Civil Aviation Bill

Lord Soley Excerpts

Monday 2nd July 2012 Grand Committee

[Lord Rosser]

My Lords, perhaps I may take one of the amendments in the group to make my point. Government Amendment 30 deletes paragraph (c) in Clause 26, which says that the Competition Commission may allow an appeal under Section 24 or 25 only to the extent that it is satisfied that the decision appealed against was wrong on one or more of the following grounds, one of which is that the decision was based on the wrong exercise of a discretion. That wording has now been replaced in government Amendment 30 with the wording,

“that an error was made in the exercise of a discretion”.

I endeavoured to listen carefully to what the Minister had to say about this group of amendments and, if he did cover my point, I would be grateful if he could repeat his explanation. He seemed to say that this was all about clarifying the current drafting as opposed to explaining what the difference was between the wording in the Bill and what is being proposed, bearing in mind that it is not the same wording and therefore presumably does not mean exactly the same.

It would be helpful if the Minister could explain what this change in wording means. I refer to government Amendment 30 to paragraph (c) in Clause 26. Does the change from “wrong exercise” mean that although a decision was made incorrectly, the process was fine and the options to choose from were correct, the proposed wording,

“an error was made in the exercise of a discretion”,

is meant to imply that the exercise itself was flawed, had the wrong information to hand, was conducted incorrectly and options were considered that should not have been? It is important that we do not just get told, “We are seeking to clarify the current drafting”, but that we have a full explanation as to what the current wording in Clause 26 means—this relates to,

“that the decision was based on the wrong exercise of a discretion”,

and how that differs in meaning from the wording with which Amendment 21 replaces it,

“that an error was made in the exercise of a discretion”.

I hope that the Minister can clarify the position.

[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.

[Earl Attlee]

My Lords, the Committee will recognise that parliamentary draftsmen work in peculiar ways. It may be helpful if I read out what I said on this particular amendment again. Amendment 30 is to one of the grounds on which the CC may allow an appeal under Clause 24 or Clause 25, which relate to appeals against conditions of new licences and modifications of licence conditions. The amendment would change the grounds on which the CC may allow an appeal from,

“that the decision was based on the wrong exercise of a discretion”,

to,

“that an error was made in the exercise of a discretion”.

The view was taken that the drafting in Clause 26(c) could have been better expressed. There was no external request to change this wording, but the Committee will understand that officials go over the drafting again. It seems to me that it is better drafting. Originally, the grounds of appeal were based on statutory precedent, based on retrospective appeals to the CC and the CAT. The wording varied slightly. That is how the inconsistency first arose.

[Lord Soley]

Perhaps I may come back briefly. In a way the Minister has answered the question. The Delegated Powers Committee—not just the parliamentary draftsmen—worries about the quantity of legislation and the way in which it is often hastily drawn up. We end up making changes of this type which do not seem to come anywhere other than in Bills that are brought out by the Government in a state of incomplete readiness. We end up having an awful lot of amendments on the Floor of the House. This has happened under successive Governments and therefore successive parliamentary draftsmen. I suspect that the fault lies both in the way we manage government and in the expectations we place on parliamentary draftsmen. It is an indication of how things can go wrong. My guess—it is only a guess; I am not a lawyer—is that the interpretation by a court of the original wording in the Bill would have been different from the interpretation by a court of the amendment tabled by the Government. On that basis I understand it but I am glad that the Minister clarified it.

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[Lord Bradshaw]

I ask my noble friend to consider very carefully the arrangements now in place in the bus and rail industries for taking care of passengers. These have been built up over a long period, although they are certainly not completely fair. Statistics on performance are very regularly published but this issue goes very much wider than performance; it relates to things such as looking after people who miss their connections or trains. When I was chairman of the bus users’ council, I was concerned about people who were left in draughty old bus stations because the last bus did not run, or something of the sort. These are all people who need protection. I am slightly surprised, but I am perhaps better advised, by what the noble Lord, Lord Davies, has said: people at airports should at least be protected as well as passengers who use buses or trains.

[Lord Soley]

I am broadly sympathetic to this group of amendments tabled by my noble friend Lord Davies, and to the recommendations of the Transport Select Committee. It is always dangerous to put too much in a Bill, but on this we need to start with the recognition that when a person comes into an airport, particularly to a major airport such as Heathrow, it is their first impression of the United Kingdom. If they are coming here from any of the emerging countries—especially China, India or Brazil—the image for someone who is thinking of setting up a business and investing here is not good. It has got a lot better since Terminal 5 opened at Heathrow. I readily accept that there is a much greater desire to do things about this. I also accept that, as my noble friend Lord Davies has pointed out, a lot of the recent problems were not caused by things that the Bill will cover; they were caused by immigration control and so on. The image of vast queues moving very slowly—which is what were seen, even if that issue will not be covered by these amendments—is very bad for Britain. It is less true for other airports but it is still true; so we need to get our act together and do rather better on this.

I was trying to envisage someone who had just emerged from one of these long queues taking part in one of these surveys, whether for immigration purposes or anything else. They might give some short, sharp answers to the questions. We have to do better. That is the thrust of these amendments and of what the Transport Select Committee was saying. I urge the Minister to look at this matter sympathetically and see whether he can come up with some way of constantly emphasising the importance of the passenger having a good experience. It does not do our business or general tourist travel any good at all to have the images we have had.

I dread to think of what will happen if we have problems of runway availability at Heathrow during the Olympics. You can see what will happen if there is a severe weather event that causes a back-up because there is no alternative runway space. You then have the inevitable position of all the other problems at the airport, and you will have some very disappointed people coming into Britain. This is rather important and the airports and the Government need to look at this whole area.

[Lord Empey]

My Lords, I am sure that most of us travelling through airports have been approached at one time or another by the person with the dreaded clipboard. No doubt all noble Lords here were free and giving of their time and answers to help these people establish their true feelings.

Whether the particular methodology contained in these amendments is right, I am not sure. No one wants to add to the difficulties of getting a licence or to the bureaucracy involved. Nevertheless, underneath all that, the noble Lord, Lord Davies, is making a fundamental point that we all share. There have been a number of cases in recent years where the whole image of this country and the welfare of many thousands of passengers have undoubtedly been put to the test. Unfortunately, on some occasions, the relevant airports have failed that test. One constantly hears that there is an absence of information being fed back to the passenger.

Of course, these emergencies obviously come out of the blue in many cases. Sometimes the airports are not properly prepared, they do not have enough staff or facilities and one understands that this is not easy to cure. Nevertheless, it should be at the core of what we are trying to do. We are trying to make aviation more efficient but, in parallel with that, we have to make it a more pleasurable experience.

In so many walks of life—we are talking mostly about finance—consumer welfare and consumer benefits are put at the core of many of the things that we do in this country. That is right and there is therefore some merit in these amendments. Whether this methodology is the right one is not necessarily the issue today. The point is that there is a fundamental issue, and I hope that the Minister will refer to it in his reply. Should there be a broadly understood standard that would apply to all airport operators in the event that an emergency will arise, as it inevitably will; and how are people to be treated? Are we to continue to see our television screens covered with images of passengers complaining about their treatment, delays and lack of information?

In order to raise standards, which is our general objective, there should surely be some methodology. I have an open mind as to whether or not it should be this precise mechanism but I hope the Minister will at least acknowledge that this must be at the core of what we do.

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[Lord Trefgarne]

My Lords, I shall not detain your Lordships for more than a moment. I very much support what my noble friend Lord Jenkin of Roding has been saying on this matter. There is a serious problem here. As my noble friend explained, it is a very unlikely circumstance but, if it did happen, it could be catastrophic, and I do not think that the Bill can be allowed to proceed to the statute book with this difficulty identified.

[Lord Soley]

I shall be similarly brief and just wish to add to what the noble Lord, Lord Jenkin, said. The figure involved for investment at Heathrow alone is £100 million a month. Putting that into context, you raise that on the bond market and you secure it against the airport in just the same way as someone buying a house secures a mortgage against the house. If there were appeals of the type indicated by the noble Lord, Lord Jenkin, they could have a very disruptive effect on the financial markets. I think that there is a question about whether the bankers entirely agree with BAA about the risk involved but the point is that, if the risk is there and we can deal with it fairly easily, then frankly we should. If there were an appeal, it would be a severe and difficult embarrassment, particularly if the fight became bitter. The risk of a challenge to £100 million a month investment at our major airport is not funny. I suspect that the CAA would not allow an appeal but, again, this is a case of being sure that we have the safeguards in place, as the noble Lord, Lord Jenkin, indicated, and I certainly support his amendment.

[Lord Berkeley]

My Lords, I, too, support the noble Lord, Lord Jenkin, and others on this amendment. An appeal may be very unlikely but, as other noble Lords have said, the consequences would be bad. I cannot see how anyone appealing under Clauses 24 and 25 would find it relevant to question the financing of BAA—or any other operator, for that matter. That would seem to have nothing to do with any appeal but one occasionally gets vexatious appeals. Given the size of the sums and the disaster that would ensue if investments did not go ahead because the bankers became uncertain about an appeal, this would seem to be an extremely sensible set of amendments. I, too, shall be interested to hear what the Minister has to say in response.

[Earl Attlee]

My Lords, I have listened very carefully to the points that have been raised. As my noble friend Lord Jenkin pointed out, I have met BAA to discuss this issue in some detail, and since that meeting I have considered its concerns.

First, I assure the Committee that the Government remain of the opinion that there are good reasons to include derogations to financial resilience licence conditions where these would otherwise cut across existing financing arrangements. The CAA, which will be issuing the first airport licences, has also confirmed that it supports the broad principle that ring-fencing licence conditions, which does not cut across existing financial arrangements, could bring benefits to users.

The practical effect of the amendment would appear to shut out an airline’s right of appeal in respect of an entire licence condition, even if only a small part of it contained an exception relating to financial arrangements. Therefore, the scope of the amendment appears to be wider than the reason advanced for its inclusion. None the less, it is a perfectly good amendment for us to debate. The Government remain of the opinion—

[Lord Soley]

The point that the noble Earl makes is a fair one but it is perfectly possible, with the government draftsmen, to make a more refined and specific amendment, if necessary.

[Earl Attlee]

I absolutely agree with the noble Lord, Lord Soley. It is my duty to point out a drafting error in case my noble friend wants to run the amendment on Report. If I had not identified the problem in Committee and suddenly jumped up on Report and said, “Actually, the amendment is defective”, I think I would be a little unpopular.

The Government remain of the opinion that the broad rights of appeal provide an effective means of improving the accountability of key regulatory decisions. The process enables the interests of both airport operators and materially affected airlines to be taken into account. We therefore believe it is correct that this right of appeal should extend to licence conditions that relate to financial arrangements. An airline seeking to appeal a financial resilience condition, or the absence of such a condition in the first licence granted to an operator, will need to satisfy the Competition Commission that it is, in this context, a person whose interests are “materially affected” by the decision.

Any dispute over whether a derogation would cause a breach of existing financial arrangements would be most likely to arise from legal questions about the true construction of the loan agreement and/or the licence condition. These could ultimately be resolved through judicial review and, in the mean time, an airport operator could seek an injunction to preserve the status quo. Further comfort may be drawn from the fact that, subject to a government amendment that has been tabled being agreed, the Competition Commission, in deciding an appeal, will be obliged to have regard to the duties imposed on the CAA. Markets should therefore be reassured that the risk of existing creditor protection in an airport operator’s funding structure being unintentionally removed and triggering an event of default is extremely small.

We acknowledge that there is a possibility that the uncertainty created by an airline making an appeal to the Competition Commission on a licence condition relating to financial arrangements could affect an airport operator’s ability to access capital markets to raise finance while the appeal is being considered. However, as the timing of an application for leave to appeal is predictable, we consider that this is something an airport operator could successfully manage by pre-funding its financing requirements. We remain of the opinion that the right of appeal for airlines would not have significant negative consequences for an airport operator’s ability to raise debt in the capital markets.

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[Lord Soley]

I am grateful but the Minister seems to be heading in the direction of neither moving on this nor looking at it again. He has described an appeal process that could take longer than six months. So it is a six-month possibility. He said earlier that the amendment put down by the noble Lord, Lord Jenkin, was too extensive. I understand that but I do not believe it is beyond the wit of the Government to come back with an amendment that is more specific. It should be possible and I do not see why it cannot be considered.

[Earl Attlee]

My Lords, noble Lords suggested that the appeal process would take six months. I am suggesting that the Competition Commission will very quickly be able to determine whether the appeal is frivolous, vexatious or unlikely to succeed. I do not believe the CAA would grant a derogation unless it was absolutely certain that it would pass scrutiny from the Competition Commission. There is also the point that the licence condition does not come into effect until the appeal is heard.

I reiterate that I am not taking this away and I am not reflecting on it. I will, however, discuss the matter in detail with my right honourable friend.

[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.