatory.

Would the noble Lord look at his own amendment? There is nothing in it to say, "work in or be part of a company". The designation is that he is a trustee of the employee-held shares who may be anybody whom they may have appointed and a perfectly suitable person for that purpose. Regarding where a large block of shares is bought, and discussion about the appointment of a director, that is done on its merits. The difference is that it is proposed to make this statutory and automatic regardless of the suitability of the individual, who may be a perfectly suitable trustee but is not necessarily qualified to be a director with general responsibilities.

Since the noble Lord suggests that I should read my own amendment, I would suggest that he also takes the opportunity of reading it. I do not say that the nomination shall be a trustee; I say that the nomination should be made by the trustees and, of course, they can have a wide field of choice. I should have thought they would choose someone from the workforce, from the managerial level probably, or probably from somewhere else. It has been very interesting in my experience, so far as the trustee company of British Aerospace is concerned. It is very interesting that when you put someone on those trustees, be he an awkward character or a militant on the shop floor, he becomes a very constructive person when given responsibilities of that kind. So let us not try to envisage an unfortunate or negative person but let us try to envisage someone who will make a contribution.

The noble Lord has said, as did the noble Lord, Lord Trefgarne, that this has not been done before. Why should that be an argument against doing it now? I thought we were trying to move forward. I am trying to help noble Lords opposite. Let us face the situation, because I believe that some of my Liberal friends see the force that lies behind this argument. The idea of employee shareholdings has not been widely acclaimed by the employees; in fact the trade unions have spoken against it. I have had the opportunity of speaking to the officials of one trade union and I have put to them the concept of this as being a constructive and developing thing. To some extent I have got them to change their minds and to agree to this amendment. If the Government really want this to be successful I suggest that we try to put it over in an imaginative way. I am trying to be helpful and constructive and I am deeply sorry that the noble Lord should try to dissect this egg of mine. You cannot choose one part of this egg: it happens to be all in the same shell and you have to have the egg as one whole. You cannot pick out bits of it.

I put this amendment forward in a spirit of constructive helpfulness and I shall certainly press it to a Division, with the help of my noble friends. However, I should have liked noble Lords to have said: "We are going to try something different and we are going to experiment here. We are going to inject some new ideas into this new company." I am sure they would not regret it.

Just before the noble Lord presses this matter to a Division, if that is what he intends to do, let us be quite clear what he intends by this amendment. He intends that there should be one director on the board of this new company, who is there by statute, representing specifically one small group of shareholders. It does not immediately occur to me whether it would be possible for that director to be removed by the shareholders, for example, at a special meeting. The noble Lord's amendment does not tell us. He is creating a precedent without equal in company law and I think it is an undesirable one. If the noble Lord does press it his amendment, I hope that your Lordships will reject it.

The noble Lord says that this particular director will represent a small group. It is precisely because of that that I think there ought to be some provision for it in the statute. If there were a wider group or if they had a greater voting power, then there would have been no need to make statutory provision. It is precisely because otherwise it is unlikely that the employee would have a voice on the board that I think the amendment should be pressed.

May I make just one further point? I am so glad that the noble Lord, Lord Collison, made it. I beg the noble Lord, Lord Boyd-Carpenter, not to think that it is going to be a question of an employee representative just "bleating" on the board. I hope that there will be a two-way exchange here. That is the value of it. It really would be a valuable thing for this company, and I hope that the Committee will see fit to accept the amendment.

Before the noble Lord sits down, may I ask him to clarify one point? As the board of British Airways is currently constituted, could he be very helpful and let me know what proportion of the board of directors either are or were salaried employees of British Airways?

I cannot give the exact proportion at present for that, but I think there are at the present time eight executive directors on the board. The noble Lord may say that they represent the workforce. I do not think that is so: they are appointed by the Government. I think there will be some value. I can tell the noble Lord that I do not just think up these things without consulting people and talking to people, and I would say that this idea would not be unwelcome at least to some of those executive directors on the board.

May I intervene just for a moment, because we on these Benches are supporting this amendment, with which we are associated. The noble Lord, Lord Beswick, said that he visualised this director having a sort of two-way traffic, bringing to the board the views of the workforce and taking the views of the board to the workforce. Is there


Amherst, E. [Teller.]Gregson, L.Peart, L.
Ardwick, L.Grey, E.Phillips, B.
Avebury, L.Hale, L.Ponsonby of Shulbrede, L.
Aylestone, L.Hanworth, V.Ritchie-Calder, L.
Balogh, L.Hatch of Lusby, L.Rochester, L.
Beswick, L.Hooson, L.Simon, V.
Birk, B.Houghton of Sowerby, L.Stamp, L.
Brockway, L.Howie of Troon, L.Stedman, B.
Collison, L.Jacques, L.Stewart of Alvechurch, B.
Cooper of Stockton Heath, L.Janner, L.Stewart of Fulham, L.
David, B.Jeger, B.Stone, L.
Davies of Leek, L.Kilbracken, L.Strabolgi, L.
Donaldson of Kingsbridge, L.Leatherland, L.Underhill, L.
Elwyn-Jones, L.Listowel, E.Wallace of Coslany, L. [Teller.]
Foot, L.Llewelyn-Davies of Hastoe, B.Whaddon, L.
Gaitskell, B.Lloyd of Kilgerran, L.Winterbottom, L.
Galpern, L.Morris of Kenwood, L.Wootton of Abinger, B.
Glenamara, L.Noel-Baker, L.Wynne-Jones, L.
Greenwood of Rossendale, L.Oram, L.


Ailesbury, M.Bolton, L.Colwyn, L.
Airey of Abingdon, B.Boyd-Carpenter, L.Cork and Orrery, E.
Allen of Abbeydale, L.Bridgeman, V.Cottesloe, L.
Alport, L.Brougham and Vaux, L.Craigmyle, L.
Ampthill, L.Buxton of Alsa, L.Cullen of Ashbourne, L.
Avon, E.Caithness, E.Dacre of Glanton, L.
Belstead, L.Cathcart, E.De La Warr, E.
Berkeley, B.Chalfont, L.De L'Isle, V.
Bessborough, E.Charteris of Amisfield, L.Denham, L. [Teller.]
Birdwood, L.Cockfield, L.Dormer, L.
Boardman, L.Colville of Culross, V.Drumalbyn, L.

not a danger that because of that there will be lines crossed? The normal relationship, surely, is between management and the trade unions who are responsible. If this director gets involved in these things, is there not a danger that he will find himself to some extent interfering with the position of the management? It is very important that members of the board should not do that.

The noble Viscount is quite right in voicing a fear of that kind. There is a danger in any new experiment. The reason why the trade unions generally are opposed to the employee-shareholding concept is that it cuts across the sort of worker-directorship pattern which they would like to see imposed upon some of these public bodies. I think the danger would have to be faced. As I see it, this would be an additional channel and not a conflicting one.

5.47 p.m.

On Question, Whether the said amendment (No. 6) shall be agreed to?

Their Lordships divided: Contents, 56; Not-Contents, 81.

Ebbisham, L.Lyell, L.Sandys, L. [Teller.]
Ellenborough, L.Mackay of Clashfern, L.Selkirk, L.
Falkland, V.Macleod of Borve, B.Soames, L. (L. President.)
Ferrers, E.Mancroft, L.Spens, L.
Fortescue, E.Mansfield, E.Strathclyde, L.
Garner, L.Marley, L.Strathcona and Mount Royal, L.
Gisborough, L.Melville, V.Strathspey, L.
Gormanston, V.Morris, L.Sudeley, L.
Gowrie, E.Murton of Lindisfarne, L.Swinfen, L.
Greenway, L.Northchurch, B.Teviot, L.
Hailsham of Saint Marylebone, L. (L. Chancellor.)Northesk, E.Trefgarne, L.
Pender, L.Trumpington, B.
Hylton-Foster, B.Romney, E.Vaux of Harrowden, L.
Kinloss, Ly.St. Aldwyn, E.Vickers, B.
Kinnoull, E.St. Davids, V.Vivian, L.
Long, V.Sandford, L.Westbury, L.
Lucas of Chilworth, L.

Resolved in the negative, and amendment disagreed to accordingly.

Clause 5 agreed to.

[ Amendment No. 7 not moved.]

Clauses 6 to 8 agreed to.

Clause 9 [ Interpretation of Part I]:

5.55 p.m.

moved Amendment No. 8:

Page 9, line 27, after ("consulting") insert ("the trade unions which are recognised as representing the employees of the Board,").

The noble Lord said: This amendment is concerned with consultation by the Secretary of State. There were complaints made by my honourable friends in another place, about the lack of consultation on the principle of the Bill between the Minister and his department and the employees in the industry. Indeed, as I said earlier, the whole idea of denationalising British Airways is something which came about very suddenly and was produced out of the hat by the Government, just before the 1979 Conservative Party Conference—

I cannot let the noble Lord get away with that. He is not correct. The Statement on the intention to privatise British Airways was made on 20th July, long before the party conference.

That is right. It was at the end of the Session, at about the latest time it could be made in Parliament before the Conservative Party Conference of that year. But there is an opportunity here for the Government to make amends on consultation, by consulting about the appropriate day with the trade unions which are recognised as representing the employees of the board. It seems to me that it would be a good idea for the Government to involve themselves in this, and to make amends for past lack of consultation. It is surely better to have consultation than confrontation. I beg to move.

I do not believe that it would be of any benefit to the employees of British Airways to have a formal requirement to consult the trade unions before setting the appointed day. The Government will choose an appointed day as near as we can to the time when we envisage shares will be offered for sale, and we shall then have to act quickly. I accept that this will involve an element of judgment, but when the time comes we shall appoint a day after consultation with our professional advisers and with the Board of British Airways, and therefore the decision will be taken having received the views and advice of those who have the most legitimate and appropriate interest in the matter. Of course, I accept that the employees of British Airways have a legitimate interest as well, but I have no doubt that this interest will be adequately served by the consultation which we shall have with the British Airways Board. The board is just as responsible for all the airline's employees as it is for the aircraft and the other assets.

One point which I would expect to interest trade unions more than the precise date to be chosen for the appointed day is the constitution of the new company which will be their employer. That is why we sent them a copy of the draft Memorandum and Articles of Association last March for their comments. They asked for more copies so that they could give it proper considerstion, and these were sent. We have not so far received their views. I concede it is a quite lengthy and complicated legal document, and there is no pressing urgency at the moment. But it illustrates the point that consultation depends upon the willingness of the parties, rather than on statutory requirements. There is no lack of willingness on our part to consult on matters where we recognise that the trade unions have a legitimate interest. In the light of this explanation, I hope the noble Lord will not press his amendment.

I thank the noble Lord for his response to this amendment. I shall study his reply and decide whether or not I shall come back to it on Report stage.

Amendment, by leave, withdrawn.

Clause 9 agreed to.

Clause 10 [ Secretary of State's potters over British air transport businesses in case of emergency]:

moved Amendment No. 9:

Page 10, line 40, leave out ("28 of the Criminal Law Act 1977") and insert ("32 of the Magistrates' Courts Act 1980").

The noble Lord said: In moving Amendment No. 9, I wish to speak to Amendments Nos. 10, 11 and 12 at the same time. These four amendments are purely consequential amendments which become necessary following the passing during August of the Magistrates' Courts Act 1980. This Act is a consolidation measure which, when it takes effect on a day to be appointed, will repeal and re-enact those parts of the Criminal Law Act 1977 which are referred to in the penalty provisions of Clause 10. The first three of the four amendments I am commending for your Lordships' approval, therefore, remove reference in subsection (5) of Clause 10 to the Criminal Law Act 1977 and substitute instead references to the Magistrates' Courts Act 1980. The fourth amendment is a transitional provision designed to preserve references to the 1977 Act until the 1980 Act enters into force. I beg to move.

On Question, amendment agreed to.

Page 10, line 42, leave out ("61") and insert ("143(1)").

Page 11, line 7, leave out ("Criminal Law Act 1977") and insert ("Magistrates' Courts Act 1980").

Page 12, line 3, at end insert—

("(11) Until the coming into force of the Magistrates' Courts Act 1980 any reference in subsection (5) above to any provision of that Act shall be construed as a reference to the corresponding provision of the Criminal Law Act 1977.").

On Questions, amendments agreed to.

Clause 10 agreed to.

Clause 11 [ General objectives of Civil Aviation Authority]:

6.2 p.m.

The noble Lord said: In reference to this part of the Bill, namely Clause 11(3), it has been stated, and I quote:

"The intention is that the Civil Aviation Authority shall continue to further the sound development of civil aviation in this country but that it shall not disregard environmental effects and disturbance to the public".

These words are the words of my noble friend Lord Trefgarne and they are words with which I am sure all your Lordships will entirely agree. The problem is that there is an implication there—I am sure it is not intended but it could be read this way—that the Civil Aviation Authority has failed in its duty so to do. I do not believe that is so in any way. In fact, I do not think anyone would disagree that in this regard civil aviation has done an extremely good job under the old regimen. It is because I question the necessity for this subsection in the Bill that I am moving this amendment, for which I seek your Lordships' support.

I will not go through it in detail, but I am sure noble Lords will recall that under the old régime guidance was given by the Secretary of State after approval of it by both Houses of Parliament. The current guidance provides precisely the same sort of standards, which are reflected in this part of the Bill, when referring to the duty of the authority to consider environmental factors in licensing certain aerodromes. But there has been a subtle but very important change of emphasis. Through the provisions of this Bill the Civil Aviation Authority will have a statutory duty to take decisions with regard to environmental matters, as opposed to advising the Government, which it is very well set up to do and has done in the past. The nub of my case is that civil aviation is not the right body to take political decisions; in other words, I believe the Government are abrogating their duty to govern in this regard.

The authority considers it most undesirable that the Secretary of State should be able, as the Bill provides, to make an order empowering civil aviation to impose a far wider range of environmental restrictions than he himself can impose under his own powers. It also believes that it is impossible, on a strictly objective basis, to weigh the economic and quantifiable disadvantages of restrictions against the unquantifiable benefits of reducing annoyance or disturbance. In my view, it would also be unreasonable, in relation to aerodrome licensing, to impose on the Civil Aviation Authority a primary duty to secure that British airlines provide air transport services which satisfy all substantial categories of public demand together with a subordinate and secondary duty to minimise adverse effects on the environment and disturbance to the public.

The judgments that would be required in respect of specified aerodromes are essentially political judgments. The Civil Aviation Authority is not equipped or fully competent to make judgments of that nature. It is motivated and professionally dedicated to the support, encouragement and development of civil aviation and would certainly seem to the environmentalists to be so. The judgments required are to do with the delicate balance between conflicting legitimate interests. Such judgments are for governments and not for a body corporate which is not the servant or the agent of the Crown and is not accountable to Parliament. I beg to move.

If the Committee were to adopt it, my noble friend's amendment would remove a very substantial part of the Bill which purports, among other things, to amend substantially the Act of 1971. Looked at simply from the procedural point of view, I have great sympathy with my noble friend's amendment. I said on Second Reading, and I hope I may be allowed to say now, with even greater emphasis, after further study of the Bill, that it does seem an extraordinarily inconvenient and awkward way of legislating to put in the Bill now before us large chunks of legislation which are then to be treated as incorporated in the Act of 1971. If my noble friend's amendment were adopted, this method would receive a considerable check. On Second Reading my noble friend Lord Trefgarne indicated that the Government had in mind some steps in aid of those who will have to construe our legislation, when it is carried, which would diminish the difficulty which this legislation induces by reference method.

On the substance of my noble friend's speech, as noble Lords will observe, I have down four amendments dealing with specific points within the area covered by subsection (3) and put by subsection (3) into the 1971 Act, and I prefer to reserve my remarks until we come to those amendments. I think we should have a very ragged debate if we did it on my noble friend's amendment. But I will comment on just one point because when we come to my own amendment I seek to deal in a different way with the point he raises. He refers to the provision which imposes certain duties, in connection with both air transport licensing and aerodrome licensing, on the Civil Aviation Authority in respect of environmental matters. It is certainly my understanding, as it appears to be his, that this is not a responsibility which the authority has sought. My noble friend Lord Trefgarne may well be able to confirm this.

However, I disagree with my noble friend Lord Morris when he says that this would appear to convey some reflection on the authority. As one who was involved in the authority, I am bound to say that I did not so read it. Surely it is no reflection on a public body to go on imposing upon it further responsibilities. However unwanted they may be, it seems to me to be more in the nature of a compliment.

I am seeking—when we come to a subsequent amendment I shall have to explain to the Committee more fully how it does it—to accept with some reluctance these environmental responsibilities to which my noble friend Lord Morris referred and am then seeking to make them sensible by transferring also to the authority, if they are to have responsibility for the environment, the most practical, effective authority for discharging the responsibility which the Government are putting on to their reluctant shoulders.

I do not know how far your Lordships want to discuss at this stage the very wide range of changes in the law, particularly the one which my next amendment seeks to deal with in respect of competition. My own feeling is that we should have an extremely ragged debate. If my noble friend Lord Morris carries his amendment, all mine will fall. It may be a great temptation to the Committee to accept the amendment of my noble friend Lord Morris and thus to be spared these four speeches by me. I would not seek on those grounds, however, to urge support for my noble friend's amendment. I can only comment that in so far as my noble friend's amendment draws attention to a thoroughly slapdash, untidy, inconvenient method of legislating, to carry his amendment would be a protest against it. I have a great deal of sympathy with him, but having carried the Bill to this stage I imagine that it would cause a great deal of practical inconvenience if we were to do so. However, it might be convenient if, apart from replying to my noble friend on this amendment, my noble friend Lord Trefgarne were to say something about the method of legislating and about what the Government intend to do to make the whole thing less incomprehensible even to those of us who have lived with the subject for some years.

I had not intended to speak at this point, but I should like to put one question to the noble Lord, Lord Trefgarne. I confess that I have not read sufficiently thoroughly the 1971 Act, and therefore cannot follow, so could the noble Lord tell me what appeal there would be to the Secretary of State in the event of the authority taking a decision with which Members of Parliament, local residents and so on may disagree?

Before my noble friend replies, it might be helpful to the Committee if I were to say that the reason why the Committee was entertained to so short a peroration by myself was the presence of the eminently sensible amendments of the noble Lord, Lord Boyd-Carpenter. In the light of that, I intend to withdraw this amendment, but I believe that it would be most useful if the specific questions I have put to my noble friend were answered at this stage.

6.14 p.m.

First may I deal with some of the points which have been raised. The noble Lord, Lord Boyd-Carpenter, asked me about the Government's proposals with regard to the consolidation of the various Acts—and I hope shortly this Bill—which now relate to civil aviation. I have to confess at once that a consolidation measure is urgently required. I am sorry that I cannot forecast when that will be possible. I hope it will be before too long, but I should be misleading your Lordships if I were to give any hope that it will be in the next Session. I should like to think that it will be, but I can give no undertaking that that is to be the case.

The noble Lord, Lord Beswick, asked me about the appeal procedures. I confess that I shall need to take advice on that point. I could tell him off the cuff about the appeal procedures which relate to the air transport licensing arrangements, but I think he is concerned with the airfield licensing arrangements as well and I do not have that information at my fingertips. Perhaps he will allow me to ascertain the position and to write to him with a full explanation.

I think it is important to bear in mind that subsection (3) of Clause 11 does not impose an onerous new burden on the Civil Aviation Authority. The purpose of the environmental provisions in subsection (3) and the environmental aspects of subsection (4) is principally to fill the gap that would otherwise have been left by the abolition of the policy guidance. These subsections relate respectively to aerodrome and air transport licensing, which are the two major functions of the authority which are not at present covered by any requirement to take account of environmental considerations other than that in the guidance.

Clause 11, as currently drafted, seeks to maintain a broad balance between the authority's current and proposed environmental responsibilities. The general objectives of the policy guidance have been replaced by specific duties relating to the authority's aerodrome and air transport licensing functions. As regards the former, the noble Lord, Lord Morris, will recall that I confirmed in a recent letter to him that an aerodrome would be specified only where it was evident that existing arrangements have proved inadequate to ensure that due attention was given to genuine environmental problems, and that such cases should be rare.

I would expect that before a specification order is made the Department of Trade would make sure that no improvement could be expected from the use, or the further use, of the arrangements for consultation between airport managements and their neighbours which can be provided for under Section 8 of the 1968 Civil Aviation Act. I would also expect that the department would consult informally with the authority to ensure that every possible use was made of the authority's existing links with the airport management. Only when it became quite clear that these informal discussions were getting nowhere and that some further sanction was required would recourse be had to specification.

It is quite impossible to say when this point would be reached since every airport is unique, but my impression is that the vast majority of aerodrome operators take their environmental responsibilities seriously, and that the small minority who do not may well be encouraged to do so by the mere existence of this sanction. I therefore repeat that I do not believe that the authority will be confronted by a significant addition to the work, albeit informal, that they already do in this field. I think I have covered the principal points raised by my noble friend. In the light of that explanation, I hope he will withdraw his amendment.

I am most grateful to my noble friend. On the very important question that the noble Lord, Lord Beswick, raised with regard to appeals, I think I can help my noble friend. No provision is made for appeal against civil aviation decisions reached after taking account of environmental matters. As drafted at present. there is no power to make regulations providing for such appeals. Notwithstanding that point, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[ Amendment No. 14 not moved.]

6.20 p.m.

moved Amendment No. 15:

Page 12, line 43, after (" with ") insert (" each other in providing air transport services on domestic and cabotage routes and with each other and").

The noble Lord said: Your Lordships may recall that a few moments ago on the amendment moved by my noble friend Lord Morris I made a protest about the complexity of this legislation and in particular about the method of using this Bill, not to provide a clear-cut code on its own as to how the licensing functions of the Civil Aviation Authority should be conducted but simply putting a number of additional clauses into the Act of 1971.

I apologise in advance for what I want to say to your Lordships on this amendment. If it is less clear than I would like it to be, I think my noble friend in the Government at least shares some of the responsibility because of the method the Government have seen fit to use in legislation. It is not immediately apparent, but on close study of the Bill one sees that one of its effects is to eliminate the really crucial Section 3(1)( b) of the Act of 1971. May I recall the terms of that subsection to the Committee setting out the duties of the authority?

" (b) to secure that at least one major British airline which is not controlled by the British Airways Board has opportunities to participate in providing, on charter and other terms, the air transport services mentioned in the preceding paragraph;

That one can call colloquially the competition sub-clause. It is a matter of quite substantial historic interest that because the Court of Appeal construed the guidance which Mr. Peter Shore sought to give to the authority under the guidance provisions of the 1971 Act as being in conflict with that section, the Court of Appeal, under the chairmanship of the noble and learned Lord, Lord Denning, ruled that substantial parts of that guidance were ultra vires and invalid.

So the section has considerable significance, and perhaps for that reason and because of some of the observations of the learned Lord Justices in the Court of Appeal, I think it does not command very great affection in the Department of Trade, at any rate at the official level. Its significance is that it provided specifically that the authority should have a duty to secure a measure of competition on international routes.

As time has gone on since it was enacted, the value of competition from the point of view of the public and of achieving moderation in fares has been very spectacularly demonstrated. Indeed, that whole development is very closely related to the history of the section, because the section of Mr. Peter Shore's guidance to which I have referred which the Court of Appeal ruled to be invalid was quite plainly designed to compel the authority to revoke Sir Freddie Laker's Skytrain licence. Indeed, the action in the courts which resulted in its invalidation was the action known in the Law Reports as Laker v. the Department of Trade.

So this crucial subsection now to go is very closely related to the whole recent development, at great benefit to the travelling public, of low air fares. Nothing of equivalent significance is now in this Bill. It is true that at the Report stage in another place, I think—and my noble friend will correct me if I am wrong—a Back-Bench amendment was put in telling the authority to have regard to the benefits of competition. However, your Lordships will appreciate at once that to have regard to the benefits of competition is, of course, an infinitely weaker command and a less effective demonstration of what Parliament wants than the original instruction to ensure this competition. My own amendment is therefore designed to put something in place of Section 3(1)( b), and in particular to see to it that the authority is instructed to ensure that there is a measure of competition, not only on cabotage and domestic routes but also on international ones.

I do not need and do not wish to detain the Committee at this hour by stressing this point at any length because I think it is accepted that, from the point of view of the interests of the travelling public, competition is a matter of major significance. I am sorry the noble Lord, Lord Ponsonby of Shulbrede, is no longer in the Chamber. He is no doubt seeking refreshment from his splendidly arduous labours earlier this afternoon. I did refer in his presence earlier to the fact that he was a prominent member of the Select Committee of the European Committee of this House which this summer investigated European air fares. I recalled, without any dissent from him—indeed dissent was impossible—that that sub-committee in the most emphatic terms pointed out that the only hope for the travelling public in Europe was to secure very much greater competition on the European air routes. It referred to the practical experience of what happened to North Atlantic fares after Sir Freddie Laker put his Skytrain on the North Atlantic route.

I do not think in this Committee of the House it is necessary to go further than that. I think noble Lords on both sides appreciate the great benefits to the travelling public which competition has produced. It is therefore a little depressing to find that in the legislation which is intended to give the background to air transport licensing for perhaps another decade the importance of competition is less strongly expressed and a less firm duty to secure it is put on the authority than was put in the original statute of 1971 which this Bill seeks to amend.

I hope therefore that the Committee may feel this is a matter of sonic significance and that my noble friend may feel that something stronger—whether in the form which I proposed or otherwise; although the drafting is my own I have no undue partiality to it—putting on the authority more strongly the duty of providing for competition will be put into the Bill.

The authority is bound to and, I know, will loyally carry out the instructions of Parliament. However, the present instructions, as they are quite clearly to be understood, will put emphasis, as the Bill says, on the competition of a British airline with foreign airlines. However, it will eliminate on international routes any direction that competition should also be fostered on such routes in appropriate cases between British airlines. My noble friend, with his very great practical experience in the airline business, will understand the significance and importance or that better perhaps than any other noble Lord in the Committee. However, hope I have said enough to suggest to the Committee that the Government and the Committee should be able to give some very careful consideration as to whether, as the Bill now stands, we are providing sufficient stimulus for the competition which, with the aid of the combined efforts of that unlikely couple, Lord Denning and Sir Freddie Laker, has brought such benefits to the travelling public.

I wonder whether the noble Lord could enlighten some of us who may have flown on such a route as to quite what a" cabotage route is.

A "cabotage" route, as I understand it, is a route between this country and a territory which this country controls. It is therefore a route where it is for the aviation authorities of this country to license and lay down who may operate it. The classic example of a cabotage route about which I hope to have a certain amount to say on a later amendment is the route between London and Hong Kong.

The principal objection—and objection it is, I fear—to this amendment is that it would require the Civil Aviation Authority to promote competition between United Kingdom airlines on international routes despite the fact that the authority is in no position to pursue such a policy. Regulation of air services on international routes by Governments is, however much we may regret it, a fact of life in the civil aviation industry. In practice, this means that in most cases it is impossible to obtain the agreement of the authorities of other countries for more than one British airline to operate on a route, and where it is possible the price demanded is usually unacceptably high.

The new Section 23A(1) which will be inserted into the 1971 Civil Aviation Act by Clause 11 of the Bill therefore imposes on the CAA a duty to ensure that British airlines compete as effectively as possible with foreign airlines. This is an objective which the CAA can be reasonably expected to follow. The terms of the duty reflect the fact that it is not possible for the United Kingdom or its civil aviation regulatory authority to act unilaterally to introduce competition on international routes and that the United Kingdom cannot force other Governments to remove the constraints of regulation.

Your Lordships will be aware that it is the Government's policy to attempt to persuade other countries to follow our lead in promoting competition. But it would be precipitate to require the CAA at this stage to promote competition between British airlines on international routes when foreign airlines are not subject to the same discipline and when, in the great majority of cases, the CAA would be unable to comply with such a requirement.

I turn now to the second effect of the proposed amendment, which would be to insert into the new Section 23A(1) a further requirement that the CAA should promote competition between United Kingdom airlines on domestic and cabotage routes. I think the major point here is that the Government's policy in connection with need for the CAA to promote competition is already given effect to in this Bill. I would draw attention here to subsection (2) of the new Section 23A inserted into the 1971 Act by Clause 11. This subsection will require the authority, when considering whether or not to grant a licence and when weighing the effect that granting such a licence might have on existing services, to have regard in particular to the benefits which may arise from licensing two or more operators to operate a similar service. The effect of this provision will be to ensure that the CAA is fully alive to the benefit that competition can bring about in terms of cheaper fares and better services. This provision will apply to all the authority's licensing decisions, whether domestic or international.

In the case of domestic services it has also to be recognised that the opportunities for competition are limited. This is because the demand for United Kingdom inter-city air services is relatively lower than in larger countries with less well-developed road and rail networks and where the potential for saving time by flying is therefore much greater. The majority of United Kingdom routes are pretty thin in terms of passengers and there is little evidence that British airlines are currently pressing in large numbers to take on additional routes in competition with existing operators. The Government therefore do not wish to go as far as this amendment would go and consider that the existing provisions of the Bill in relation to competition are sufficient to ensure that where competition is desirable it will be introduced by the authority.

This amendment would place a duty on the CAA to promote competition between British airlines on international routes which the authority could not fulfil and it would duplicate the existing provisions of the Bill in respect of the need to promote competition on domestic routes. I hope that in the light of these considerations the noble Lord will not press his amendment.

I have heard my noble friend speak on many occasions and I hope he will not mind my saying that rarely have I heard him being less persuasive than he has just been. To say, as he did, that one cannot put a duty on the authority to stimulate competition on international routes because foreign governments would only permit one airline to operate, is a dangerous half-truth. I invite my noble friend's attention to the provisions of the Bermuda II agreement, which was made only last year and under which at least two British as well as two American airlines are able to operate on a number of North Atlantic routes.

That is true, but of course the Bermuda II agreement was not negotiated by the Civil Aviation Authority.

Of course it was not, because under the 1971 Act that is the prerogative of the Government, but—and here my noble friend really has missed the point—Bermuda II having been negotiated and being the framework it is then the duty of the Civil Aviation Authority to licence the airlines who apply to operate on it. That is precisely the point. Therefore my noble friend is really not right when he tries to lay down the universal proposition that foreign Governments, and the negotiations with them which the British Government undertake, forbid in all cases the putting of a second British operator on the route, because Bermuda II does the exact opposite. Does my noble friend wish to intervene?

I am obliged to my noble friend for giving way once more. I did not say that every foreign Government forbids the operation of two British carriers on a route to their country. The majority do but there are a few which do not. The United States is one of them and hence the Bermuda II agreement, and indeed there are one or two others. However, the great majority of foreign Governments do not authorise more than one British carrier on routes to their country.

I am grateful to my noble friend because now we have succeeded in establishing that there are some international routes on which it is perfectly possible to license more than one British carrier. The question is what should be the authority's duty in that respect. As the Bill now stands, the authority may well read it that none the less it shall license only one British operator on that route, whereas it is free, under the arrangements made with a foreign Government, to license two operators. If my amendment or something like it is accepted it will clearly be the duty of the Civil Aviation Authority to license two, or as many British operators as wish to apply and are acceptable to the foreign Government.

My noble friend knows as well as I do that if we put a duty of this kind on a British authority it is only a duty to do its utmost to bring this about. It is never commanded to do the impossible. Parliament never does command a British authority. It gives an indication of policy as to what is to be done in particular circumstances. Of course if it is impossible it then follows automatically that it cannot be done, and it is therefore really not good enough for my noble friend to say, as he said just now, that this would be putting an impossible duty on the authority. If he says that it is precipitate to do this, let me recall to him the words of Section 3(1)(b) of the 1971 Act which are law today and have been law for as long as nine years. They are to ensure that at least one British airline which is not controlled by the British Airways Board has opportunities to participate in providing, on charter and other terms, the air transport service mentioned in the preceding paragraph. If it was possible for Parliament to enact that nine years ago and if it is indeed the law today, how can my noble friend now come forward and say that to put on the authority the duty proposed in my amendment would be to compel it to do the impossible? My noble friend is really on a very bad point there.

I think not. The section to which my noble friend has referred was not one designed specifically for dual designation. On the contrary, it was the basis of what came to be called the "second force" in British civil aviation, and I think the noble Lord is inadvertently misleading the Committee if he seeks to call that particular section in aid of the arguments enshrined in his amendment. I believe that my noble friend is seeking to impose upon the authority a duty which it can barely perform. He has agreed and accepted that only a few countries allow dual designation, as it is called, on routes to their cities, and yet he is seeking to impose this duty on the authority to promote that state of affairs on every route that comes within its purview.

Would the noble Lord allow me to put this? Am I being unfair or unkind if I say he is coming dangerously near to appearing to want to establish—I quote a word which he will recognise—a tame authority.

I know the Civil Aviation Authority well enough to know that it could not be tamed, either by the noble Lord or by my noble friend Lord Trefgarne. On the contrary, what I am seeking to do is to give it a guidance—guidance itself being technically abolished by an earlier section—that what Parliament wishes to see is the promotion of competition, and I have little doubt that it would welcome that with open arms. I will give way to the noble Lord in a moment, but I do not want to get my noble friend Lord Trefgarne out of my sights for too long. My noble friend referred to Section 3(1)(b) and said it was not dual designation. Let me read this to the Committee and let the Committee judge between us:

"to secure that at least one major British airline which is not controlled by the British Airways Board has opportunities to participate in providing on charter and other terms, the air transport services mentioned in the preceding paragraph ".
How on earth it is to do that unless it is wherever the foreign Government would agree to indulge in dual designation I do not know, and I do not think my noble friend does.

My noble friend has a short memory. This is the second time he has read that subsection to us and my view has not changed. The fact is that following that section a policy was designed where a second force airline came into being, and indeed certain spheres of influence were devised and arranged where certain airlines, for example, British Caledonian, were flying to one part of the world, while British Airways, as it has now become, were flying to other parts. It is not true to say that that section which the noble Lord has now twice read was primarily designed to promote dual designation.

It had the direct effect of promoting dual designation, as my noble friend knows perfectly well. It provided dual designation on New York—he cannot dispute that—and San Francisco; those are examples that leap immediately to mind. It is perfectly plain that the purpose of this was to promote competition between British airlines on foreign routes. Let me put this to my noble friend. If he thinks my amendment is wrong and Section 3(1)(b) is right. I will do a deal with him. Will he accept it if I withdraw this amendment and put down an amendment on report to restore Section 3(1)(b) to the Bill, which the Bill proposes to abolish? If he says there is this great difference between their effects, that Section 3(1)(b) is all right, and my amendment is all wrong, surely the sensible thing would be for us to settle it amicably by simply restoring Section 3(1)(b) to the Bill.

I would never agree to that, as the noble Lord well knows. Section 3(1)(b), which the noble Lord has now recited I think three times to your Lordships, refers to creating conditions for airlines not controlled by British Airways, whereas the Committee will now appreciate that we are seeking to put British Airways, as a new company, to be called British Airways Limited, on an all-fours basis equal to the other airlines. I do not think it would be right to restore a situation where British Airways had some special position.

On the contrary, British Airways did not regard Section 3(1)(b) as putting them in a special position; they regarded it with some hostility as putting British Caledonian in a special position. I think that there again my noble friend has got it wrong. But let us come back to the point of substance. You cannot read this Bill—and people outside in the airline industry so read it—without seeing that, so far as international routes are concerned, it is less competition orientated than was the 1971 Act, and that amendment to which the noble Lord referred, which was put in, not on Government initiative I think, on the Report stage, about having regard to the values of competition, is an infinitely weaker direction to the authority than Section 3 (1)(b) or my own amendment, in which they are instructed to ensure it. I hope my noble friend will realise that there is a great deal of feeling about the restriction of competition which could flow from the very natural and proper interpretation which the Civil Aviation Authority will give to this Bill if it goes through in its present form.

I am surprised, to put it mildly, that the noble Lord complains of a lack of competitive spirit in the air transport policy of the present Government when he complains so bitterly of our applying that full principle to the Hong Kong route.

My noble friend will perhaps preserve his soul in patience until we come to the amendment on which the Hong Kong route arises. He may find that the criticism I make of it is not of the substance of that but, on the contrary, as to the particular method which his right honourable friend the Secretary of State saw fit to adopt and all the repercussions which will follow from that. But we shall both be wasting the time of the Committee if we anticipate that amendment at this stage.

I do really ask my noble friend to think a little more seriously about the real desire generally throughout the country for more competition to be induced into airlines. He may say I am wrong in my interpretation, that this measure is less competitive than the Act of 1971; we did argue that. But can he suggest that there is any provision in this Bill which provides a real stimulus and direction to the Civil Aviation Authority to stimulate and wherever possible secure that there is competition on international routes? If he can do that, he will relieve the anxiety to a much greater extent than he perhaps realises now.

I wonder whether the noble Lord is not in danger of standing on its head the argument he employed on the first part of the Bill, about our setting up an organisation and letting it get on with the job. When we were talking about British Airways the whole tenor of the argument on that side was, "If you appoint a company, do not interfere, do not control". Here we are intending to set up an authority which is a competent authority by all accounts—it has had very good training; it could not have had better chairmen in the past; it has been taught excellent ways of procedure—and I would have thought that, given the wording in Section 23A, we should allow them to exercise their judgment. If you are going to say that they can exercise their judgment only in the way in which Parliament lays down, I think you are unreasonably curtailing their discretion. There is absolutely no reason why, given this wording, they should not encourage all proper competition. To say what is all proper competition I should have thought was wrong.

If the noble Lord will look at the provisions of the Bill, he will see that it is not giving the authority that kind of freedom of discretion. If it left the matter absolutely to their discretion, I have the greatest confidence in them and I would be perfectly happy. But the trouble is, as the noble Lord will see if he looks at the section, that it lays down with a certain measure of precision—the new Section 23A, for example: "It shall be the duty of the Authority" to do this and that. Having reached that point the Government are seeing fit to lay down these rules. Whether the Government should do so is another question on which I take the noble Lord's point, but, having done so, it is up to this House to scrutinise very carefully whether that actual direction given to them is such as will encourage them and lead them to permit competition or not.

I think if he reads the whole of this, together with the removal of Section 3(1)(b), which was the cornerstone of competition policy in the past, the noble Lord will see that the general effect of the legislation is to be less conducive to the stimulation of competition than both he and I would like.

All I can say is that if there is that lack of confidence in the authority, the authority should be replaced. Given this instruction, I would have suggested we should feel safe in letting them get on with it. You could not have it laid down more simply and effectively than the need to have proper competition.

If the noble Lord thinks that, then I can only say that in his reading of the statutes he and I must agree, in the most friendly way, to differ. In my view it is less conducive to the stimulation of competition on international routes—and I am not talking about cabotage or domestic—than is the current Act of 1971. I do not think that the noble Lord, Lord Trefgarne, challenges that.

Before my noble friend decides what to do with his amendment perhaps he would just read the next paragraph of Section 23A, which we are now to incorporate in the 1971 Act. I am reading from the last few lines where duties are imposed on the authority and where it says:

" the Authority shall have regard in particular to any benefits which may arise from enabling two or more airlines to provide the services in question".
I feel sure that that would meet the point which the noble Lord seems so worried about.

If my noble friend will permit me, I referred to that in my speech some little time ago. I pointed out—and he has not dealt with the point—that that (which was, of course, the amendment put in on Report in another place), tells the authority only "to have regard to". We can and do in this very Bill tell it to have regard to all sorts of things, but it is quite a lower degree of duty than, as my amendment would do and as Section 3(1) did, directing it to ensure that this takes place. I really should have thought that my noble friend could apprehend that quite important distinction.

With reference to the point which the noble Lord, Lord Beswick, was making, I believe that he was not quite fair to my noble friend Lord Boyd-Carpenter in comparing the arguments regarding a commercial company—British Airways and the Civil Aviation Authority—because I should have thought that their two roles in life are totally and completely in contradistinction.

I cannot pretend to be satisfied with my noble friend's reply and I say to him, with great respect, that when he reads it, himself, tomorrow morning he may share a measure of that dissatisfaction. But, if the Government are obdurate on this, and if the Government wish to go back, to some extent, on their past attitude to the promotion of competition on these routes, I do not think it is any use my continuing to press the amendment. For even if the Committee were, as it might, to decide to support my amendment, I suppose that the Government would go back to another place and waste everybody's time by having it taken out of the Bill. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.54 p.m.

Page 13, line 11, at end insert—(": and

(c)to the need to secure the availability to air-travellers and to the consignors of air cargo of the best and most economical air services.").

The noble Lord said: I beg to move Amendment No. 16. This is a somewhat simple amendment. It has the advantage—and I hope that my noble friend will see the point of it—of putting the needs of air travellers and the consignors of air cargo on the same level of attention—if I may, while on the word "attention", have my noble friend's attention—as the other considerations set out in the Bill. It puts them not in a superior position, but in a position of equality. I would guess that as such—and I see a representative of the Airline Users' Committee here—it might well be in accordance with their thinking. I beg to move.

Although the intention of this amendment is obviously benign—if that is the right word—it does not in fact do more than repeat duties already laid on the Civil Aviation Authority by the Civil Aviation Act 1971. Paragraph (a) of Section 3(1) already requires the CAA to exercise its functions in a manner calculated to secure that British airlines provide air transport services which satisfy all substantial categories of public demand at the lowest charges consistent with a high degree of safety and an economic return to the efficient operator.

In other words, it must be the CAA's objective to ensure that British airlines offer air transport services at the most economical charges which are compatible with high safety standards and a reasonable return to the operator. Moreover, the services offered must satisfy all substantial categories of demand, which, of course, includes the requirements of air cargo consignors as well as those of air travellers. Hence it is the CAA's duty to monitor and approve charges for all types of air transport services, including air freight services, to ensure that prices are as low as possible.

I would also draw attention to Clause 11(4) of the Bill which will require the CAA, when exercising its air transport licensing functions, to have regard to the benefits which may arise from enabling two or more airlines to operate the same or similar services—a point which has a familiar ring about it. This will strengthen the CAA's duty to make sure that it gives proper weight to the scope for reducing the cost of air fares and freight rates by introducing a due measure of competition where this would be appropriate.

I do not think, therefore, that the amendment would add to or complement the duties and obligations already laid on the CAA by statute or those which will be laid on the CAA by this Bill. Moreover, the wording of the amendment could be a source of problems, as it would introduce into the legislation a legally imprecise concept, that of a "best" air service. On that basis I hope that my noble friend will not press his amendment.

This amendment was intended to make abundantly clear the importance of the position of the consumer. If my noble friend's speech means—as I think it does—that in the Government's view that is already fully and adequately provided for, then I would certainly not wish to waste the time of the Committee in pressing him further. Therefore, unless any other noble Lord or Baroness wishes to speak, I shall beg leave to withdraw the amendment.

Before my noble friend withdraws the amendment I, too, would like the case made doubly clear because it seems to me that the wording:

" of the best and most economical"
do go together in this case because, if we put in "economical" without "best" we may be economising on safety which would be a very dangerous precedent to set. So I would like my noble friend the Minister's assurance that it is implicit in what is written that "the best" and "most economical" do form part of this case.

One of the difficulties to which I referred just now was to prepare a precise definition of the word "best" in this context. And that is at least one of the reasons why I was not able to accept the amendment. But certainly the duties laid on the authority by the original 1971 Act include the need, as I have explained, to provide good, economical air services.

Amendment, by leave, withdrawn.

Page 14, line 17, at end insert—

(" ( ) The following subsections shall be inserted after subsection (6) of section 24 of the 1971 Act:—
" (7) Provided however that the power granted to the Secretary of State to allow in whole or in part an appeal from any decision of the Authority with respect to or on an application for a licence shall only be exercised by him in circumstances which are in his opinion exceptional and of substantial public interest; and in the event of his exercise of such a power it shall he his duty to lay before both Houses of Parliament a report setting out his reasons for his decision to allow such appeal and specifying the matters which in his opinion appear to be exceptional and of substantial public interest.
(8) Regulations shall be made by the Secretary of State providing that any decision by the Secretary of State to allow such an appeal from the Authority shall he given within fifteen days of receipt by the Secretary of State of the formal decision of the Authority." ").

The noble Lord said: I beg to move Amendment No. 17. This amendment, the discussion of which my noble friend showed signs of a desire to anticipate on the last amendment but one, arises from the recent decision of the Secretary of State on the Hong Kong route. As I said in an intervention then, and I repeat, I am not criticising the merits of that decision. But I think that decision gives rise to very real anxieties as to the future conduct of the Secretary of State in respect of these appeals. The purpose of this amendment is to endeavour to get some reassurance from my noble friend on that subject.

Your Lordships will recall that the Civil Aviation Authority licensed two airlines—British Airways and British Caledonian—on the Hong Kong route, and, on appeal, the Secretary of State decided also to license Cathay Pacific and Laker. It was a curious decision, inasmuch as the evidence which satisfied the authority was that the route would support two airlines, and the Secretary of State has now put on four. I venture the prophecy that none of those four will make a penny on that route and some of them will no doubt soon come off. From that point of view I think that the Secretary of State may find that this was a mistaken decision. It carried, as my noble friend tried to make the point, the doctrine of competition perhaps rather further than I would carry it. However, that is not the point on which I seek reassurance; I seek reassurance on the procedure.

The decision by the Secretary of State to allow an appeal from the authority was the first ever made since the authority was set up in 1972. It has, of course, raised considerable doubts as to the position of the authority and the extent to which airlines are sensible to go ahead and make their arrangements when they get a licence from the authority. Therefore, the purpose of this amendment is to restrict the number of cases in which in future the Secretary of State allows such appeals—to restrict them in particular to cases where there is a substantial issue of public importance and to put on the Secretary of State the duty, when he comes, for that reason, to the opinion that he should allow the appeal, to make his statement to both Houses of Parliament.

This may or may not be the right way to do it, but my noble friend from his own experience in the industry, which is considerable, will know that the fact that the authority can be overruled on a question of judgment of what a route will bear—which is the matter on which it is the technically expert body—has, to some extent, perhaps undermined its authority, and has certainly meant that when airlines get a licence in the future they will not dare to go ahead buying aircraft, making preparations, or expending money until the time for an appeal to the Secretary of State has run out.

That is the purpose of the second part of the amendment which seeks to ensure that if the Secretary of State decides to deal with an appeal, he should do it quickly. As I say, the purpose is not to try to lay a new code; the purpose of this amendment is to try to get from the Government some assurance as to whether the Secretary of State will act similarly in the future. On Second Reading I suggested that perhaps he had an aberration of judgment in a hot summer. I put that lightheartedly. However, it is quite a serious point. If this jurisdiction is to be exercised substantially in the future, the effects could be quite serious.

During the Second Reading debate I made substantially the same points as the noble Lord, Lord Boyd-Carpenter, has made today. In the interests of time I do not propose to repeat those arguments. However, I do not believe that it is good enough simply to ask for an assurance. We were given something in the way of an assurance on Second Reading. In the circumstances, I do not think that an assurance is satisfactory. We need something which prevents the sort of happening that we saw in the case of that Hong Kong decision. I have tabled an amendment which has the same effect as that of the noble Lord, Lord Boyd-Carpenter. I am quite happy to press his amendment, and I propose to do that and save time by not moving mine.

I am advised that there is some doubt about the drafting of my noble friend's amendment, and it is not entirely clear as to which subsection it refers. However, I accept and understand the substance of his intentions, and perhaps I can apply my remarks to that.

The first new subsection appears to have two objectives; one to restrict the Secretary of State in reversing or varying the authority's decisions to circumstances which are, in his opinion, exceptional and of substantial public interest; and the other to require the Secretary of State, whenever he reverses or varies an authority decision, to present a report to Parliament explaining why he has done so and specifying those matters which he thinks are exceptional and of substantial public importance.

In the nine years or so in which the Civil Aviation Act 1971 and the Civil Aviation Authority Regulations 1972 have been in operation there have been very few occasions on which the air transport licensing decisions of the authority have not been upheld on appeal to the Secretary of State. I think that this shows very clearly that the Secretary of State does not reverse or vary his decisions lightly or without the most serious consideration, and there is no reason to think that that situation will change in future. At the same time one can imagine that there may very occasionally be circumstances in which a minor variation might be necessary without those circumstances necessarily being exceptional and of substantial public interest. It would be a pity if a small but desirable change could not be made because of unduly restrictive wording.

On the second point providing for the Secretary of State to report each reversal or variation to both Houses of Parliament, I must say that this does seem to be an unnecessarily all-embracing provision. It is, as your Lordships may know, already the practice for the Secretary of State, in giving his appeal decisions, to set out in his decision letter those considerations to which he had special regard in reaching his decision. As your Lordships may recall my right honourable friend, in announcing his decision on the recent London to Hong Kong route appeals—which, of course, I repeated in your Lordships' House—took the view that it was of such importance that the announcement should be made before Parliament. On the other hand, there may well be occasions when such a procedure could hardly be justified. If in any particular instance there is a need for parliamentary discussion, there are the accepted ways of bringing this up, but in general it seems to me to be better to leave the Secretary of State with an appropriate measure of discretion.

So far as the proposed new second subsection is concerned, I find myself not altogether sure what my noble friend intends. It seems to be saying that if the Secretary of State decides to allow an appeal against an authority decision, he must do so within 15 days of receiving that decision. I should like to point out that the Secretary of State cannot begin to consider an appeal until he receives it, and the existing regulations already give parties to the case 21 days after receiving the authority's decision in which to appeal to the Secretary of State. I think that your Lordships will find that on many occasions appellants already consider 21 days to be little enough time in which to formulate an appeal, and that there would be strong protests if the time were to be reduced even further so as to enable the making of an appeal and the Secretary of State's decision on it both to be accomplished within 15 days.

In fact, I fear that the proposal is not practicable. The complexity of many cases, the length of the appeal submissions and the volume of background evidence, such as the transcript of the original hearing, would make it quite impossible for the Secretary of State to give adequate consideration to the issues within such a short set period. Every effort is made to give appeal decisions as quickly as possible, but many of the cases have complicated and important aspects to which adequate consideration must be given. To provide for a fixed period which might make such consideration impossible would be to set aside the whole value of the appeals procedure and effectively to remove the rights of appellants. I hope that my noble friend will not press his amendment.

On the second part of the amendment concerning the time limit, I think that my noble friend has given a perfectly adequate answer. I put down that arbitrarily short period with the intention of probing this and eliciting some statement. On the other hand, my noble friend knows that sometimes when appeals have been made to Secretaries of State, they have taken a very long time indeed to give their decisions, and such delay causes the greatest inconvenience and, indeed, loss to the airlines themselves.

Therefore, although I certainly would not wish to press the 15-day rule, I should have been happier if my noble friend had been able to indicate that the present Secretary of State understands that to hold up a decision of this kind can be damaging in itself, and there are cases where it has been held up for quite a number of months.

If I may intervene for a moment, I can assure my noble friend that my right honourable friend the Secretary of State appreciates the importance of this matter and certainly makes every effort on each and every occasion that an appeal is referred to him to reach his decision in the quickest possible time, having regard to all the evidence that he has to consider.

I am much obliged. I think that that goes a good way. The indication is that the Secretary of State hopes to do better in the future, and I hope that he will.

On the first point which is the question of the substance of the appeal, my noble friend did not deal with the point that the Secretary of State should exercise his powers only where there is a substantial issue of public importance; that the Secretary of State should be restricted in that way which, of course, is part of the point about which the noble Lord, Lord Beswick, is also concerned. Will my noble friend say something about that?

I think that I referred to that originally. We envisage circumstances where there might be a minor, perhaps only technical, matter which the Secretary of State would wish to reverse on appeal and thus the restriction to acting only when the matter was of substantial public importance is not one that we could accept.

It is a curious argument that, because that is how he always acts, he cannot accept the restriction. It might have been an argument put the other way. I hope that this amendment has served to show the concern to which a further decision by the Secretary of State to allow an appeal would give rise. The noble Lord, Lord Beswick, indicated that he wanted to ride a Division on my amendment. I suppose he can therefore suggest that the Committee refuse permission to me to withdraw it. Of course he cannot compel me to vote for it in those circumstances. I should have thought that, from his own point of view and his own high standing in this House, he would do well not to object to an application to withdraw by me, but would move his own amendment and let it stand on its own merits. I am sure he would be the last man to say that my draftmanship is better than his.

I have come to that conclusion that the noble Lord's draftsmanship is not superior to mine, especially after hearing the arguments against the timetable. I can see that there was a point there. I do not refer to this 15 days in my amendment, and I therefore propose to press my own amendment.

In those circumstances, without further ado I ask leave to withdraw my amendment.

Amendment, by leave, withdrawn.

As we have just had the argument here and I do not propose to repeat it, I wonder whether we might take my next amendment before the adjournment?

The difficulty is that it is not the next amendment. The next amendment is my Amendment No. 18.

I beg to move that the Committee do now adjourn until ten minutes before eight.

Moved accordingly and, on Question, Motion agreed to.

[ Committee stage adjourned from 7.12 until 7.50 p.m.)

7.50 p.m.

page 14, line 17, at end insert—

("( ) The powers and duties conferred on the Secretary of State by and under section 29 of the Act of 1971 shall be transferred to the Civil Aviation Authority, and any reference in that section to the Secretary of State shall be construed as a reference to the Authority; and subsection (9) of the said section 29 shall cease to have effect.").

The noble Lord said: This amendment is designed to be helpful to the Government, not that my earlier amendments were not. The Government have decided and it is so provided in the Bill, that responsibility for concern with the environment in respect of air service licences shall be transferred to the Civil Aviation Authority and, as has already been mentioned in the Committee, the authority is not particularly happy about that. But accepting, as one must I suppose, that the Government's decision on this should prevail, the purpose of the amendment is to give to the authority to whom responsibility is transferred the powers to discharge that responsibility.

The powers under Section 29 of the 1971 Act relate to what are called curfews at airports—that is, the restrictions imposed on jet aircraft, though oddly enough not at all on rather noisy propeller-driven aircraft—as to the hours at night at which they may operate. There is little dispute that the present curfews operate rather unevenly and unfortunately. On Second Reading I quoted—therefore I will not repeat it now—the example of a case in which three British Airways' 747 aircraft, each with 400 passengers, which failed to get off just before zero hour at Heathrow, had to stay the whole night with the passengers—some were put in hotels and some sat in the lounge all through the night—simply because of the inflexibility of the curfew arrangements.

If responsibility for environmental matters is to lie with the authority, it would seem logical that they should have the power to deal with these curfews, and it is also certainly sensible, I should have thought, that the authority which is concerned with the success of our airline industry should be the authority which is able to operate these curfews and so to apply them with some understanding of the problems which they can create. The point is simple, the amendment is intended to be helpful and I therefore beg to move.

It is clear from what my noble friend said that it is his intention that the Civil Aviation Authority should be given the power to designate or de-designate aerodromes for noise abatement purposes. It seems clear to us that this is a power which may appropriately be held only by the Secretary of State.

The Government are satisfied that the noise abatement measures currently in force at designated aerodromes strike the right balance between the interests of the airlines and users, on the one hand, and of those living around the areodromes, on the other. Where it has given the British Airports Authority, as manager of the aerodromes, limited discretion in the implementation of its policies—for example, in the restriction on aircraft movements at night under Section 29(3A) —that discretion has been exercised in a reasonable manner. If changes become necessary, they can be achieved by amending the measures or the guidance given to the BAA under current Notams; it is neither necessary nor appropriate for such responsibilities to be transferred to a body having no direct responsibility for the management of the areodrome.

Involvement by the CAA would be appropriate only in the very small number of cases where the aerodrome management had shown itself to be unable or unwilling to cope with environmental problems. Provision has been made for such cases in Clause 11(3), but the Government have no plans, as I said earlier, to apply these provisions at the great majority of aerodromes, including those owned by the British Airports Authority, where reasonable steps are being taken to deal with the problems presented by aircraft noise.

My noble friend referred specifically to a case he raised on Second Reading. I looked into that matter following his speech on that occasion and I remain con- vinced that the Government have the balance of these things about right. I hope that with that short explanation my noble friend will see fit not to press the amendment.

While considering that suggestion, may I ask my noble friend two questions? First, in using the argument that it would be wrong to put the CAA in the position of controlling these limitations, has he in mind that they provide the air traffic controller at all the BAA airports and therefore are in fact, as it were, the executive arm in deciding whether or not aircraft should take off? Surely it would be convenient that they should also have the power and particularly the discretion to waive limitations in appropriate cases?

Secondly, my noble friend said he had been good enough to investigate the case last July of last year involving those British Airways 747s. I wonder whether he really intended to suggest, as he seemed to be doing, that the power and discretion was exercised sensibly in that case, where, for the sake of a few minutes after the curfew hour, 1,200 people were involved in spending a night of discomfort and the national airline was involved in very heavy additional expenses. Surely that was a case where, if there had been a sensitive authority on the spot, there could have been a waiver.

I would not want to get dragged too far into the specific case; I have all the facts and correspondence with me. We must strike a balance in these matters between the interests of all those people who live around Heathrow and the interests of the airline and its passengers on the other hand. British Airways, like all other airlines, are well aware of the restrictions there are. They are well aware of the fact that the discretion granted to the British Airports Authority in certain cases is a limited discretion, and indeed they are encouraged to plan their operations so at least a small buffer of movements is available to them, to cover precisely the circumstances that arose on the occasion to which my noble friend refers.

So I think it is fair to say that to some extent British Airways were responsible for the fact that there were no slots available for the movements which they asked to operate extraordinarily with additional authority. Of course, I deeply regret that the passengers were put to considerable inconvenience, as obviously they were, but we must decide whether to have restrictions or whether not to have them, and if the restrictions were so flexible that it was possible for the airline whenever it wished to get exemptions or easements, there would be hardly any point in restrictions at all.

As I told my noble friend, I looked into the circumstances surrounding the specific case he raised on Second Reading, and that specific case was the subject of correspondence between British Airways and my honourable friend Mr. Tebbit, the Under-Secretary of State responsible for these matters, and I confess that I remain convinced that my honourable friend's decision on this occasion was right.

Could my noble friend perhaps go a little further and consider whether the Minister could pass over the duty under the 1971 Act but retain a reserve power if there were such a public outcry that the discretionary powers now being conferred on the CAA were being misused or mishandled? My noble friend Lord Boyd-Carpenter has raised an important point which seems to have been somewhat fogged over in that apparently we are not to know the actual facts of it. However, it seems that if he is correct in saying that for the sake of two minutes the Sword of Damocles came down and no one was available with whom to discuss the matter, that cannot be a satisfactory situation. I assume it could occur again and I therefore support my noble friend's amendment, as indeed a later amendment of mine which is in similar terms.

If the amendment in the name of my noble friend Lord Boyd-Carpenter is designed primarily or specifically to cover the case to which he referred on Second Reading—I do not think it is; it is a wider amendment than that—I would still be concerned to resist it because in relation to that specific case I believe the Government's position has always been clear: that our policy has been laid down in clear terms and that it was applied correctly and appropriately on that occasion. I say again that we have never made any secret of the fact that there is a limit on the number of movements which can be tolerated around our major airports, and if it is sought to increase that number of movements, there must be very good reasons indeed, and the reasons on this occasion were hardly adequate. However, on the wider question we are still convinced that at the specific designated aerodromes to which the amendment refers it is right for my right honourable friend and my honourable friend to remain responsible for the allocation of quotas.

8 p.m.

I am sorry to press my noble friend on this, but I believe that my noble friend Lord Boyd-Carpenter has a very important point here. Within the provisions of the Bill, under the general objectives of the Civil Aviation Authority, as shown in Clause 11, subsection (3) imposes a duty on the authority to consider environmental matters in relation to these specified aerodromes while at the same time it maintains under Section 29 of the Act of 1971 the power within the fiat of the Secretary of State. If this matter is to be transferred to the Civil Aviation Authority, why is it deemed necessary to maintain a duty within the hands of the Secretary of State?

One particular reason for that is that if this matter had been transferred to the Civil Aviation Authority, then when my noble friend had asked about it I could have said quite simply that it was a matter for the Civil Aviation Authority and not a matter for my right honourable friend. These designated aerodromes are of course the major aerodromes around London. A large number of people live around them, and it is I think right, for example, that the Members of Parliament who represent constituents living around Heathrow and Gatwick should have the facility of being able to question the Minister about the effects of the curfew and about the need for perhaps further restrictions, or less restrictions, as the case may be. The issue of the control of noise around our major airports is a vitally important one, especially to the thousands of people who live around them, and I think it right that my right honourable friend should retain responsibility.