Civil Aviation Bill

Mark Reckless Excerpts

Wednesday 25th April 2012 Commons Chamber

[Graham Stringer]

The hon. Lady is right in what she says, but all three mayoral candidates are wrong on this matter.

It is completely legitimate for any constituency MP, including the Secretary of State, to oppose what they think their constituents do not want. However, it is also incumbent on any Government to consider the national interest, not just the interest of people representing west London. Exactly the same argument is used about High Speed 2, and the analogy is a good one. I chair the all-party group on high speed rail, but if somebody was driving High Speed 2 through my constituency, I would oppose it, because I would like to carry on being an MP and representing my constituents. That is a reasonable thing for an MP to do, but I also know that HS2 is good for the economy. Similarly, I know that constraining runway capacity in the south-east is extremely bad for the economy. It will do no good for the environment; it will just strangle the British economy.

[Mark Reckless (Rochester and Strood) (Con)]

The hon. Gentleman implies that there may be a tension between a constituency interest and the national interest, but the Government’s policy and the Conservative party’s policy of being against a third runway at Heathrow precedes the previous Secretary of State. It has really been this Minister, when in opposition and in her current role, who has taken on the vested interests and put forward a policy that protects the environment, as well as the national interest. I do not believe that there is any relevant constituency interest here.

[Graham Stringer]

I have great respect for the hon. Gentleman, and I agree with him on a number of policies, but he is in error in his understanding of the history of the development of the Conservative party’s policy. To be fair to the Lib Dems, they have always opposed the third runway at Heathrow. The Conservative party was in favour of it until Boris Johnson thought he had a chance of winning the previous mayoral election—that changed its national policy. The Labour party was in favour of a third runway. When the Conservatives became the Government, the shadow Secretary of State said that she would change the Labour party’s policy—I do not agree with this, but I can see why she did it—so that there could be a discussion about how to deal with the problem facing us.

That problem—this is the final point I wanted to make—is that Heathrow is losing destinations and business, and not just because of the capacity on runways. We face at least a double whammy: air passenger duty is having an effect, too. The situation is directing passengers to airports in Europe that have added extra runways, such as Madrid, to where British Airways has moved much of its operations, and Charles de Gaulle. The hon. Member for Daventry (Chris Heaton-Harris) was talking about integrators. The two main centres for freight in the aviation industry are Brussels and Charles de Gaulle; we have already lost out on those issues. Passengers are going to Madrid, Charles de Gaulle, Schiphol and Frankfurt, and, increasingly, to Copenhagen, at the expense of London. That is damaging not only the London economy, but the UK regions, because of the decreasing number of routes from the regional economies into Heathrow, in particular, and into the whole of the south-east system.

--- Later in debate ---

[Graham Stringer]

Since the second world war, as the Minister will know, Heathrow has been the largest international airport in the world. Soon it will no longer be that. It is still bigger than Frankfurt as regards its international destinations, but—I do not have the figures in front of me—the number of destinations served by Heathrow has gone from something like 220 to 180. Increasingly, the passenger numbers are going up because larger aeroplanes are going to fewer and fewer destinations.

I wanted to make both that small point about why the word “effective” is not in the first two clauses and the larger point that I would like not only the words to be in the Bill but there to be an effective aviation policy, which the Government do not have. On this issue, although not necessarily on others, the Government’s policies are anti-business and anti-growth. They are damaging the UK economy and they need to change them. Changing the wording of the Bill would help.

[Mark Reckless]

It is a pleasure to follow the hon. Member for Blackley and Broughton (Graham Stringer). First, let me respond to what he said about Heathrow and China. We all see the adverts in Westminster tube station, but there is a fundamental inconsistency in the line being pushed by BAA and the Mayor of London, among others, that Heathrow is essential as a hub but that we do not have enough point-to-point flights to different places in China. The model used by BA and its oneworld alliance relies not just on Heathrow as a hub but on Hong Kong, too. It is deciding that it is more effective to use Hong Kong as a hub, for all the reasons given by the hon. Gentleman and others, and to fly to all those Chinese cities with greater frequency and service out of Hong Kong. I do not accept the argument that a lack of point-to-point flights from Heathrow to cities in China makes the case that Heathrow needs a third runway to be a hub airport. The very economies of the hub and of the Heathrow and Hong Kong dual hub model for service for China lead to the system that we have.

[Graham Stringer]

The hon. Gentleman is making a very sensible point about where hubs develop in the world. Hubs developing in the middle east are doing a similar job in serving parts of China and there are also hubs in south-east Asia. A better measure of the failure of Government policy is the number of airlines that want to get into Heathrow from all parts of the world but cannot do so. A number of those airlines, some from China and some from other developing countries with large growth rates, have applied but cannot get their aeroplanes into Heathrow. Does he not agree that that is a better measure?

[Mark Reckless]

The reason there is unsatisfied demand for Heathrow and people who would like to fly from there but cannot is that landing slots at Heathrow are still cheaper than those at other airports and certainly cheaper than they could be. BA uses most of those landing slots, has capitalised the value and does not sell many of them on, partly to ensure that there is only limited competition so it can maximise its profits. I will return to that point, but I have quite a lot of sympathy with the hon. Gentleman’s arguments that the regulator should look to ensure that licence holders—airports—are effective as well as economic and efficient.

I also have considerable sympathy with the shadow Minister’s new clauses on National Audit Office oversight. However, I understand that those are only intended to be probing. I hope that that will also be the case with his amendments, because ultimately I trust the Minister on this issue. I do so for the ultimate reason that, in so many areas of public policy one can pretty much know what the policy will be by looking at where the money is—where the vested interests lie—and at what the civil servants are pressing. Too often Ministers merely oversee that policy solution. In this area I believe that it is the personal, political intervention of the Minister, both as shadow Secretary of State in opposition and now as Minister responsible for aviation policy, that led to, and kept, the Conservative policy against a third runway at Heathrow.

[Gavin Shuker]

Twice now the hon. Gentleman has referred to the blocking of a third runway as a policy, as in an aviation policy that could deliver some outcomes. Does he not accept that that is not a policy—it is just saying no?

[Mark Reckless]

No. I think we need a basket of options. I am delighted to hear that at Luton, in the hon. Gentleman’s constituency, there are such significant plans for expansion. At Gatwick, too, there is significant expansion, even of the one runway, and the possibility of a second runway from 2019. I wonder whether one option might be rail links between Heathrow and Gatwick and/or Luton, and whether the charges could pay for those. I am interested in hearing about the Northolt options and what the impact might be if Northolt were linked in to Heathrow. I very much believe that Birmingham airport, in terms of being half an hour from Old Oak Common or 40 minutes from Euston on High Speed 2, can become a very significant player in the south-east aviation market.

[Pat Glass]

Will the hon. Gentleman give way?

[Mark Reckless]

I will finish the point, if I may. I do not understand why so much aviation demand from the north and the midlands has to come all the way down to Heathrow when, perhaps, Birmingham or Luton could satisfy much of that.

[Gavin Shuker]

All those potential options with different airports are hugely interesting. Unfortunately, we have not heard from the Government what their policy is—their strategy. The options have to fit into some kind of framework, and still as we speak, two years into the term of this Government, none exists.

[Mark Reckless]

The policy is for a south-east airports consultation. The previous Government sought to conduct such a consultation, and would not even consider as an option a second runway at Gatwick until I, along with Medway council, Kent county council, the Royal Society for the Protection of Birds, and Essex county council, backed a judicial review which overturned that policy.

[Pat Glass]

Will the hon. Gentleman accept that now only two regional airports in this country have flights into Heathrow? Therefore, if we are travelling to New York, South Africa or Australia from the regions in this country, it is far easier to go to Charles de Gaulle, Frankfurt or Schiphol. That is not good for Heathrow, it is not good for the British economy and it is certainly not good for business in the regions.

[Mark Reckless]

I strongly support our policy of promoting High Speed 2 for inter-regional transport within the UK. I recognise the value of transfer passengers at Heathrow for the provision of the network it has, but I do not ultimately see how it is a disaster for the British economy if some people from the regions transfer at a European hub for some flights, rather than always coming to Heathrow. What I would like to see at Heathrow are high value flights that produce the best outcome for the country as a whole. Having Heathrow operated effectively would be very sensible. It has significantly increased its landing charges in order to pay for the third runway and, under the quinquennial review, Heathrow-BAA has carried on raking in that money, even though it is not investing in the third runway that that money was meant to fund. I do not see how that makes sense.

Most people refer to the CAA as a good and effective regulator, but how will it remain so? What certainty do we have about that? That is why a role for the NAO, expectations that it should be efficient in its management, and a role in ensuring the effectiveness of licence holders are, in principle, sensible things to ask for. I hope the Minister, the Department and in due course the CAA will listen to Members and ensure that those things happen.

The point made by my hon. Friend the Member for Daventry (Chris Heaton-Harris) about freight transport—that the consumer is indifferent to the mechanism used for that freight transport—may also apply to Heathrow. As an economist, my assessment is that the end user, the consumer of flight services through Heathrow, may be indifferent to the level of landing charges—to the extent that the price of tickets is set by the scarcity and the monopolistic pricing at Heathrow, rather than on the basis of the cost of using Heathrow. Therefore, just as I previously suggested that there might be a great deal of investment in Heathrow, which could be good for consumers without pushing up prices for those end users, so, if the CAA were to be a flabby and inefficient regulator that was putting its own charges on the industry, it could do that without the statutory constraint of acting in the interests of the users of those services.

We have seen that the scarcity at Heathrow has become capitalised in the costs of slots. When they are traded, it can be £5 million or £10 million now per pair of take-off and landing slots, to the great benefit potentially of BA, but to who else’s benefit? That has happened not through a decision of the House, and not even through the development of the common law, but through the development of European jurisprudence in this area. There is very significant value there. The CAA could transfer that value from BA to BAA with little, if any, impact on the consumer, or it could allow for significantly greater investment, or it could be quite flabby and inefficient or, to the extent that Government policy influences this and we have air passenger duty which is higher for the south-east or particularly higher for Heathrow, that might raise money to help the Government close the deficit, without having a negative impact on the users of Heathrow. All these are significant points that need to be considered, along with the value for money and the effectiveness propositions.

I should like to address briefly the issues raised in Government amendment 19 in relation to the market power determination. I support the Bill and the Minister, and I will defer to her judgment on this, but I am nervous about the extent to which we are giving power to the CAA to make this market power determination. It used to apply to Manchester; it no longer does. I have heard arguments with respect to Stansted and to Gatwick as to why it should not apply. The risk with Stansted, I would have thought, is not so much that it would shove up the prices massively, but that Stansted may not be competing effectively with Heathrow as it would if it were under separate ownership.

We have just heard comments about flights to Asia and emerging markets, but we have recently seen significant openings of routes into and out of Gatwick to places such as Vietnam and South Korea. There may be the prospect of significant further movement in that direction. But larger airlines—A380s and so on—currently do not have particularly good service at Gatwick, and it is difficult for Gatwick to invest to service the A380s and to have people transferring straight from the plane into the terminal, because of the significant cost involved and the need at least to bring along the current airline users of the airport and the great difficulty of putting through the investment if they are fighting it tooth and nail.

If Gatwick feels that it should invest significant sums of money in better terminal facilities in order to service the A380s and the type of airline that flies them, and allow the sorts of routes to high-growth markets in Asia that we so strongly support, I see no strong reason why it should be prevented from doing so and charging what the market will bear. I believe that that could be to the benefit of the consumer. The CAA might be a good regulator and take that into account, but at least the idea, in principle, of allowing freer competition and having less regulation and fewer airports with the market power determination—it is only really Heathrow where there is clearly substantial power—might lead to a more competitive system in which Gatwick and Stansted were free in the way Manchester now is. I am not certain, but it might do so. Under the Bill, it will now fall to the CAA to make that decision, unless this is reconsidered before the Bill is passed. I would like to pay my regards to the Minister and say that I trust her position on this and hope that the CAA will make the right decisions as well.