Flying Schools

Chris Law Excerpts

Tuesday 12th September 2023 Westminster Hall

[Chris Law (Dundee West) (SNP)]

I thank the hon. Member for East Worthing and Shoreham (Tim Loughton) for securing this debate that allows us to discuss what is a wide-ranging and important topic, given the number of flying schools that have closed over the past 12 months and the impact that has had on those affected by the closures. Unfortunately, like others who have already spoken, my constituency of Dundee West has direct experience of that, and its situation has many parallels with what other Members have described.

With great sadness, Tayside Aviation in Dundee, one of Scotland’s leading flight schools for more than 50 years, went into administration and ceased trading in April. At the time of the school’s collapse, around 60 trainee pilots were either participating in or enrolled in training, with fees paid in advance. As we have heard, unlike for most other career paths, student loans cannot be used to fund flying training. The likelihood of the payback of student loans from a pilot career is arguably greater than many others, and that anomaly needs to be fixed.

Furthermore, pilot training is uniquely subject to VAT in the UK, whereas it is exempt in other countries. That is astonishing, because it is about education. We are taxing those who often take loans from their parents an extra 20%, on top of fees that could be upwards of £70,000 or £80,000. The Minister will surely agree that we need a level playing field. Charging VAT limits the number of people who can afford flying as a career path and increases the numbers who choose to train abroad, thus reducing the viability of training schools in the UK.

The costs associated with flight training are very significant and have to be wholly met by the trainee pilot. They encompass tuition fees, aircraft rental, exams and licences. For many aspiring pilots, realising their dream of taking to the skies comes with a hefty price tag. The closure of Tayside Aviation left numerous trainees in a dire situation after investing significant sums of money in their training, only to see their dreams shattered.

It has been reported that some students have lost upwards of £50,000, with no indication of whether they will receive any of it back and their future career ambitions now in jeopardy. In one instance, a trainee made a £6,000 payment to Tayside Aviation just five hours before the company went bust. Although some who paid using credit cards have been successful in clawing back some of their moneys, most will receive very little of what they paid. Many families were in contact with me about their individual cases, and I share deep concern and sympathy for those who, for instance, had to remortgage homes to fund their training and were subsequently affected by the business’s collapse.

The lack of financial regulation in the flying school industry exacerbates the financial risks. Unlike many other educational institutions, flying schools are not subject to the same level of oversight and financial protection measures, which begs the question: why? Trainee pilots are left without adequate safeguards to protect their investments when a flying school faces financial difficulties. In the case of Tayside Aviation, trainees are left with uncertainty, struggling to recover their investments and unsure of where to turn for support. In a recent letter to the Transport Secretary, it has been noted that the potential sum owed to the customers of now-defunct flying schools is estimated at around £4 million.

Furthermore, the schools often required advance payments because of the elevated risk of insolvency. Disturbingly, anecdotal reports suggest that certain flying schools refuse to accept credit card payments for such advances, as we have already heard, leaving consumers without the protection afforded by the Consumer Credit Act. This concerning situation underscores the need for greater financial safeguards and transparency in the aviation education sector to protect the rights and investments of aspiring pilots.

Although flight schools fall under the regulatory purview of the Civil Aviation Authority, it is crucial to note that that oversight primarily covers safety measures and the quality of pilot training. It does not extend to monitoring financial stability or providing protections for would-be pilots. To enhance consumer protection and financial transparency in the aviation education sector, it has been suggested by representatives of BALPA, Wings Alliance, Flyer magazine and Bristol Groundschool that the CAA should consider implementing specific requirements as part of a flying school’s approval process. Requirements could include limiting advance payments from consumers to a maximum of £5,000 and mandating the availability of credit card payment options without additional surcharges. Sounds perfectly reasonable, surely?

Additionally, the CAA should conduct a comprehensive review of its oversight procedures for flying schools, aiming to ensure full compliance with retained EU law. Furthermore, the establishment of a dedicated consumer protection scheme, akin to the ATOL—air travel organisers’ licence—scheme for package holiday customers, could be explored to safeguard the funds of student pilots and provide them and their families with greater financial security.

The demise of Tayside Aviation has been of detriment not only to its trainees but to the city and its wider economy. Tayside Aviation supported 22 full-time jobs and delivered the RAF air cadet pilot scheme. The collapse also threatens to undermine a key project in the Tay cities deal. Tayside Aviation played a pivotal role in the Tay cities initiative to establish an aviation academy for Scotland. The project aims to cultivate a proficient workforce comprising aircraft engineers, air traffic controllers and emerging pilots. With a budget of over £8 million, the initiative seeks to enhance infrastructure and foster the seamless integration of aviation education and training at local, regional and national scales.

The lion’s share of the investment is designated for Perth College and its subsidiary, Air Service Training Ltd. An allocation of £2 million was specifically earmarked for the Dundee campus of the aviation academy for Scotland, to be operated by Tayside Aviation. The Dundee campus would have a primary focus on delivering comprehensive training programmes for aspiring pilots and future air traffic management professionals. It is therefore imperative that a flight school at Dundee airport is re-established. I firmly believe that the facilities there remain an attractive proposition for any prospective buyer, including airlines looking to train their own pilots.

Moreover, the viability of the airport itself is dependent on its regular use, through flying clubs, education and training and the maintenance of commercial passenger routes. Bearing that in mind, the UK Government must recognise how vital it is that the public service obligation for flights between Dundee and London is renewed at the end of next month, when the current contract ends. Historically, the PSO has been funded by the UK Government, the Scottish Government and Dundee City Council. The case for the continuation of the PSO has been accepted, which has allowed the competitive tender process to commence. However, no confirmation has been given in respect of future funding for the PSO. The total tender amount is expected to increase, so it needs to be affordable for all parties.

The PSO underpins the wider activity at Dundee airport and is vital to its future success and connectivity. It makes the city and the region more attractive to investors, businesses and tourists. Analysis has shown that the economic benefit brought by the PSO has the potential to be six times the cost of the PSO contract. First, in principle, do the UK Government continue to support the Dundee-to-London PSO? If so, do they recognise the importance of the Tayside Aviation flying school, alongside the route, to the future of Dundee airport?

Secondly, subject to detailed assessment of tenders received, will UK Government funding for the PSO continue at the same level and increase if necessary? Given that it is a PSO route, what further steps can the UK Government take to support the viability of connectivity between Dundee, Scotland’s islands and the rest of the UK?

Furthermore, recognising the importance of the PSO to the operations at Dundee airport, is there scope to explore further revenue funding to support the PSO through the Tay cities deal, as part of a wider Dundee airport project, should there be a funding deficit? I have written to the Minister responsible for aviation to request an urgent meeting to discuss this issue and to look for a way forward for both the flight school and the PSO, so that they can secure a future at the airport. I would be grateful if the Minister could address those points.

Finally, with flying schools closing, airports and routes at risk, and the number of UK commercial pilot licence holders down 10%, we do not want to be in the same situation as the USA, where regional air services have been decimated by pilot shortages and more than 100 small communities have lost some or all of their air services in the last two years.

Our airports and airlines and the people who work for them are vital for domestic and international connectivity, which we value so highly. The loss of flight schools does not involve simple cases of enterprises going out of business. The closures are devastating to the careers of potential pilots, who have had to invest huge sums of money that are not expected of those in other professions. Flight schools are crucial to the aviation industry and, as outlined, critical to the success of smaller airports throughout the country. It is essential that would-be pilots are supported properly and that flights schools are regulated properly, enabling trainees and the industry to have the confidence and certainty to succeed.

--- Later in debate ---

[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.