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Viscount Goschen: My Lords, I certainly would not take issue on the great strength of British Airways and

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its achievements since privatisation. It has shown to other airlines in the Community that it is possible to run an extremely profitable airline very well and to expand the services provided to consumers. We agree with the points put forward by the noble Lord, Lord Wyatt. Airlines should be able to stand on their own two feet and it has been shown that that is possible. We thoroughly oppose state aid in aviation.

Lord Mackie of Benshie: My Lords, how does the noble Viscount equate his indignation at this gross breach of the private theory of investment with the fact that his Government are paying subsidies to people all over the place to run the railways?

Viscount Goschen: My Lords, if there were no subsidies to the railways they would not run. They are different from airlines in their ability to generate income and cover their costs. It is clear that a good railway system has always been subsidised and will always be subsidised. There are socially necessary services involved. It is also equally clear that airlines can provide the services that their consumers want on a profitable basis. That is essentially the difference.

Viscount Caldecote: My Lords, can my noble friend say whether the Commission is also approving subsidies to European shipbuilding yards?

Viscount Goschen: My Lords, shipping has a different regime. There is considerable anxiety among British shipowners and shipbuilders on the state subsidy regime within Europe. The United Kingdom Government have pressed for more transparency in their accounts so that it is possible to see whether this state aid is legal or illegal. That is the crucial matter that we must determine.

Lord Dean of Beswick: My Lords, I agree in principle with opposing such financial assistance, but did not Commissioner Kinnock apply far more stringent conditions to this particular financial assistance than was the case on the last occasion? If that is the case, why will the Minister not tell us so, instead of trying to give the impression that the money was handed out with no conditions at all attached?

Viscount Goschen: My Lords, the important point is that conditions were attached last time, and look what happened. Despite the very strong conditions that were imposed last time that there would be no further state aid within the period of restructuring, the Spanish Government have returned and requested further state aid to inject into the restructuring of Iberia. It is true that Commissioner Kinnock attempted to impose strong conditions to the judgment, but we have only to see what has happened in the past. We do not believe that state aid should be injected into these airlines, conditions or no conditions.

Lord Clinton-Davis: My Lords, does the Minister agree that when he was Commissioner for Competition Sir Leon Brittan approved the first tranche of aid to Iberia? Does he also agree that so much was Sir Leon driven to despair on this occasion that he supported the

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view of Neil Kinnock, which in fact was the unanimous view of the whole Commission? Will the Minister explain to the House that even though he is so dismissive of the market investor principle in this case, the Government have sought to apply that principle in relation to aid to a number of railway companies under privatisation, with regard to a £80 million package to help to finance the new Jaguar plant at Castle Bromwich and with regard to a £61 million application for support for a Northern Ireland textile plant? Does he also recall in relation to all this that the Government, with a somewhat forked tongue in the circumstances, sought to apply for illicit state aids for British Aerospace and Rover?

Viscount Goschen: My Lords, I entirely reject everything that the noble Lord says. It is clear that the noble Lord finds himself in difficulties in addressing this decision by the Commission. I believe that he thinks that airlines should stand on their own two feet and should not have injections of capital, so he has sought to turn the Question to other areas. The essential point is that state aid must not be allowed in areas which distort competition. We have tried to create a single market in aviation throughout the Community. There is direct competition between airlines which provide a similar service. If there is that direct competition, we must ensure that airlines are not subsidised. How can British Airways, for example, and other United Kingdom carriers be expected to compete on an equal basis with loss-making airlines which have enormous sums of capital injected into them whenever they start failing?

Lord McNally: My Lords, is it not--

Noble Lords: Order!

Lord Strathclyde: My Lords, we have only 30 minutes for Questions. I think that we should move on to the next Question.

Further Education Policies

3.21 p.m.

Lord Dormand of Easington asked Her Majesty's Government:

    Whether they propose any changes in the implementation of their policies on further education.

The Minister of State, Department for Education and Employment (Lord Henley): My Lords, we gave further education and sixth-form colleges freedom from local authority control three years ago. We will continue to enable colleges to reap the benefits of independence, and to play their full part in widening opportunity and raising attainment in post-school education.

Lord Dormand of Easington: My Lords, as the funding of further education comes from two main sources--the Further Education Funding Council, which

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provides government money, and the Private Finance Initiative--what will be the position in any particular case where PFI fails to raise the necessary money?

Lord Henley: My Lords, I suspect that the noble Lord is being somewhat over-negative on these matters. I think that PFI will provide a great many opportunities for the further education sector. I very much hope that at the Further Education Funding Council's annual conference this Friday we might hear of some imaginative suggestions and projects. I can assure the noble Lord that there have been a great many such projects in the health service. I believe that about one-third of Private Finance Initiative projects in the health service were in the range of £1 million to £2 million, which is just the sort of thing for which the further education sector is looking. I have considerable optimism that we shall hear some good news in the future.

Lord Morris of Castle Morris: My Lords, can the Minister tell the House how, in view of the reductions in the amount of spending per student in the further education sector, that sector will be able to maintain its contribution to the achievement of national educational and training targets without doing devastating damage to the quality of education and training offered to those over 16 years of age?

Lord Henley: My Lords, perhaps I may put the noble Lord right. First, we have seen a growth in actual expenditure over current expenditure for the further education sector. Expenditure for the FEFC will be increased by 3.4 per cent. for 1996-97, compared with a 4 per cent. increase for the previous year--and that was in what I think everyone would acknowledge was a very difficult public expenditure round. I can also assure the noble Lord that we still see considerable scope, as in the past, for efficiency savings in the further education sector.

Lord Dormand of Easington: My Lords, in his answer to my supplementary question is the Minister saying that in every case PFI will provide the necessary finance? Are there not more students in further education now than ever before? Is there not a greater backlog of capital maintenance work to be carried out? Following the question which my noble friend has just asked, the Minister referred to figures for the past, but will he confirm these figures, which have been given to me in a letter from his colleague in another place: that the present funding is £159 million for the current year which will reduce to £59 million in 1998-99? Does not that contradict what the Minister has just told my noble friend? Will the Minister deal with the first part of my question, which is the most important part?

Lord Henley: My Lords, the noble Lord deals only with the capital expenditure and I can confirm that that goes down from £159 million in 1995-96 to some £59.3 million in 1998-99. That capital funding is still available and can be used on occasions when private finance will not lever in the necessary money. Perhaps I should remind the noble Lord that current expenditure--some £2.8 billion, which is a very considerable amount of

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money--will be increasing over the same period. That will allow the number of students in further education to increase dramatically. We estimate that the number will increase from a little over 1 million to 1,168,000.

Lord Dormand of Easington: My Lords, will the Minister answer my first question which, as I have said, is far and away the most important?

Lord Henley: My Lords, I am afraid that the noble Lord did not listen to me. I answered the noble Lord's further question when I said that money was available both from the Private Finance Initiative and from the capital allowed to the FEFC.


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