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House of Lords

Wednesday, 4th February 1998.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Birmingham.

British Airways: Proposed Alliance

The Earl of Bradford asked Her Majesty's Government:

    Whether they are concerned about the length of time that the European Commissioner for Competition is taking to rule on the proposed alliance between British Airways and American Airlines, and when they expect a decision to be announced.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, the United Kingdom's competition authorities have been working closely with the European Commission on the competition investigation of the alliance. The investigation has taken time but the case is a complicated one both in relation to its substance and jurisdiction. At this stage, with a number of factors still outstanding, I cannot say when a final decision will be reached. But with the co-operation of all concerned, Her Majesty's Government look forward to a balanced and appropriate outcome.

The Earl of Bradford: My Lords, I thank the Minister for that reply. When the decision is made I hope that the American authorities will not take equally as long. Is the noble Lord aware of the grave concern, if the alliance is allowed to go ahead, over the weekly slots to be surrendered at Heathrow and redistributed? Can he give any indication as to the number that is likely to be put forward by the Government and by the European Commissioner? If he is not able to give an indication as to the exact number, is it likely to be above or below the 168 asked for by the Office of Fair Trading?

Lord Simon of Highbury: My Lords, unfortunately, I cannot comment at this stage on the details of the slots because the matter is still in negotiation. We fully recognise the importance of air services to many regions but we also need to ensure that any requirement to release slots is directed at the competition concerns raised by this alliance. I know that my right honourable friend the President of the Board of Trade will reflect on the matter of the balance of slots, should they need to be released in the final settlement, with a view to the competitive balance on regional services.

Lord Brabazon of Tara: My Lords, whatever the noble Lord says, this inquiry has now gone on for more than 18 months. Surely it is time that the Commission came to a conclusion. Is the noble Lord aware, for example, that the United-Lufthansa alliance, which came in at about the time this alliance was announced,

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has been going for that length of time without apparently any great investigation by the Commission? Is this not a case of British business being lost potentially to Frankfurt and Schiphol and to American and continental European airlines? Can we be assured that the Commission has not been got at by either of those airports or by the other airlines concerned, or is the delay simply due to incompetence?

Lord Simon of Highbury: My Lords, the noble Lord rightly alludes to the fact that there are other major alliances in place featuring European airlines and US airlines. I would not want readily to concur with the implication that the Commission is not looking at the balance between all these alliances. The issue here is to achieve a level playing field in the European competition arena. I recognise that the investigation has taken a very long time. It is not an unusually long time for very complex potential monopoly situations. It is worth taking time to get the right answer between the existing alliances and the proposed alliance.

Lord Borrie: My Lords, would it not be desirable to have the discipline of time limits on the authorities and the businesses concerned in answering questions so that decisions of this nature are come to in a more timely manner than is sometimes the case?

Lord Simon of Highbury: My Lords, I wonder whether my noble friend had the opportunity of suggesting that technique when he was actually in office. I would clearly like to see this kind of time limit being a function of what is a complex legal investigation and service. However, the most important point for us to remember is that we want to get the right answer rather than the wrong one. As my noble friend will realise, force feeding the timing on something as complex as this is probably--I do not mean to belittle the contribution--easier said than done.

Baroness Thomas of Walliswood: My Lords, can the noble Lord reassure the House that the Government stand fully behind Commissioner van Miert's efforts to increase competition on the north Atlantic routes? In particular, is there any chance that as a result of these negotiations there will be increased cabotage available in the United States to UK airlines?

Lord Simon of Highbury: My Lords, it is right to say that in examining the aspects of all the major alliances Commissioner van Miert is trying to look at the basis of the relationship between the US as a whole and Europe as a whole. In the light of that, the noble Baroness's subsidiary question may be clarified. However, I should like to take notice of the question and perhaps give the appropriate answer when we have seen the entire solution regarding the basis of the relationship between Europe and the US. We will have to take account of the US jurisdiction once we have the European position clear. So I say again that it is a little early to comment in detail.

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Baroness Strange: My Lords, does the Minister agree that in this case the playing field appears to be more level for some than for others?

Lord Simon of Highbury: My Lords, I would not, no.

Lord Geddes: My Lords, following up the supplementary question of my noble friend Lord Brabazon, can the Minister advise the House approximately how long the negotiations, discussions, or whatever we like to call them, took with the Commission as regards the examples that my noble friend gave, relative to the 18 months that it has now taken for this alliance to be discussed and negotiated?

Lord Simon of Highbury: My Lords, I am not aware that the discussions about the other alliance have terminated.

Lord Razzall: My Lords, is the Minister prepared to indicate what is government policy and what pressure they are prepared to bring on the European Commission in the whole area of reducing air fares throughout Europe? Are we following a policy of pursuing what is the undoubted situation that air fares are too high on many routes within Europe? What is the Government's policy?

Lord Simon of Highbury: My Lords, the purpose of the original Question about the effectiveness of the alliance and when we can expect to see it in place is taking time to consider, particularly in the light of giving the best opportunities for airlines to be able to reduce fares. We have seen a regular reduction of fares due to increased competition across the European continent. That has the interesting aspect of making that policy even more tenable within Europe. As reflected in an earlier answer, perhaps that can be extended to the United States as well. The drive of all these policies is to get a better fare structure for consumers. It is never quick enough, but that is the intention.

Scottish Parliament Building

2.45 p.m.

Lord Dean of Beswick asked Her Majesty's Government:

    On what basis the Secretary of State for Scotland made his statement about the siting and development of the Scottish parliament at an estimated cost of £20 million; and how will this project be financed.

The Parliamentary Under-Secretary of State, Scottish Office (Lord Sewel): My Lords, the decision to site the Scottish parliament at Holyrood was taken on the basis of a thorough assessment of suitability of the site in terms of accommodation, building costs and the environment. Estimated construction costs of around £50 million, plus site acquisition costs, fees and VAT will be met from the Scottish block.

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Lord Dean of Beswick: My Lords, I am grateful to the Minister for that Answer. Is he aware that I, and other people, have seen figures very much in excess of those quoted? If the cost of development of accommodation at the other end of the Palace has gone up from £100 million in the initial stages to £200 million, does the Minister agree that we are looking at substantially more money than the figure he quoted? Can he give an undertaking that if there is an escalation in costs it will come from the Scottish fund and not be met by taxpayers south of the Border?

Noble Lords: Hear, hear!

Lord Sewel: My Lords, we have made clear throughout that the funding of the Scottish parliament building will be met from moneys made available through the Scottish block. So the answer is yes.

Lord Inglewood: My Lords, I am sure the Minister will agree that it is in the public interest that public money should not be wasted. I am sure that he will also agree that it is not appropriate for this project to go forward in a niggardly, penny-pinching and cheeseparing way, for to do so would be to denigrate the devolution project. Which definition of the public interest applies in these circumstances?

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