Civil Aviation Bill

Lord Jenkin of Roding Excerpts

Monday 2nd July 2012 Grand Committee

[Lord Rosser]

My Lords, this is a probing amendment. The Bill provides that operators of dominant areas located at dominant airports require a licence to levy charges for airport operation services, and states that an airport area is dominant if the CAA makes a determination that the market power test is met in relation to the area. Subsection (8) of Clause 7 states that the Civil Aviation Authority may make separate market power determinations in respect of different areas at the same airport with the same relevant operator and may also make a market power determination in respect of an airport area that consists of two or more areas that are not adjacent if the areas are located at the same airport. Subsection (9) then states that a market power determination ceases to have effect if the Civil Aviation Authority publishes a notice of a further market power determination in relation to the airport area or in relation to an area that includes all of the airport area.

The effect of the amendment, which would add further words to the end of Clause 7(8), would be to require the Civil Aviation Authority, at such intervals as it considers appropriate, to,

“review market power determinations made on the basis of an earlier analysis”.

It is not clear whether other wording in the clause, or elsewhere in the Bill, is intended to require the Civil Aviation Authority to review decisions that it has made on market power determination. Circumstances can change over a period of time, and factors that were important in the original decision may cease to be so, or other factors may come into play.

Other subsections in Clause 7 say that the Civil Aviation Authority may make a determination that the market power test is or is not met in relation to an airport area, and that the Civil Aviation Authority must make a market power determination if asked to do so by the operator of the airport area or any other person whose interests are likely to be materially affected by the determination, subject to certain laid-down criteria being met.

There ought to be a requirement for the Civil Aviation Authority to review market power determinations it has made, irrespective of whether it is asked to do so. Subject to what the Minister has to say in reply, that does not appear to be a requirement laid down in the Bill. Even the reference in subsection (1) to the Civil Aviation Authority making a determination whenever it considers it appropriate to do so is not clear as to whether it also means reviewing a market power determination it has made that the test has been met or whether it applies only to making determinations where it has not previously been decided that the test has been met.

If the Minister does not intend to accept the amendment, I hope that he will say why the Government do not consider it appropriate, if that be their argument, or which provisions already in the Bill cover the issue raised in the amendment. Perhaps the Minister could also say how often the Government expect the Civil Aviation Authority to be making market power determinations. Are they likely to be regular occurrences and is it anticipated that such decisions will have to be revised or amended on a regular or frequent basis or only rarely? I beg to move.

[Lord Jenkin of Roding]

I was surprised at the last sitting of the Committee when my noble friend made it clear that it is envisaged by the Government that there should be competition between two different terminals at the same airport. At an airport such as the JFK International in New York, where the terminals are situated widely apart and are approached in different ways, there may be some sense in that. Even in as large an airport as Heathrow, which now has five terminals, I find it difficult to conceive how there could be competition between the various terminals. It is built into this clause, on which the noble Lord, Lord Rosser, has moved his amendment, which seems to have some merit.

I would be grateful if, in responding, my noble friend could describe how he sees such competition arising. At the moment, taking Heathrow or Gatwick as an example, they are all under the same management. It may be separate between the airports; I find it difficult to conceive how it might happen between terminals. I would be grateful if my noble friend could explain how this might come about. It would obviously need to involve a change of ownership between the different terminals. Is there any prospect of that or is it somehow envisaged that there should be competition without a change of ownership? Perhaps my noble friend might explain that.

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[Lord Jenkin of Roding]

My noble friend must explain how it would work. I find it very difficult to see how it would if the facilities were under the same management.

[Earl Attlee]

My Lords, if they were under separate management there could be a competition situation. Under the current legislation, one simply cannot regulate because it does not provide for competition within one airport. Therefore, we are future-proofing the legislation.

The CAA’s functions under Chapter 1 comprise, broadly, deciding whether an airport operator should be subject to regulation—and if it should, regulating it accordingly. Clause 1(1) requires the CAA to carry out its functions under Chapter 1 in order to further the interests of passengers and freight owners in the provision of airport services. Under Clause 1(2) the CAA is required to promote competition when doing so, but only where it is appropriate to its carrying out its functions under Chapter 1. This is set out in Clause 1(2).

The concept of competition in provision captures competition in the provision of airport operational services between all airports, regulated and non-regulated, and competition in airport operational services within airports—for example, competition between terminals. However, the CAA must promote competition only where appropriate. It would not be appropriate to promote competition where the CAA was not carrying out its duty under Clause 1(1)—specifically, where promoting competition does not further the interests of users of air transport services in the range, availability, continuity, cost and quality of airport operational services.

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[Lord Soley]

Before the Minister replies, I was looking at this with some interest. I cannot help feeling that the issue might be one of parliamentary drafting. I would like to know whether the CAA, the airlines or the Competition Commission asked for the wording to be changed. My noble friend Lord Rosser has already pointed out that there is a change of wording, with “the wrong exercise”, but it is also odd that the original wording from Schedule 1 is in the present tense, whereas the wording in the amendment is in the past tense. I cannot help feeling that the parliamentary draftsman who did it first was found to have got something slightly wrong; I am not sure what. It is puzzling why that wording has changed from the present to the past tense, unless it is just for a legal reason. If there is another reason, I would like to see where the amendment came from and why.

[Lord Jenkin of Roding]

My Lords, I am full of admiration for the textual criticism of the noble Lords opposite. I have a rather simpler question for my noble friend. As I listen to him, and I try to do so carefully, the main purpose of this large group of amendments is to ensure that the same rules apply to the Competition Commission and the Competition Appeal Tribunal. How is it that anybody ever thought that the rules should be different? Why is it only at this stage that we are making them all the same? Was there some purpose to the way in which the Bill was originally drafted? I would be most grateful for an explanation. I am sure that there is a perfectly good reason, but I do not know what it is.

[Lord Soley]

There is a reason I am picking up on this, of course. I am a member of the Delegated Powers and Regulatory Reform Committee. We are getting increasingly worried about the quality of drafting of government Bills. It looks like a case where the drafting has changed for some reason. I do not want to be critical of the parliamentary draftsman concerned without knowing the facts but, if we flag it up as rather odd, there might be an explanation. I do not know what it is, and I would quite like to.

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[Earl Attlee]

My Lords, it is probably best if I write to noble Lords; this is a very technical point.

[Lord Jenkin of Roding]

I have not heard an answer to my question. Why were there different rules for the Competition Commission and the Competition Appeal Tribunal? What was the original reason for having different rules? I entirely support the proposition that the rules should be the same; it makes a great deal of sense. However, I am puzzled by why somebody at some stage thought they should be different.

[Earl Attlee]

My Lords, as I said, originally the grounds of appeal were based on statutory precedent and retrospective appeals to the CC and the CAT. The wording varied slightly; that is how the inconsistency arose.

[Lord Jenkin of Roding]

At least we are getting it right.

Amendment 20 agreed.

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[Lord Berkeley]

I suppose my noble friend is thinking in particular about those bankers who are now all over the press for possibly having committed criminal acts to fiddle the LIBOR. They are probably the only people who could afford to spend an extra £2,000 or so to save five or 10 minutes—or maybe several hours—coming into the country. There is just one thing that I would add to this. There is some benefit in having famous people who are prepared to speak out going through the same process as everyone else. Occasionally, they get so fed up that they go to the media and complain about it. I suspect that part of the reason why things are getting better at immigration in airports is that one or two people have had the guts to speak out and say, “This is iniquitous”. If these people were tempted to jump the queue by paying £1,000 or £2,000, we would lose that. My noble friend has made a very strong argument for having this in legislation on the basis that people should not pay extra for special treatment.

[Lord Jenkin of Roding]

I should like to be reassured that the noble Lord, Lord Davies of Oldham, does not seek to insist that everyone must stand in the same queue for check-in. If you buy a first-class ticket, many airlines have special check-in counters for such travellers. That seems entirely appropriate and entirely different from going through immigration, either outwards or inwards. The amendment specifically mentions check-in. However, it seems entirely appropriate that if you buy a first-class ticket you can go to a first-class check-in desk and not wait as long as you would if you had bought a standard fare.

[Lord Trefgarne]

Perhaps the noble Lord will tell us how he proposes that disabled people should be handled. They often have special provision at airports, which is necessary and very proper.

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Moved by

[Lord Jenkin of Roding]

27A: Clause 24, page 17, line 10, at beginning insert “except in relation to a relevant financial arrangements condition,”

[Lord Jenkin of Roding]

My Lords, we can also discuss Amendments 28A, 28B and 29A. I can deal with this fairly briefly because I made a point about it at Second Reading. No doubt noble Lords will recognise that this is the amendment which raises in Committee the issue that I described to the House on 13 June at column 1379. The problem is relatively simple. Appeals can be made by anybody who considers himself disadvantaged as a result of decisions affecting the airports.

The British Airports Authority raised the question of whether it could be to their huge disadvantage if they were trying to raise the large sums of money that they invest every year. I quoted the figures at Second Reading. It is investing very large sums in our airports. That investment depends entirely on confidence and a degree of certainty, otherwise the markets will be less likely to advance money, or will charge more, which of course would immediately affect the costs of the operation and therefore the charges to passengers.

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[Lord Trefgarne]

I am bound to tell the noble Lord that his answer has been wholly unconvincing on this matter. I hope he will undertake to reconsider and bring forward amendments if he thinks fit at the next stage.

[Lord Jenkin of Roding]

When my noble friend started his reply by talking about the amendment being too extensive, I thought he was going to move on to say that a redrafted one that was not quite so widely drawn might meet with his approval. As my noble friend proceeded, however, that possibility seemed to disappear over the horizon until we got to the end when he said that he will continue to discuss this with his right honourable friend the Minister of State at the Department for Transport. I hope that will be a serious reconsideration. This is not a frivolous point and it is not covered by saying that the Competition Commission could dismiss appeals as being frivolous or pointless.

Of course, the financial markets would be totally spooked by the threat of an interruption which, as the noble Lord, Lord Soley, said, might last for more than six months. They would not be prepared to go on lending and the whole investment programme would be threatened. This could not be in the interest of passengers. I understand that my noble friend has to be cautious about what he says, but when he said at the end that he would not reconsider it but would discuss it with the Minister of State, I paid more attention to the second point than the first. Perhaps we are making progress. If it is a question of drafting something that removes the risk only so far as is necessary, I am sure that the lawyers working for BAA—perhaps with the department lawyers or parliamentary counsel—would be able to find a form of words. In the mean time, Ministers must be willing to recognise that this problem has to be dealt with and cannot be put off.

[Lord Soley]

Another way of approaching it is to allow the CAA to take into account the risk to investment before coming forward with any appeal. That is another way of coming at the same problem.

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[Lord Jenkin of Roding]

I am grateful to the noble Lord, Lord Soley, who has been extremely supportive throughout this, raising a number of useful points. This has been a valuable debate. The point that was raised at Second Reading has now been exposed here. My noble friend met the BAA people and it seems that we are making some progress. However, it takes two to tango. I am not sure I would want to tango with my noble friend, although it might be rather fun, but I hope that what he has said indicates that minds are not closed and that the Government will be prepared to consider this between now and Report stage.

The Government would lay themselves open to criticism if they put anything in this Bill which was liable to put at risk the huge investment programme that BAA has at its airports. That is the point. However unlikely, the damage could be immense. Having said that, I am sure the Minister has recognised the support around the Committee and I beg leave to withdraw my amendment.

Amendment 27A withdrawn.

Amendment 28

Moved by