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Mike Kane (Wythenshawe and Sale East) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert.
I, too, congratulate the hon. Member for East Worthing and Shoreham (Tim Loughton) on the powerful personal testimony that he brought to us of constituents and others affected by the closure of flight schools. I also congratulate the hon. Members for North Antrim (Ian Paisley) and for Strangford (Jim Shannon) on their testimonies. For one moment, I thought the Democratic Unionist party was getting on a biblical stage—the tale of two sons, like Cain and Abel, one becoming a farmer and the other a shepherd. One will become a pilot and, on behalf of His Majesty’s official Opposition, I wish that son well in his endeavours.
We are in this debate because two flight schools have closed, one at Dundee airport and the other at Shoreham airport—I say that before I am admonished by the hon. Member for East Worthing and Shoreham, as my notes call it Brighton City airport—which is a sad loss of the jobs for trainers and staff. As the hon. Member for Strangford said, we have a world-class aviation sector in the UK, and we want to keep it that way.
The closure of those valuable facilities most severely impacted the aspiring student pilots who were just setting out on their careers. The closures left them and their families seriously out of pocket, as we have heard. Commercial pilot training can cost up to £150,000 and is not currently eligible for student funding, which is available for other professions such as law and medicine. With no mechanism for student finance, many aspiring pilots take extreme measures, such as multiple loans and—when they can—credit cards, borrowing from friends and families or, as Baroness Vere said as Aviation Minister back in 2019, relying on the bank of mum and dad to get through training.
In May this year, the Government published a report called, “Addressing the cost of pilot training”, which was a fascinating 62-page read in preparation for this debate—
Mike Kane
I thank the Minister for his support on that.
The report highlights the fact that the lack of diversity and the barriers to access are something we all agree on. This is in no way data, but in my capacity as shadow Aviation Minister I attend many events and conferences, and I am still surprised at the lack of diversity in the industry. I get the irony of somebody who looks like me saying that.
To return to the collapse of the two flight schools, the amounts owed to the individual students affected is about £4 million, with an average individual loss per student of some £90,000. That money is unlikely ever to be recovered, as some flight schools do not take payment by credit card—as has been pointed out—so the consumer protections afforded by that method of payment have not been possible. In addition to that, the students are unsecured creditors, so there is no legal requirement for them to be repaid the money—morally, however, that is another issue.
In the decade since 2007, the average cost of initial pilot training in the UK increased by about 54%. Various academic and industry studies undertaken on pilot recruitment have noted that of the thousands of potential pilots who start flight training every year, about 80% leave. The failure to fund tuition fully is cited as a major reason for the drop-out rate.
Research commissioned by the Department for Transport showed that increasingly dynamic market conditions in the light of covid-19 meant:
“Training organisations and airlines suffered financially from lack of operation during the pandemic and lockdowns”.
There is little doubt that being unable to operate would impact on such businesses. For example, Lufthansa Aviation Training suspended its training from the beginning of the pandemic. Interestingly, Lufthansa was able to offer all its 850 students full refunds. I wonder whether the chaos in the sector and the refusal by the Government to offer a sector-specific deal might have added to the knock-on effects we see now.
The heavy reliance on self-funding creates barriers to entry to the pilot profession, disproportionately affecting some demographic groups more than others. Only 6% of pilots worldwide are women, and just 4% are from BAME communities. How can that be? I would be interested to find out the figures for children of a traditional working-class background who cannot rely on the bank of mum and dad. Kids like me ruled out ever becoming a pilot, because there was not, and clearly still is not, a route for working-class children and children with no access to credit who were unwilling or unable to go into debt to fund the training. If I may, I will quote Baroness Vere again: back in 2019, she said that
“social mobility is a fundamental right and it should not be that some people are blocked out of entire careers just because they don’t have the ‘Bank of Mum & Dad’”.
The cost of learning to fly not only plays a key role in limiting the pool of talent that the profession can draw on, but hampers the diversity of the pilot community. There was an attempt to address diversity in the pilot workforce with the creation of a first officer apprenticeship, which is a level 6 qualification that involves training as a co-pilot over a two-year period. Although the scheme is welcome, it is flawed by its very design. Industry sources have said that the £27,000 funding cap is not sufficient to cover flight training. Furthermore, apprentices cannot be asked to take on debt to supplement their training, which puts the onus on the airlines. There are restrictions on bonding apprentices to training providers, but airlines are likely to be unwilling to invest sufficient sums of money in a person who might leave immediately on qualifying. Almost by design, the scheme is flawed.
Moreover, there is a concern that the cost of training to secure a pilot’s licence in the UK may begin to put UK airlines at a competitive disadvantage relative to counterparts in the European Union, where pilot training is less expensive. Other changes have an impact on that situation: since the UK exited the EU, potential non-UK candidates now require settled status to live and work in the UK. In addition, those undergoing pilot training in the UK will be required to sit additional exams to get additional licence approval, which has additional cost and time implications for students. Taking those matters into consideration, there is a real concern that trainees will opt out of a UK licence and fly on an EU licence only, which will significantly reduce the pool of pilots available here. A 2020 study shows that the emerging shortage of qualified pilots is a high priority for airlines. Respondents to the flight operations survey noted upcoming pilot shortages as a top five focus, and 22% said it was their leading focus.
The collapse of the schools only serves to highlight a number of issues in flight schools and wider issues with pilot training: flight schools’ operating models, funding for aspiring pilots, lack of diversity in the workforce and the complexity of the first officer apprenticeship scheme, which by its own construction and in its current format is destined to fail. There is much to be done to ensure that the job of a pilot is open to all, not just to those with a well-resourced bank of mum and dad. I look forward to the Government’s acting on the recommendations of their own report, “Options for addressing the cost of pilot training”, and ensuring a pipeline of talent from all demographics.
The Minister of State, Department for Transport (Jesse Norman)
It is a delight to see you in the Chair, Sir Robert. I thank everyone who has spoken in the debate, and I congratulate the hon. Member for Wythenshawe and Sale East (Mike Kane) on retaining his place in the shadow Transport team. It has been an interesting debate, and I am grateful to colleagues for their contributions. Aviation is a very important sector and is a matter of local importance in the constituencies involved.
Let me start by reiterating the apology that my noble Friend Baroness Vere gave to my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton). I know that she and he are to meet in a matter of days, and I look forward to that being a constructive and engaging conversation. I am delighted to respond to his concerns in this debate. As he will know, the Government regard the aviation sector as an important strategic asset. It contributes at least £14 billion to our GDP every year and supports some 230,000 jobs across all regions of the country. We recognise the sector’s importance both geographically and economically.
It is important to focus, as hon. Friends have done, on the dire impact of training operators’ failures on the students involved. There is a tremendous human cost, which has been brought out well during this debate. I have a particular sense of identification with it because I have a pilot’s licence myself, although tragically it has long since fallen out of use. It was paid for not by the bank of mum and dad but out of my own earnings, in case Opposition Members were wondering. I am the son of a pilot, the brother of pilots, the nephew of a pilot and the grandson of a pilot, so I have a very considerable personal understanding of the issues involved, as well as the ambition, inspiration and joy that flight gives young men and women across this country, as it has done for generations. I fully recognise the point that the hon. Member for Wythenshawe and Sale East made about the increasing importance of a relentless focus on improving diversity in the sector. He is absolutely right about that, in every dimension.
Having said that, what we have here, as far as I can tell, is the disorderly liquidation of three local aviation training operators. That carries with it tremendous disruption and difficulty, and it exacerbates the impact because an individual can literally turn up one day or—as colleagues’ constituents have done—receive an email saying that the institution to which they have confided their hopes, their dreams and a lot of money has gone, completely unexpectedly and without any notice, into liquidation. They may, and in many cases will, receive back none of the money that they have already contributed.
When we think about the wider picture, however, it is important to put things into perspective. May I offer the Chamber a correction to a number that has been used? In 2023—I am advised by civil servants that this is true—there were 11,675 applications for training across all licences in aviation. We are talking about terrible local impacts on a relatively small number of people so far and three failures of ATOs among some 270 registered flight schools across the UK. That is not to derogate for a second from the tremendous importance and extreme sadness and in some cases grief that has been inflicted; it is only to say that making general rules on the basis of a relatively small portion of the whole sector is something that one needs to bear in mind. When we think about the enormous sums that have been lost in some cases, we are talking about people who are in commercial licences at the very top of the pyramid and are therefore as close as one could be to potential long-term gainful employment.
I will come on later to what the CAA is doing and the suggestions that have been made, but let me just pick up on a couple of points that, rightly and importantly, have been made by my hon. Friend the Member for East Worthing and Shoreham. He is right that the pandemic had a difficult impact on the aviation industry generally and on the training sector. As he will recall, the Government made every effort, at considerable cost to the taxpayer, to support institutions, companies and individuals throughout the air transport sector. That amounted to something like £8 billion of pandemic-related support and included support through loan guarantees; support for exporters; the Bank of England’s covid corporate financing facility; the coronavirus job retention scheme, for which I was responsible; the Treasury’s furlough scheme; and the airport and ground operations support scheme. A tremendous amount of specific support for the sector was given during what was a completely unexpected and dramatic change in our business, social, personal and economic arrangements. My hon. Friend is absolutely right to focus on that; he is also right that fuel prices have gone up, which will have had the effect of driving prices upwards.
However, as a former Financial Secretary to the Treasury, I do not share my hon. Friend’s view that a cut to VAT would be the answer to the problem. There is a very simple reason for that. There are many cases of sectors in the UK economy that have called for VAT cuts. In a very small number of cases, because VAT is by design a broad-based tax, reductions have been made to levels of VAT. Very often, they have not been passed on as any kind of saving to the end user; they have gone to support the margins of the company. In the training operator business there may be some value in that, but it is the normal course of things that in a competitive private sector industry there will inevitably be organisations that for various reasons do not manage themselves effectively, or go bust for other reasons.
Tim Loughton
I am slightly disappointed by the Minister’s comment. This is not a huge mass industry; it is not beyond the wit of a regulator or of the Treasury to ensure that VAT savings are directly passed on, or else the companies would not be eligible. Even if the Minister will not consider this for the future, does he not think that there is a moral case for students who have lost their fees and are severely out of pocket at least to be refunded the VAT element that they paid, which has gone or may still go to the Treasury for a service that they have not received?
Jesse Norman
I am not making policy from where I stand; I was speaking as a former Treasury Minister about the general attitude towards VAT and the general problem that no Government of any stamp can compel a private company to pass a saving on to consumers. Indeed, whether or not savings are passed on is itself a function of the competitive conditions in the sector. I will come on to what the CAA can do later in my remarks, but although I understand my hon. Friend’s concern about the cost of VAT, let me remind him that the taxpayer will be a significant loser from the failure of these companies. I recognise a certain strength in his point about individual students being recognised; if he wishes to raise that point with the Treasury or with Baroness Vere, he is very welcome to do so. However, the general policy, as far as I am aware, is the one that I have enunciated for the Government.
Chris Law
I am trying to reflect on what the Minister has said about VAT, and specifically on one of the clear points that has been raised. We are at a competitive disadvantage because we charge but no other country in Europe is charging. If we look at the decline in flying schools and the issues with financing to go and study in the first place, and then someone is being asked to pay 20% on top, what is to stop any young aspiring pilot from saying, “Wait a minute, I’ll just go to Europe where I won’t have this extra 20% surcharge”?
Jesse Norman
Of course individuals are welcome—and will want—to consider all the options under all circumstances, but I have not accepted the hon. Member’s narrative that the sector is in decline. We have had three important local failures of flying schools, but in general the sector has rebounded remarkably well from the pandemic. I would not accept that it is in decline; in fact, in many ways it has made a robust recovery.
In his own remarks, the hon. Gentleman highlighted the failure of Tayside Aviation. As far as I understand it, however, it would absolutely have been within the power of the Scottish Government not to change VAT, but to provide some grant intervention to Tayside Aviation had they wished to do so, either as an education provider or under the heading of industrial strategy, both of which are devolved areas. I do not know whether the hon. Gentleman wants to comment on whether the Scottish Government had considered that, either as a matter of intervention at the time or now, in order to support Tayside Aviation if it wished to get back up as a trading entity.
The hon. Gentleman does not respond. Let me press on. The question is what we can do to support students under the very difficult circumstances in which they have found themselves. The CAA has responsibility for flight safety rather than for the financial wellbeing of the flight schools. Nevertheless, I think it has understood and recognised that there is every benefit to the UK in seeking to retain the value of students’ training so far. It has therefore enabled the transfer of training records to other ATOs so that, wherever possible, training is not lost. It also lies within the CAA’s power to extend the 18-month period in which students can restart their training; it can do so on a case-by-case basis for anyone caught out by exam timescales or other aspects.
The hon. Member for Wythenshawe and Sale East mentioned first officer apprenticeships. I do not share his rather negative approach. This is an important development, which can itself be further built on. It may not provide the full total towards the training, but it is a very substantial contribution. It remains available to sponsors of apprenticeships, beyond the individual students, to support—as they do in other industries—students who wish to complete the training under that framework.
It is also important to say that treating ATOs as higher education providers would carry costs to them. They would be required to register as higher education providers with the Office for Students. There would be a number of regulatory burdens that ATOs might wish to take on, but they might very well decide that they did not want to submit to them. Some of those would address the issue of concern here, for example through student protection plans, compliance with consumer protection laws, Ofsted inspections, quality and standards assessments and the like. My hon. Friend the Member for East Worthing and Shoreham may wish to pick up that point with my noble Friend Baroness Vere when he sees her. It is a matter of empirical investigation whether ATOs would be interested in registering as higher education providers with the Office for Students and whether they would treat it as a competitive trading advantage.
Ian Paisley
I understand and appreciate the Minister’s Treasury background. Does he accept that the student loans scheme is an investment in the value of what an educated person brings to society? We recognise the value of an arts degree, which we relate to salary, and that is very commendable. We recognise that for a pilot, it relates not the school they go to, but to the individual. A pilot will be in the higher echelons of earning, probably from day one, in a jet company. Surely the Government recognise that giving them a soft loan under the student loans scheme would be of great benefit to society, because society would get the money back more quickly. Is that not of value?
Jesse Norman
The hon. Gentleman is right to raise that interesting question. I have already talked about one scheme that has a similar approach—not a loan scheme, but an apprenticeship scheme. However, for a loan as he has described, the problem, which I have raised, would be the need to register with the Office for Students. As one goes up the flight training tree, one gets further away from basic education and closer and closer to a commercially valuable proposition that it is in the interest of companies in the aviation sector to support and finance. There may well be other things that can be done.
Ian Paisley
It is not unlike a doctor or a lawyer as they get further up the commercial tree in their training—it has that cross-application. A pilot may be training in instrument rating and instrument readings, which is a skill like an engineering skill.
Jesse Norman
The hon. Gentleman raises an interesting and somewhat philosophical question. I do not intend to get enormously technical on this issue, but the reason why, in the case of doctors, for example, this support has been given is that historically these doctors then go and work for the majority—perhaps all—of their careers in the NHS, in the discharge of a public function. If doctors left immediately to go and join commercial medical organisations, which an increasing number are, it might well be that, in some cases, from a public sector perspective, the philosophical question whether or not they should be supported by the taxpayer would be raised. I think we are in the same space of discussion; that is interesting.
I will say a couple of other things, if I may. Of course, the Department is working with industry and the Education and Skills Funding Agency on the first officer apprenticeship, as I mentioned. That, I think, has an important role to play in this.
Let me just pick up one other little thing that was just raised by colleagues before I close. The hon. Member for Dundee West (Chris Law) raised the question of PSOs. Of course, that does not directly have anything to do with this debate, but it is important. Let me just say that the Government recognise that PSOs are important to meet regional connectivity and levelling-up objectives. As I understand it—and I think he said—Dundee City Council has recently undertaken a tender for a new contract on the route from the end of October, and the Department has said that it will consider the application. It is obviously not appropriate for me to prejudge that in a debate today in Parliament, but the Government are very much looking forward to seeing that application and will judge it, of course, on its merits, in the usual way, in due course. With that, I think I will sit down.
Tim Loughton
I will not take up too much more of the Chamber’s time, because I spoke fairly extensively to start with, but I would certainly like to thank hon. colleagues who have brought to bear their own experiences and those of their families, particularly from the Northern Ireland angle, and from Dundee and the large and important training school that the hon. Member for Dundee West (Chris Law) spoke about in detail.
As I started by saying, this is not a localised issue; it is a UK-wide issue, and we have had three parts of the United Kingdom represented in contributions today, for which I am grateful. But I must say that I am disappointed by the Minister’s response. I fear that he spoke rather more with a Treasury hat on than with his more recent Transport Minister’s hat on. He does seem to be in a state of denial about a very real and serious problem, which is recognised by the industry. He just does not seem to acknowledge that flying schools are in a state of decline and the number of pilots that they have the capacity to produce is substantially declining.
I quoted, again at the outset, that around 2,500 pilot licences were granted in 2015, whereas this year, they are anticipated to be one fifth of that, at 500. That is not a healthy, vibrant business as it stands.
Jesse Norman
I do not think that that number is correct. Let me put that on the record.
Tim Loughton
Okay, well, those are the figures that have been provided by those in the industry. The three flying training schools that have gone under produced many hundreds of pilots a year. That represented a substantial part of the capacity within the United Kingdom. Therefore, I am afraid that this is not a localised problem, involving just a few individual schools. There are serious fears for the sustainability of many of the surviving large schools in particular.
I will not rerun all of the issues that we came up with earlier, but there are serious problems that I hope we will be able to air in more detail when we meet the Minister about the immediate problem of the hundreds of students who find themselves without a course, without the funds to find an alternative course, and without an awful lot from the CAA. I am afraid that that has been the experience, hence the request for the CAA to step up and step in rather more proactively than it has. We need an acknowledgment that students who pay fees up front are vulnerable to the flying schools going out of business, and are without the protections we take for granted when we buy goods and services or embark on educational courses elsewhere. Again, I take issue with the Minister’s challenging that this is some form of education. The clue is in the title: these are flying schools, which are training people, in the air rather than on the ground, to provide a vital public service on which this country relies.
It is not just the training schools and their immediate employees that will be suffering. It is the local economies—the economies of smaller regional airports that rely on the flying training schools for a great deal of their revenue, from touchdown fees or the purchase of kerosene. That is often the most profitable part of the business of those small airports and crucial to their survival, not least my own in Shoreham.
Contrary to what the Minister says, the implications go beyond just the three individual cases of flying training schools that have gone under in the last 10 months. I am grateful that we have had this airing of an issue that has not had a great deal of publicity but which has a great many implications, well beyond the constituencies represented today and the three specific training schools I have mentioned. I hope we can take those points further when we meet the noble Baroness, which I think is next week. I will be happy if any colleagues here wish to join me in that delegation along with BALPA. I am grateful for the time in the Chamber.
Question put and agreed to.
Resolved,
That this House has considered flying schools.