Civil Aviation Bill

Lord Clinton-Davis Excerpts

Wednesday 13th June 2012 Lords Chamber

[Earl Attlee]

My Lords, we are an island nation and our access to the rest of the world—and the rest of the world’s access to us—is primarily through air travel. That is why the aviation sector is so important to our economy. In 2010, goods worth £113 billion were moved by air between the UK and non-EU countries. In the same year, UK airports served nearly 400 international destinations. That level of activity is possible because over the past 30 years the aviation industry has changed to meet the needs of the customer. The emergence of low-cost carriers is one example of how the industry has innovated and diversified. There has also been an increase in the number of people travelling by air in this country, from 59 million passengers in 1982 to 211 million in 2010.

While the sector has changed dramatically, the regulatory framework which governs it has not. Much of our aviation regulation originated in the 1980s, and needs to be brought into the 21st century. The Government are committed to bringing vital reform to our aviation regulation. In a moment I will set out this reform in more detail, but let me first make clear the important theme that runs through the Bill: putting the interests of the passenger at the heart of airport regulation. For the first time, the CAA’s primary economic regulation duty will be to users of air transport services—that is, the passengers and owners of cargo.

The Bill introduces reform in four areas: the economic regulation of airports, the legislative framework of the CAA, the Air Travel Organisers’ Licensing scheme, and aviation security. I would like to explain each of these in turn, beginning with the reform to the economic regulation of airports. In the UK, the gas, electricity, water, telecoms and post sectors all have some level of economic regulation. Economic regulation typically operates through an independent regulator capping the prices that companies with substantial market power are able to charge and specifying levels of service quality. Much of the aviation industry in this country is competitive. That is how the Government prefer it to be. Effective competition gives firms the incentives to invest and improve efficiency, choice, and service quality.

However, a small number of airports—currently Heathrow, Gatwick and Stansted—have substantial market power and are not subject to sufficient levels of competition. In order to replicate the effects of a competitive market on these airports, the CAA exercises its powers of economic regulation in the form of price caps and service quality requirements. However, there is compelling evidence that the framework for the economic regulation of airports needs updating. The Competition Commission has concluded that the regime distorts competition between airlines and should be reformed. Advice from an independent panel of experts and responses from three evidence-gathering exercises has further indicated that the current regime is not fit for purpose. I should also add that the previous Government agreed that reform is necessary—a fact that helps explain the considerable degree of cross-party support the Bill has attracted so far.

The most common criticisms of the current regime are that the regulation is disproportionate and difficult to adapt to individual airports, that the CAA is unable to respond effectively to extraordinary events such as volcanic ash or extreme weather, that the regulator is insufficiently accountable for its decisions and its priorities are unclear, and that the regulatory process is burdensome and inefficient. The Bill would remedy these problems.

Where the current legislation gives the CAA four separate and sometimes competing duties, the Bill replaces them with a primary duty to passengers and owners of cargo. Where the CAA is presently constrained by rigid rules that require it to set five-year price caps when regulating dominant airports, the Bill would give the CAA a modern licensing system. Under this new system, licence conditions could be tailored to individual airports to tackle specific challenges at particular times. This licensing system would also enable the CAA to reduce the degree of economic regulation imposed on individual airports if it believed that this would benefit passengers. For example, instead of controlling prices, it could monitor prices while regulating certain aspects of service quality. The new system would also enable the CAA to impose different regulatory time periods. For example, setting longer periods for price controls would provide greater certainty and could stimulate investment.

Currently, it is the responsibility of the Secretary of State to decide which airports should be subject to economic regulation. The Bill proposes that the CAA, as an independent and expert body, should make that decision against clearly defined criteria set out in the legislation. Another criticism of the current regime is the lack of accountability it provides for key regulatory decisions. At present, judicial review is the only way to challenge the CAA’s decisions on the price cap and service quality standards that airports must meet. Under the Bill, the licence conditions imposed will be appealable by the licence holders and materially affected airlines. These appeals will be made to the Competition Commission, thereby removing the need to go straight to judicial review. The decision on whether an airport is dominant will be also be appealable to the Competition Appeal Tribunal. To summarise, the reforms will deliver a new system of regulation that is fairer, more flexible, and more focused than the current regime.

I turn to reforming the legislative framework of the CAA itself. Measures in Part 2 of the Bill will change the way in which the CAA operates, improving transparency and accountability; removing unnecessary government involvement and funding; and cutting red tape. The Government believe that a more transparent system of providing information would be of benefit to the public. At the moment it is very difficult for passengers to compare air services—for example, to establish which airline is most likely to lose luggage, or which airport garners the most complaints from passengers. It is also difficult for consumers to find out environmental information about aviation.

In 2011, PricewaterhouseCoopers looked at the reports of 46 world airlines and found, for example, that only one-third reported on their noise levels. The Bill will create a new duty for the CAA to publish, or arrange for the aviation sector to publish, information to help users compare services. The CAA will also be given a duty to inform the public about the environmental effects of civil aviation in the UK. It is important that these duties are performed proportionately, so the CAA will have to consult on its approach and have regard to the principle that the benefits of taking action should outweigh any adverse effects.

Other measures to modernise the legislative framework of the CAA include giving the CAA new freedoms to appoint its own executive directors. Where at the moment the CAA has recourse only to slow, costly, and often disproportionate criminal sanctions in enforcing regulations, the Bill will enable the Secretary of State to give the CAA powers to enforce offences through civil sanctions. I am pleased to say that Part 2 of the Bill also brings forward a recommendation that was made by this House.

In the course of its licensing duties, the CAA collects medical data on individuals in the air transport industry. In 2007, your Lordships’ Committee on Science and Technology, as part of its inquiry into air travel and health, recommended that anonymised medical data held by the CAA should be made available for ethically approved medical research. Clause 104 meets this recommendation. Of course, we have built in safeguards to help to ensure these data are used appropriately. I urge your Lordships to read the appropriate section carefully.

I will now move on to our proposals to improve the regulation of aviation security. Keeping people safe and secure when they travel is of prime importance. At present, aviation safety is regulated by the CAA, while security regulation is carried out by the DfT. The Bill would move security regulation from the DfT to the expert regulator, the CAA. On both safety and security, the aviation industry would have to deal with only one regulator, not two. The move would have the further advantage of bringing the “user pays” principle to aviation security. The costs of the aviation industry should, as far as possible, be paid for by the people who use it. At the moment, the aviation industry pays for safety regulation, but the public purse pays for security regulation. The position under the Bill would be fairer.

The final measure in the Bill that I will mention, which accounts for just one clause, Clause 94, is the reform to the Air Travel Organisers’ Licensing scheme—ATOL for short. Over the years the ATOL scheme has given peace of mind to millions of holidaymakers who have known that because their holiday is covered by the scheme they will not be left stranded or out of pocket if their travel company becomes insolvent. However, diversification in the holiday market since the scheme was set up—in particular, the changes associated with internet booking—mean that it is no longer clear to some consumers whether their holiday is ATOL-protected or not.

Certain sorts of holiday—for example, those sold by airlines and on an agent for the consumer basis—cannot currently be required to be included in the ATOL scheme because they fall outside the relevant powers in Section 71 of the Civil Aviation Act 1982. So Clause 94 of this Bill would allow us to improve clarity for the consumer, by giving the Secretary of State powers to add more holidays to the ATOL scheme, including holidays sold by airlines and agents for the consumer. This should also mean that businesses selling holidays that include a flight will have a more coherent and consistent regulatory framework in which to operate.

The Civil Aviation Bill has undergone thorough scrutiny—

[Lord Clinton-Davis]

The Minister is right to stress the importance of aviation to this country. Does it not follow that the pilots are an extremely important part of that? Why did 91% of the members of the BALPA union consider the Government to be not supporting the industry sufficiently? Is that not a serious point that ought to be taken into account?

[Earl Attlee]

My Lords, I am sure it is a very serious point. I will be meeting representatives of BALPA shortly, certainly before the Committee stage starts.

The Transport Committee found the Bill to be clearly welcomed by the aviation industry, including airlines, airports and the CAA. It also found that the draft Bill has been,

“subject to detailed review and consultation over a lengthy period”—

and, although it raised some points which have since been picked up in the Commons, it found that the Bill—

“appears to offer a better way to regulate UK airports in the future”.

I look forward to debating the merits of the Bill with your Lordships in this Chamber. I am confident that we will maintain the high level of scrutiny that the Bill deserves and has attracted so far.

I beg to move.

--- Later in debate ---

[Lord Bradshaw]

My Lords, this is not a debate about determining new runway capacity. I believe that we can make much better use of the capacity we already have. In preparation for this Bill, I have been to Luton, Gatwick, Stansted, and Birmingham airports. It is obvious that there is plenty of spare capacity which can be bought online. Releasing capacity is very much tied in with having good quality public transport access. This area needs attention and probably ought to be addressed when the Government consider the HLOS target for the railway. However, the improvements to surface capacity—for example, between Stansted and London—would benefit a huge number of people who live in the Lea Valley and at the moment enjoy what I would call a less-than-good train service.

I wish that people would stop talking down—I am talking about what is going in the press, not in this debate—the ability of airports within easy reach of London to maintain good air services throughout the world. If we take Germany as an example, it is not necessary to have one hub airport which offers everything. Members will know that, for example, Gatwick now has two services to China, one to Hong Kong and one to South Korea, and one other which has been started recently. It shows that when there is competition between the airports, they seek out the markets to which Heathrow draws a lot of attention but which can, in fact, be served quite effectively by other places. Gatwick and Birmingham are not far from London, and Luton would be very much more convenient if the arrangements for getting people from the train to the plane were anything other than third world.

We support the general thrust of the Bill and, particularly, devolved power to the CAA and the extension of the ATOL licence to enhance the protection of passengers and holidaymakers. Does the Minister consider that the proposed charges are sufficient to eliminate the insolvency of the Air Travel Trust Fund? That is, the fund out of which people are compensated, which I believe has an accumulated deficit of £40 million. However, we are more concerned that the CAA should have environmental objectives and duties relating to pollution and noise. These objectives should, of course, be funded by airport charges levied on airlines. Again, is the noble Earl minded to engage seriously with the environmental issues of pollution and noise?

I am a little concerned about the words in the Bill concerning a market power test. When Stansted, Gatwick and Heathrow were all part of the British Airways Authority there was not much competition between them, but Gatwick has shown that there can be competition. It has 25% spare capacity and could be an effective competitor for a number of services from Heathrow. Unless there is market power, there is no need for regulation. Regulation is necessary in the absence of fair competition.

I want to draw the Minister’s attention to the scope of rights of appeal, which he touched on in his opening remarks. To protect airport investment in environmental improvements, many airlines will attempt to use the proposed appeal mechanism as a delaying tactic. I leave it to noble Lords to imagine which airlines might wish to avoid any charges at all, but they will have to be made if we are to meet the objectives. Of course, the environmental duty should apply not only to the three designated airports, but to those which handle more than 5 million passengers a year. That would include Manchester, Luton, Birmingham, Edinburgh, Glasgow, Bristol and Liverpool airports.

There is also concern that in proposing to control the environmental problems, the CAA will invent, as it were, a new bureaucracy. Almost all of the airports’ annual reports include reports about pollution and noise, as well as on things like the use of water and salvage. We should not seek to duplicate work, but simply to harmonise best practice between the various airports.

[Lord Clinton-Davis]

Will the noble Lord say something about the new generation of aircraft? Are they not bound to be able to limit noise more effectively?

[Lord Bradshaw]

Of course they will because every aircraft manufacturer is striving to produce quieter aircraft, and that we would like to see. It is not just a question of noise from the aircraft, it also concerns maintaining the right take-off trajectory and angle of climb, which can significantly reduce noise. However, I would draw the noble Lord’s attention to the fact that more than 50% of the pollution relates to ground access. It is not the aircraft, but what happens on the ground, and it is that area which I would ask the CAA particularly to review.

Lastly, I refer to the practice of stacking. What progress is being made on the elimination of stacking through better control of the airspace? It is not reasonable for an aircraft flying from Hong Kong to arrive an hour early and then circle around London. If there is a tail wind, the whole flight can be regulated so that the aircraft travels less quickly, which would save fuel and ensure that it arrives at London airport when it is ready to accept it. We should try to use technology and the single-sky policy to control airspace generally and thus ensure that aeroplanes reach their destinations on time. You cannot have trains stacked outside stations; you have timetables to regulate them. I believe that the same is true of aircraft.

--- Later in debate ---

[Lord Clinton-Davis]

I speak as a former Aviation Minister and European Union Commissioner for Transport and the Environment. Those experiences have some relevance to this debate.

It is absolutely right to emphasise the importance of aviation, as the noble Earl, Lord Attlee, did. The contribution of aviation to our economy is immense. The number of people that it employs—some 250,000 directly and another 200,000 indirectly—is impressive. However, in a recent poll, to which I alluded earlier, some 91% of BALPA members considered that the Government did not sufficiently support the industry. I hope that the noble Earl will comment on that, since what he said in reply to my intervention was wholly inadequate.

Safety standards need to be stressed whenever possible. Should this point not appear forcefully in the Bill? This issue undoubtedly affects the members of BALPA and will, like others, be raised in the meetings that the Minister foresees taking place in the near future.

New technologies and biofuels, about which the Minister said nothing, need further investment. The Minister’s opening speech was silent on this issue. Perhaps he will expound on it in winding up.

As many Members have said, particularly my noble friend Lord Hunt of Chesterton, safety is a vital component of an effective aviation strategy. Lip service alone will not suffice. It is simply unacceptable for financial pressures on operators to push safety standards downwards and the Government should say so at every available opportunity.

I turn to the question of fatigue. Too often, insufficient attention is paid to this issue. Jim McAuslan, the general secretary of BALPA, has said that its call to the Government remains that they must follow the principled stand taken by the previous Government and underwrite existing UK standards until Europe can come up with something better. I ask the noble Earl whether the Government agree with that proposition. If so, what is being done?

The noble Lord, Lord Aberdare, stressed the importance of environmental duties. I entirely agree with his comments. It is essential—whatever the Government may say about this—

[Lord Jenkin of Roding]

I hope that the noble Lord will give way. In defence of my noble friend, the last speech was made by the noble Earl, Lord Cathcart; the noble Lord, Lord Aberdare is not here.

[Lord Clinton-Davis]

I am sorry—I did not know. It is entirely my fault.

No issue affecting aviation can be considered without addressing the issue of Britain’s runways. I know that the noble Lord, Lord Bradshaw, does not entirely agree with that, but he is quite wrong in not stressing the importance of that issue. It is highly significant. It is a case of Hamlet without the prince, and it is entirely ignored in this Bill. The issue of where Britain’s airport is to be located is essential, and I make no apology for referring to it. No legislation affecting aviation should be considered without addressing that issue. Of course, I differ with my own party concerning this issue, but they will all come round eventually. My own party and the Government will see the advantage of making Heathrow a vital part of our economy in ways that it is not at the moment. Of course, the Government excuse their silence by referring to the inquiry which it has set up—and they are right to do that. However, equally, there is no alternative to expanding Heathrow.

Prevarication in action inevitably impedes progress and, moreover, it is immensely costly. In my view there can only be one candidate: an improved Heathrow. Its advantages are manifest. First and foremost, the waiting time for the start of operations would be far less if Heathrow were chosen. Then, further airport and aircraft development, both of which will inevitably occur, will enable Heathrow to derive huge advantages from these issues. Most significantly, there is no viable alternative within a reasonable time span. The Government, plainly, are playing for time in the hope that something—anything—will turn up. That is not a policy but the abandonment of foresight. The clear fact is that Heathrow exists. Undoubtedly there are some—even major—disadvantages, but any alternative regime will also have those. There must be, and can be, the possibility of overcoming them. Above all, decisive action and a powerful lead from the Government are needed, and sadly, at the moment, both are lacking.

--- Later in debate ---

[Earl Attlee]

My Lords, we have conducted a full and wide-ranging debate on the merits of the Bill. Many noble Lords have made the case for the continuing importance of our aviation sector. The continuing success of the industry is essential to our economic growth. The reforms in the Bill have been designed to allow competition to flourish and for our aviation industry to innovate and thrive. The Government, the Opposition, the regulator and the wider aviation industry all support the Bill.

I shall now endeavour to respond to some of the points made by noble Lords but they will understand if I have to be selective in what I reply to. I am grateful for the thoughtful and generally helpful response from the noble Lords, Lord Davies of Oldham and Lord Rosser. I am very happy to accept that the previous Administration put a lot of work into the Bill. The noble Lord, Lord Davies, complained that the Government did not accept Front Bench amendments in another place. Of course, our roles are now reversed and I am sure that the same accusation could have been levelled at the noble Lord when he was in government.

The noble Lord, Lord Davies, mentioned climate change. He and the noble Lord, Lord Rosser, will recognise that the Bill is about regulation of the aviation industry. However, I look forward to seeing the noble Lord’s amendment on carbon emissions and how they will work within the confines of the Chicago Convention. The noble Lord, Lord Rosser, offered gentle criticism of the aviation industry. He will be aware that the new generation of aircraft is much quieter and much more efficient.

My noble friend Lord Bradshaw and the noble Lord, Lord Soley, talked about the problem of stacking. The Civil Aviation Authority’s future airspace strategy deals with this problem and one or two others. The Director of Airspace Policy at the CAA recently made a presentation to your Lordships on the possibilities of the future airspace strategy. My noble friend Lord Bradshaw talked about the possibilities of other UK airports and, for his pains, he got a response from the noble Lord, Lord Soley, about hub connectivity.

The noble Lord, Lord Davies of Oldham, and many other noble Lords, raised the issue of capacity at Heathrow. They recognise, of course, that the Bill deals with regulation but I am happy to respond. The Government recognise the need to maintain the UK’s excellent connectivity now, and in the longer term. This is why we will issue a call for evidence later this summer alongside our consultation on the draft aviation policy framework to explore the options to achieve this. We remain committed to adopting the aviation policy framework by March 2013.

The coalition Government’s position regarding a third runway, mixed mode, and the planning cap on air traffic movements at Heathrow has not changed. I can assure noble Lords that we will follow a proper process in developing a long-term aviation policy which is in the UK’s best interests.

[Lord Clinton-Davis]

Is it still the noble Earl’s view that the Government are ruling out a third runway at Heathrow?

[Earl Attlee]

My Lords, I repeat: I can assure the noble Lords that we will follow a proper process in developing a long-term aviation policy which is in the UK’s best interests.

[Lord Clinton-Davis]

Time without number it is reiterated that a third runway is to be ruled out and several other government Ministers have said the same. What is the present policy?