Report received.

Clause 1 [Secretary of State's general duty]:

moved Amendment No. 1:

Page 1, line 10, at beginning insert--

("(A1) The Secretary of State must exercise his functions under this Chapter so as to maintain a high standard of safety in the provision of air traffic services; and that duty is to have priority over the application of subsections (1) to (4).").

My Lords, these amendments all relate to safety. Noble Lords will recall the eloquent arguments put forward in Committee by the noble Lords, Lord Brett, Lord Clinton-Davis and Lord Hoyle, as well as by the noble Baroness, Lady Thomas, and others. As a result, I agreed to consider again the case for putting additional reassurance on the face of the Bill about the leading role of safety.

These amendments do precisely that. Their effect will be to oblige the Secretary of State, the CAA and the Competition Commission, when exercising their functions under the Bill, to ensure that a high standard of safety is maintained before taking into account any other consideration.

Let me make it clear what "maintaining a high standard of safety" will mean in practice. It means that when the Secretary of State, the CAA and the commission exercise their functions, they must consider the safety standards in place at the time and ensure that those standards will not be reduced as a result of their exercising those functions.

This means that safety levels cannot be compromised, even if they are above the statutory minimum, as is the case in some areas of NATS' operations. I know that the latter point was a matter of concern for noble Lords, and I hope that this clear commitment to safety above all other factors in the Bill provides them with the reassurance that they sought. I hope that it will also reassure noble Lords that we are as concerned as they are to ensure that NATS will continue to strive for the highest standards of safety, rather than simply settling for the minimum.

I listened to noble Lords in Committee and agreed that safety should clearly be the first priority in this part of the Bill. These amendments put that beyond any doubt and I commend them to the House. I beg to move.

My Lords, let me say from these Benches how much we welcome the government amendments. I spoke to our amendments in Committee and specifically asked the Minister whether he could put a safety amendment at the front of the Bill. That is what he has managed to do. We are grateful for this improvement in the Bill as it stands.

My Lords, I echo the gratitude to my noble friend the Minister for proposing these amendments. They go a long way to meeting the objectives of the amendments tabled in Committee. Speaking for the Government on Second Reading, my noble friend Lord Whitty said:

"Safety in our regime will be paramount".--[Official Report, 5/6/00; col. 1026.]

We have sought both in Committee and in discussions outside the Chamber to establish how we get that "paramount" assurance into the Bill. Alas, we understand that that word is not a legally acceptable parliamentary term, but we accept that the wording of this amendment does in fact mean the same thing. We are grateful for the assurance given by my noble friend the Minster. I should like to express my appreciation and that of my colleagues for the way in which my noble friend has taken the matter on board. It will be a matter of some reassurance to those in the industry, especially the staff.

My Lords, as one of those who raised the issue in this place, I, too, am obliged to the Minister for referring to me and to the noble Lord, Lord Hoyle. However, as the Minister knows, I wish that the Government had come to another conclusion. But having regard to what are the parameters of the Government's thoughts on the matter, I accept that the noble Lord has done all that he can in relation to the issue of safety. It is only right and proper that the issue of safety, which is a concern of the public, is recognised. That is what the amendment will achieve and what the Bill, as drafted, did not properly address.

Like the noble Lord who preceded me, I am grateful for the changes that the Government have made. It is an example of the Minister listening. I do not think that he listened with both ears open, but one-and-three-quarters is better than none. That being the case, I thank the Minister for the concession that he has made. However, that is not to say that we are entirely satisfied about the remainder of the Bill.

My Lords, I was not present during most of the Committee stage, so it is possible that my point may already have been addressed. Can the Minister tell the House whether the word "safety" for the purposes of these amendments relates not only to the obvious need to protect passengers, crew and those on the ground from accidents, but also to protecting passengers from the risks to their health--and, sometimes, their lives--arising from excessive crowding and inadequate oxygen and humidity in passenger cabins? Is it not a disgrace that airlines are still permitted to provide a seat pitch of as little as 26 inches in economy class? No adult should be expected to fly in such dangerously crowded conditions. Indeed, I submit that 29 inches for short flights, 31 inches for medium-length flights and 34 inches for long-distance flights should be the absolute minimum.

I do not believe that the noble Lord's point is covered under this Bill. However, it is a matter that we ought to consider and perhaps we may do so at another time. I, too, join other noble Lords in paying tribute to my noble friend the Minister for the way that he has dealt with the matter of safety. We should have preferred to see the word "paramount" included in this provision; indeed, my noble friend the Minister used it in Committee. Nevertheless, he has gone as far as he possibly can. I, for one, am satisfied that safety, as it says in the amendment, will have priority over other measures. That is most important. I cannot stress too strongly how much we appreciated not only my noble friend's courtesy in receiving us but also the way in which he acted on this matter.

My Lords, noble Lords on this side of the House welcome the fact that the Minister has put forward such amendments today. When I spoke on the issue in Committee, I said that safety was the raison d'etre--the entire reason--for National Air Traffic Services. Therefore, it is extremely welcome to have measures on the face of the Bill which, as the Minister said, put a duty not only on the Secretary of State but also on the Civil Aviation Authority and the Competition Commission.

My Lords, I am grateful for the supportive words we have received for this amendment. I apologise for having used the word "paramount", which I know some noble Lords wish to see employed here. It is rather arcane. Although it has been used elsewhere--for example, in Section 1 of the Children Act 1989--it was brought to my attention that the context was different. Indeed, the parliamentary draftsman says that the word is used in that legislation for the section that describes the single objective that is to guide the court in deciding what to do when making an order relating to the future of a child. Therefore, it would not be appropriate here. However, I am assured that maintaining a high standard of safety in the way phrased in the amendment will achieve all the purposes sought by noble Lords.

I should tell the noble Lord, Lord Monson, who raised the point about conditions inside aircraft, that that is, as has been suggested, more a matter for the CAA and perhaps better dealt with at some other time. Noble Lords should be assured that a consultative document dealing with all those issues is due to be issued from my department in the very near future. That will allow noble Lords to address such points at a future date.

On Question, amendment agreed to.

moved Amendment No. 2:

Page1, line 17, at end insert--

("( ) to prevent or minimise noise, vibration, pollution (including light pollution), disturbance or environmental damage of any nature;").

My Lords, in moving this amendment, I shall speak also to Amendments Nos. 29 to 33, which deal in general with environmental matters. Clause 1 obliges the Secretary of State to exercise his functions under Chapter 1 in the manner best calculated to promote the purposes set out in Clause 1(1). Those purposes do not include protection of those affected by the adverse environmental consequences of air traffic.

My amendment adds to those purposes the prevention or minimisation of noise, vibration, pollution, disturbance and environmental damage. That is partly recognised by Clause 39 of the Bill, which gives the Secretary of State power to give directions on such environmental matters. But as the Bill now stands, he could not exercise that power if it were to conflict in any way with the duties set out in Clause 1. This will limit unnecessarily the Secretary of State's ability to act on environmental matters. The duties set out in Clause 1(1) should therefore include consideration of such environmental issues to ensure that they can be given proper weight.

When I moved a similar amendment in Committee, the Government's response was to fall back on the provisions in Clause 39. I submit that that is a weak response and one that lacks logic. Clause 39 gives the Secretary of State the power to make directions on environmental matters, but because of Clause 1 that power cannot be exercised unless it promotes the interests set out in subsection (1)(a); namely, those of owners and operators of aircraft and airports, air travellers and transporters, financing by licence holders and their efficiency and economy.

Because environmental factors largely affect people living near airports and under flight paths, rather than owners and operators of aircraft and the other interested parties that I have just mentioned, an exercise of the Secretary of State's powers under Clause 39 may conflict with the interests set out in subsection (1)(a). If the Secretary of State attempts to issue directions under Clause 39, he may find himself the victim of judicial review on the basis that he "must", under Clause (1)(a), give priority to owners and operators of aircraft and airports, and so on.

I believe that the Government's refusal to take this simple point on board--and their late insertion of Clause 39 into the Bill--suggests that their commitment to environmental issues is more apparent than real; indeed, it is not as strong as it should be.

I turn now to the other three amendments in this group which all relate to Clause 39. This clause enables the Secretary of State to give directions relating to the environment. The amendments would make such directions subject to approval by Parliament. We welcome the addition of these powers because they recognise the importance of ensuring that damage to the environment is minimised. However, the powers are extremely wide ranging and the best way to exercise them may be disputed or prove controversial. Issues of this importance are matters into which Parliament as a whole should be allowed an input.

The Government argued again in Committee that environmental directions have been used sparingly in the past and that the Secretary of State must have the flexibility to take a wider view on when environmental matters should take priority over financial expediency.

It may become necessary and, indeed, desirable, with the expansion of air traffic, to use environmental directions more in the future. Having to come to Parliament before using directions does not impair the Secretary of State's flexibility; it just makes its proposed exercise subject to proper democratic scrutiny. The balance between environmental considerations and financial benefits is precisely the kind of issue which could be controversial and is worthy of debate.

As regards the final three amendments in the group, the Government said in Committee that general directions will be made, on which there is no need to consult, and that the appropriate time to consult will be when general directions are translated into particular details. Surely this is the wrong way round. If the Government have given general directions which will be binding on all licence holders, why will they need to give particular directions to individual licence holders? Even if particular directions are needed, it is the general directions which are likely to be more far-ranging and relate to points of principle. It is even more important to consult properly on such points of principle as, if directions incorporating points of principle are misconceived, consultation on particular directions implementing the general directions will not provide any remedy. This would make even the limited consultation exercise envisaged in the Bill something of a sham. I beg to move.

My Lords, this group of amendments concerns environmental issues. The first amendment seeks to add an environmental limb to the Secretary of State's duty under Chapter I, the primary purpose of which is to introduce a system of economic regulation into the provision of air traffic services.

The duties of the Secretary of State, as set out in Clause 1, deal with concepts such as efficiency, economy and the financing of activities, and "en-route" air traffic services will be regulated through an operating licence which is in itself an economic construct. Furthermore, Chapter I, which should be read in its entirety, is totally in line with the Government's sustainable development strategy. The environmental pillar is delivered in Clause 39 which provides for the Secretary of State to give directions in relation to environmental matters not only to the licence holder, or holders, but also to persons authorised by exemptions to provide air traffic services. To exercise properly those powers the Secretary of State has to consider the giving of directions to be necessary or expedient to prevent or deal with issues such as noise. The considerations under Clause 39 are not dissimilar to those proposed by the amendment.

The next five amendments would impose pre-requisites to the exercise of the power to give directions. The first would require the Secretary of State to get the approval of Parliament before giving directions under Clause 39. This is a significant departure from the present position, under Sections 6(2)(f) and 72(2) of the Civil Aviation Act 1982, which this clause largely replaces in respect of air traffic service providers. The procedure envisaged here would, I think, be the affirmative resolution procedure involving debates in both Houses.

We see no need or justification for this. The power to give environmental directions is long established. In the past, Parliament has been content to leave these matters for the Secretary of State to deal with, not least because he must have the flexibility to take a wide view. One example would be if the provider wished to remove a navigational aid that had residual environmental monitoring benefits. The provisions of this Bill have not altered that position. I suggest again that it would place an unnecessary burden on Parliament if these matters had to be referred to both Houses of Parliament. I would add that the Secretary of State would simply not be able to act in an unreasonable manner. If he were to act in such a fashion, he would be rightly open to judicial challenge.

The remaining amendments concern the provision requiring the Secretary of State to consult before giving a direction under this clause. As presently drafted, the Bill provides that the Secretary of State must consult a licence holder or authorised person regarding a direction to do or not to do a particular thing. The amendments proposed by noble Lords opposite try to ensure that licence holders or authorised persons in the plural are consulted where they are affected by a proposed direction. The fact of the matter is that we simply do not envisage issuing such a specific direction to more than one licence holder or authorised person. If such a situation did in the future arise, we would expect to issue separate directions and therefore any licence holder or authorised person would indeed be consulted. I hope that I have made clear why we regard the amendments as unnecessary. In the circumstances I invite the noble Lord to withdraw the amendment.

My Lords, I am grateful to the noble Lord for the detailed explanation he has given for not wishing to accept the amendments. I am not entirely convinced that it would not be better to have parliamentary approval in some form or another, not necessarily perhaps by affirmative resolution procedure, as I proposed in one of the amendments. I am also grateful for his comments on consultation and on directions to individual licence holders. Having said that, I shall obviously need to read with care in Hansard what the noble Lord said. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendments Nos. 3 to 6:

Page 1, leave out lines 18 to 20.

Page 1, line 21, leave out from beginning to ("interests") in line 24 and insert ("The only interests to be considered under subsection (1)(a) are").

Page 2, line 3, leave out from ("must") to ("as") in line 4 and insert ("apply them in the manner he thinks is reasonable having regard to them").

Page 2, line 5, at end insert--

("(4A) The Secretary of State must exercise his functions under this Chapter so as to impose on licence holders the minimum restrictions which are consistent with the exercise of those functions.").

My Lords, I spoke to Amendments Nos. 3 to 11 with Amendment No. 1. I beg to move Amendments Nos. 3 to 6.

On Question, amendments agreed to.

Clause 2 [CAA's general duty]:

moved Amendments Nos. 7 to 11:

Page 2, line 8, at beginning insert--

("(A1) The CAA must exercise its functions under this Chapter so as to maintain a high standard of safety in the provision of air traffic services; and that duty is to have priority over the application of subsections (1) to (4).").

Page 2, leave out lines 22 to 24.

Page 2, line 25, leave out from beginning to ("interests") in line 28 and insert ("The only interests to be considered under subsection (1)(a) are").

Page 2, line 35, leave out from beginning to ("as") in line 36 and insert ("apply them in the manner it thinks is reasonable having regard to them").

Page 2, line 36, at end insert--

("(4A) The CAA must exercise its functions under this Chapter so as to impose on licence holders the minimum restrictions which are consistent with the exercise of those functions.").

On Question, amendments agreed to.

Clause 3 [Restrictions on providing services]:

[Amendment No. 12 not moved.]

Clause 4 [Exemptions]:

[Amendment No. 13 not moved.]

Clause 5 [Licences: general]:

[Amendment No. 14 not moved.]

moved Amendment No. 15:

Page 4, line 8, leave out from beginning to second ("the") in line 11 and insert ("a not for profit company, formed and registered as a company limited by guarantee under the Companies Act 1985 or").

My Lords, the purpose of the amendments in this group is the transfer of National Air Traffic Services to a not-for-profit trust in substitution for the Government's proposal of its transfer to a public/private partnership. The principal amendment in the group is Amendment No. 35. This clearly defines the company as one that issues no shares and pays no dividends to its members.

Amendment No. 35, together with Amendment No. 36, also requires that this transfer shall not take place until it has been approved by a resolution of both Houses.

Amendments Nos. 38 to 40, 44 and 45 are consequential. Amendments Nos. 41 and 42 provide for the Secretary of State to be able to modify a scheme before it is laid before Parliament. Amendments Nos. 47 and 48 omit certain sections of Clauses 47 and 48 which are incompatible with our amendments. Amendments Nos. 49, 50, 56 and 63 omit respectively Clauses 49, 50, 51 and 55. Amendment No. 64 adds to Clause 56. Amendments Nos. 68, 69, 71 and 72 amend later clauses accordingly. Finally, Amendments Nos. 58, 59 and 62 amend Clauses 52, 53 and 54 to enable the Secretary of State to make loans to, guarantee the discharge of the financial obligations of, and make grants to a not for profit company to which NATS has been transferred. I have spoken briefly because I dealt with the amendments at greater length in Committee.

During the long passage of the Bill through both Houses we have become, as it were, the standard bearers for an approach to the future character of our National Air Traffic Services which has support far beyond these Benches. Without looking too far backwards I remind the House that the trust model was the option favoured by the Select Committee and by many Members in another place. The advantages of the model are its relative immunity to takeover, the construction of a trust board which would reflect both public and stakeholder interests--airline companies and employees, which are so important--and the ability of the board to raise funds at lower rates of interest.

Today I want to look forward and discuss those arguments which have developed since Committee stage. First, the Minister was very dismissive of NavCanada's ability to satisfy the requirements for reducing operational costs, increasing investment and greater accountability. NavCanada is, of course, the model for what we are putting forward today.

Since Committee stage we have had a report from the noble Lord, Lord Brett, on his visit to Canada which clearly refutes these doubts. NavCanada has substantially reduced its operating costs and increased its investment programme in the past two years, as the 1999 annual report shows. The Canadian Government are entirely satisfied that its economic and safety regulatory regime is adequate to maintain the public interest in safety as well as the financial energy of the trust. Moreover, the airlines seem satisfied with their powers to influence decisions which affect their costs. In other words, a satisfactory balance has been struck between public and private interests.

Secondly, in Committee the Minister made much of the opportunities that would be available to NATS as a PPP to play a part in the air traffic control market of other countries. Yet now we see that the bidders for this PPP include not only foreign-owned suppliers to the air traffic control industry, which must create a conflict of interest, but also several major, national publicly-owned air traffic control organisations. In other words, the PPP will create a market in our air traffic services while protecting those of other countries--Ireland, Germany and Iceland are all bidders--which are all publicly owned.

I am mindful that we are at Report stage and that there are other speakers well able to expand on the points on which I have deliberately touched in general terms. I urge the Government most sincerely and fervently to reconsider their proposals for a PPP even at this late stage. It would be of benefit to them and to the future conduct of air traffic services in this country. I beg to move.

My Lords, I thank the noble Baroness, Lady Thomas of Walliswood, in moving this amendment, for drawing attention to my visit to Canada. I went there because I did not recognise the NavCanada model, which I thought I knew, from the Government's response to the Select Committee report in another place. What I sought to do through interviews with representatives of airlines, with NavCanada itself, with Transport Canada, the sponsoring ministry originating the trust, and with the controllers and engineers, was to understand their experience. I was reassured that my understanding was not awry and that investment had increased to 400 million Canadian dollars. Operating costs had been reduced by 24 million dollars per annum. There were also reduced charges to the airlines of about 225 million dollars per annum. There was also an increase in training of about 200 air traffic control staff.

I also asked how the decision was reached. Originally, there was wide consultation, looking at six models. That was short-listed to three, and finally they decided on the trust model. They had looked at the equivalent of a PPP--they called it a mixed company--but rejected it. The PPP that they sought would have delivered much the same results as those sought here. But they decided that they could do better via a trust model. That has been successful in achieving its ends. It is not as unaccountable as was suggested in another place. It seems to be a model which has enjoyed success and the confidence of the staff and pilots of the Canadian skies and the public at large.

I also discovered that the Canadians had been very concerned about conflicts of interest. We are looking at a new situation. We now know that the number of bidders for the NATS strategic partnership has been reduced from eight to four. As the noble Baroness said, they all have potential conflicts of interest. It is possible that the DTER will have responsibility for ensuring that those conflicts are removed. The list of four could be reduced to a lower number in a matter of weeks or days. Therefore, I echo what the noble Baroness said. Perhaps even at this late stage the Minister would consider a non-profit-making trust model.

I made my report available to all Members of your Lordships' House who had participated at Committee stage. I also made it available to the Minister. A number of noble Lords kindly commented on the report. I understand entirely why my noble friend the Minister has been unable to do so because of the many other pressures on his time, particularly at the present time. Whatever the outcome of this discussion, I hope that the Government will be prepared to look again at a model which I believe will give enhanced confidence to the four groups--I call them the four "P"s--that we have to satisfy. They are the public, the pilots, the practitioners and the various parliaments. During the 10 months of this ongoing debate none of the four "P"s has been entirely satisfied. It is not too late to look again at a model which will ensure that greater confidence is gained more quickly rather than continuing with the Government's present plan.

My Lords, I speak on behalf of the British Airline Pilots Association, of which I am the president. I have made full disclosure to the House. Any statement that I make in relation to other amendments are dependent on that.

At the very outset my noble friend Lord Brett said that he had visited Canada and seen for himself the operation of the scheme. He is right or wrong. It is incumbent on the Minister today to satisfy the House that the Canadian scheme has no application in this country. He has not done that so far. I am not sure about it.

My noble friend the Minister has a duty to provide rather more than that. He has to show that his officials, preferably himself, have been to Canada and repeated the experiment that my noble friend Lord Brett has undertaken. So far the Minister has not done that. He has that duty because this House is concerned about air traffic control. The noble Baroness, Lady Thomas of Walliswood, moved the amendment on the basis that many people are concerned about the issue. That is the case and I speak on behalf of them today. It is not simply the pilots, but a great many people who are concerned about safety.

Bearing in mind that the Minister has not been to Canada himself, he has a duty to inform the House why he is so opposed to the scheme. He may be right. He has to inform the House, not on the basis of what civil servants have advised him, but on what basis he has determined that the Canadian experiment has no relevance to what we are considering today. I do not think that he can.

My Lords, I am somewhat cautious about copying schemes from other countries. After all, other countries have different cultures and circumstances. Those schemes can be adapted but, if we have schemes in this country with which we are familiar, they should take priority in our consideration.

I quite like public/private partnerships. We are operating them in other parts of the economy: in health, in hospitals; and in construction with housing. It is a formula which has been developed in this country. It gives us access to private sector finance in a way that is acceptable. We have also developed ways of regulating public/private partnerships.

I am a little concerned about not-for-profit companies. Over many years in business I have learnt that profit is a great incentive to efficiency, effectiveness and to meeting the needs of customers. I hope that the Minister will give some consideration to these matters. I am not entirely sold on the copying of the formula from Canada.

My Lords, I rise to speak because if I had not done so my noble friend Lord Haskel would have forced me to my feet. I respect him as a business person but I was somewhat amazed at his remarks today. As regards air traffic control, there is concern about one issue--safety. For the life of me I cannot understand how safety is enhanced by profit determination: that there must be profits and safety must suffer because of that. I ask my noble friend to think again. We are talking in this instance about safety.

My Lords, does my noble friend agree that safety is not entirely the prerogative of the public sector? Safety is also very important, and is maintained, in the private sector.

My Lords, it is indeed. But my noble friend will agree that there are many cowboy firms in the private sector. The public sector is at least accountable with regard to the standards which should be acceptable to all of us. It is ironic that these remarks are made at a time when we have seen the failure of privatisation on the railways. We have heard of the damaged track which has cost lives. Can my noble friend imagine what would happen if aircraft began to fall from the skies following our determination on this issue? Safety is uppermost in the minds of the public.

I ask the Minister to reflect on that point when he replies. We should at least think carefully before we go down the path advocated in particular with regard to the bidders. All are flawed. All have a conflict of interest. I refer, for instance, to the airlines. I am attracted more to the airlines bid than to the others--and the airlines bid is not conceived on the basis of profit. Safety of customers is paramount in the minds of the airlines. As regards efficiency, they are interested in reducing the costs charged to them. But in relation to the consortium, foreign airlines flying in might think that preference would be given--

My Lords, if my noble friend will forgive me, perhaps I may intervene. I seem to be missing part of the argument. I thought that airlines were private companies.

My Lords, we are referring to an airline consortium which includes a public sector in the Irish Government's control. I am saying that it is a no-profit trust model. I think that would be of concern to my noble friend Lord Hughes of Woodside. I shall be surprised if he does not believe that safety should be paramount and that profit should not be one of the major consideration in any trust set up. That is what I sought to say in relation to the airlines. But there is a public sector partner and it seems strange to me that we are going outside for public sector partners--to New Zealand, and with regard to the airlines to Ireland--and yet are taking our air traffic controls out of the public sector.

I cannot believe that Lockheed Martin is a serious consideration. Not only is there conflict of interest because it is a manufacturer; it is also responsible for the new air traffic centre at Swanwick being delayed for six years. What will it bring to the table?

The same consideration applies to Raytheon. There is a conflict of interest because it is a supplier of equipment. Even worse, if it came in what about Lockheed Martin's system which should have been operating at Swanwick? It is planned for Scotland. There would be obvious conflict of interest there. Lockheed Martin would not allow Raytheon to use its data and would not supply it. Raytheon would have to bring in its own system which would further delay the advances made.

Serco has a small amount of operational knowledge; it deals only with small airports. It has withdrawn from Liverpool airport. I should like to know why Serco is being considered.

Perhaps I may refer to what has been said. We all owe a debt of gratitude to my noble friend Lord Brett for going to Canada to see what was happening on the ground rather than accepting what the Civil Service told us. It is often better to see for one's self what is occurring. Before his departure it was said that the airlines bear full financial risk without being in a position to manage that risk. On examination, the airlines exert substantial influence in the NavCanada model. They have five directors on the board. They believe that improved safety and investment performance has resulted. The bondholders are taking the risk, not the airlines.

My Lords, perhaps I should have made this point myself. Perhaps my noble friend will explain why a former Labour government of approximately five years and three months did not take any action in this regard. Is it not a fact that that Labour government considered that NATS performed well? Is there any evidence that NATS has failed to perform up to standard in the 20 years since that Labour government ceased to be in office?

My Lords, as my noble friend will understand, it is for the Minister to reply. Like my noble friend I am puzzled because I had thought that the safety standards set by NATS are second to none not only in this country but throughout the world.

It was also said that NavCanada is not responsible to anyone. Again that statement is not true because the Canadian Government have a great deal of control over it. There is a right to call it in; there is a right to check it. If one considers what has happened in relation to the NavCanada model, not only has safety improved but efficiency has improved and costs to the airlines reduced. New air traffic controllers have been recruited and are being trained.

A lot of that relevant information would not be before us if my noble friend Lord Brett had not undertaken his mission to Canada. My noble friend the Minister has said that safety should be uppermost. Why put the whole thing at risk by going forward with any of the four bidders, all of which are flawed in one way or another? Surely it is time to consider again setting up a trust model. I accept that it does not have to follow the Canadian model exactly, but it should be a non-profit-making trust. That would mean that safety was paramount. That is why I ask my noble friend to give the matter more thought.

My Lords, I shall not detain the House by repeating the many excellent arguments that have already been made for the amendment. I simply remind the Government of a very good American saying, usually attributed to Harry Truman: "If it ain't broke, don't fix it".

My Lords, in speaking to Amendments Nos. 34 and 35 and the associated amendments, I return to an important point that I made in Committee, because I have not yet had an adequate answer from the Government. I refer to the relative costs of the proposed PPP scheme and the public trust scheme that we advocate.

The Secretary of State has estimated that NATS will require £1.3 billion of investment over the next 10 years. As I have previously pointed out, the cheapest way would be for the Chancellor to fund that. Since he has declined that option, the next best way is to form a public trust along the lines of NavCanada to raise the necessary funds on the money market. Given its guaranteed income flow, it would attract the highest security rating and could thus borrow at the cheapest rates. Lower interest rates would mean lower costs to the airlines and passengers alike, as NavCanada has achieved.

That would be much cheaper than selling half the equity shares in a privatised NATS, as the Government intend. Why are the Government hell bent on pursuing such an expensive method? Why should the public be fleeced in that way?

Unprecedentedly, the National Audit Office has initiated a detailed examination of the Government's proposed PPP for the London Underground. The NAO is particularly examining its value for money relative to other options and its safety implications. If prior NAO scrutiny is deemed necessary for the Government's plans for part-privatisation of the London Underground, why are the Government not submitting similar plans for the part-privatisation of NATS? It would be just as appropriate and just as crucial on cost and safety grounds.

I hope that the Minister will be able to give a considered response to that important question. We believe on all counts that the public trust proposal for air traffic control remains the best option, as the noble Lord, Lord Brett, has demonstrated.

My Lords, I had not intended to speak in the debate, but when words such as "trust", "profit" and "safety" were used, I felt that I should. Until 30th September, I was a health and safety commissioner. We often looked at reports of cases in which health and safety had been endangered. Time after time, profit was the reason for safety precautions being cut. The admirable idea of a not-for-profit trust should be accepted.

My Lords, can the Minister cite one case in which the private sector has delivered safety without the benefit of competition?

My Lords, I fear that there are still some doubts about the ability of the private sector to be involved in any process that has safety at its heart. That fundamental fear is tainting some of the views that have been expressed. I do not accept that the private sector is incompatible with the provision of safety, so I do not approach the issue feeling that there is a need to exclude the private sector from the equation or to constrain its impact.

The Bill faces up to the need to add first-class project management skills to the real operational expertise of NATS. That has consequences.

I have not had the benefit of a trip to Canada--or at least, not to look at air traffic systems. I have three brief points to make about what we have heard. First, the situation in Canada is very stable. There has been a lot of investment and the situation is being managed. We need enormous new investment. I do not believe that it is appropriate to raise such sums without some equity.

Secondly, the Canadians do not have the considerable problem of congestion that exists in European and UK air space.

My Lords, I am sorry to interrupt, but will my noble friend look at the record of NATS? Whenever it has asked for a loan from the Treasury, it has always repaid it with interest. It is a profitable company. There is no reason that the Treasury could not put up the money. NATS would repay it. We all know that we are awash with money at the moment.

My Lords, if we added up all the things that people say that we could spend money on because we are awash with it, we would soon be in the position that we were in under the previous administration, when borrowing was going up sharply and we were far from awash with money. That is not a sensible basis on which to proceed.

Canada is not a congested country and does not have to face up to the difficulties that we have. The proposed structure for the board of a trust is similar to the current structure at the BBC. Over the past 20 or 25 years, that structure has not had sufficient sharpness or dynamism to enable the BBC to deal with sharp competitive intrusion into its market. It is all very well for managing something--in the case of the BBC, managing the decline in its control over world broadcasting--

My Lords, will my noble friend explain where the competition is in air traffic control? It is a natural monopoly of the air over our country. I do not accept the analogy with the BBC's competition from independent or satellite television.

My Lords, the issue is how to get a sharp, competitive body that will have to deal with the massive restructuring that there will be in European air space in the next few years. We are not dealing with a stable or unchanging situation. If we were and there were no possibility of restructuring, I would probably support the proposal, but it would not provide a sufficiently sharp or commercially focused unit that would be able to deal with the restructuring that there will undoubtedly be in Europe. In those circumstances, NATS will certainly lose out. For those reasons, I hope that the amendment will not be accepted.

My Lords, it might be help if I briefly set out the views of the Conservative Party on the amendments. I am most grateful to the noble Baroness, Lady Thomas, for having explained them so ably. As has been said, we also owe a tremendous debt of gratitude to the noble Lord, Lord Brett, for having visited Canada--I gather at his own expense, as he said on the radio this morning--and for bringing back a report which I found so interesting. I look forward to hearing the Minister's reply to some of the points where clearly a difference of opinion exists between what the noble Lord, Lord Brett, found in Canada and what we were advised the last time this issue was debated in your Lordships' House.

I am not sure whether the Canadian trust model is the best one. Therefore, if the noble Baroness, Lady Thomas, decides to divide the House on this issue, I do not feel able either to support or to vote against the amendment. I believe that that will be music to the ears of a number of noble Lords opposite, not least because on the previous occasion the noble Lord, Lord Hoyle, among others, said that it would be entirely opportunistic for noble Lords on this side of the House to support an amendment when it was quite well known--

My Lords, I said that it would be a marriage made in Hell.

My Lords, I have the noble Lord's quotation somewhere but I did not intend to extract it at this point. He may well have said that. However, I agree with him about some of the points that he made in relation to the conflict of interest among the bidders for this process. I shall not give a commentary on the four groups involved, but I consider that the noble Lord put forward some well made points.

I believe that it was the noble Lord, Lord Clinton-Davis, who said that a raft of people is concerned about this issue. He is right about that. I also agree with the noble Lord, Lord Haskel, that profits are not always bad. I submit that not a single person in aviation could say that British Airways is any less safe since it was privatised and since it has looked, sometimes elusively, for the profit motive.

My Lords, I am grateful to the noble Lord for giving way. I accept the profitability of British Airways. But is it not curious that the profit-making British Airways is a main mover in a not-for-profit consortium? Obviously it does not view profit as part of air traffic control.

Yes, my Lords, I agree with that. I said that I did not consider it right to comment on individual groups or to list my favourite bidder, but the noble Lord's point is well known. I agree with the noble Earl, Lord Russell, who said that competition was involved. That is an interesting point. I hope that that clarifies the position from this side of the House.

My Lords, new Clause 35 and its associated amendments seek to restrict the strategic partner to a not-for-profit company. The new clause would also require the Secretary of State to satisfy himself that the company includes representatives of employees and users of aviation, air travel, air navigation and related services.

I assume that one purpose of the new clause is to establish that profit will not be put before safety. However, perhaps I may assure noble Lords that whatever type of strategic partner we select, whatever its nationality and whoever it is, profits will never be put before safety. I believe that that was made clear in the first amendment that we discussed today, which was so warmly welcomed.

This PPP will not jeopardise safety; rather, it is designed to enhance the safety regime for air traffic control. Safety regulation will stay firmly in the public sector in a reformed CAA. The robust public sector regulatory regime will ensure that whatever the status or ownership arrangements for NATS, the company will remain one of the safest air traffic service providers in the world. In short, I do not accept the profit before safety argument and nor should other noble Lords.

Let there be no doubt that we take safety extremely seriously, as we demonstrated earlier today. The additional amendments that we tabled reflect our fundamental and overriding commitment to safety. In any event, I stress again to your Lordships and to my noble friend Lord Hoyle that there is absolutely nothing in this legislation or, indeed, elsewhere that would prevent a viable not-for-profit company from becoming our strategic partner. If such a company can pass all the eligibility criteria, can otherwise be made compatible with our proposals for the PPP, such as shareholdings, and puts forward a good bid, then a not-for-profit group could be the right partner for the Government.

However, in order for us to take a view on that, and for a not-for-profit group to prove that it offers the best future for NATS, there needs to be a competitive process which allows a rational assessment of all the bids that we receive. A not-for-profit bid needs to stand up and be assessed alongside other bids. Limiting the selection criteria to a not-for-profit group would knock out potential candidates who at the end of the day might be better partners.

The second change which the new clause would bring about would be to require the involvement of representatives of employees and users of aviation in the ownership of the company. It is certainly entirely right to assert that such people have a crucial interest in the future of NATS. That is why we devised the innovative stakeholder council. Although not part of the decision-making structure of the company, it will certainly be an influential body whose views will carry considerable weight. In addition, apart from their participation in the council, the employees of NATS will have a 5 per cent stake in our PPP.

The proposed amendment suggests that some noble Lords believe that a trust model such as NavCanada is appropriate for NATS. I say to the noble Lord, Lord Clinton-Davis, that I do not believe I shall feel the need to go to Canada to examine it carefully. I am grateful to the noble Lord, Lord Brett, for the perseverance that he showed in bringing the Canadian experience to our attention. However, I listened, too, to my noble friend Lord Haskel and note the business experience that he brings to bear when he says that the NavCanada experience may well suit Canadian circumstances but we do not believe that it provides the best solution for air traffic control in the United Kingdom.

A key rationale behind the PPP model is the improvement of NATS project management expertise, along with access to private sector finance, so that NATS can invest successfully in the right technology to meet growing demand safely. We do not believe that NavCanada would meet those needs. In the NavCanada model the airlines clearly have a great interest to ensure that the company is operated commercially. However, in the absence of equity participants, the airlines would bear the financial risk as users of the service. If, for example, an investment project overran its budget through mismanagement, the users would pay higher user charges. Under the PPP model, the economic regime and participation of equity holders mean that the airlines will not have to bear the financial risk. For example, if an investment project overran its budget through mismanagement, through the regulatory regime it would be the equity participants, who are best placed to manage the project, and not the airlines who would shoulder that risk.

My Lords, I am obliged to the noble Lord for giving way. Is he saying that British or any other airlines have opposed the Canadian experiment? The logic of that would be that together they would have announced some kind of demarche against the Canadian experiment, but, so far as I know, they have not done so.

My Lords, airlines which have involved themselves in the not-for-profit bid clearly are prepared to take that risk. However, we are discussing how we believe that our PPP might be best founded. I should say that NavCanada itself refers to the setting up of its trust which, incidentally, was followed by a massive reorganisation over the past three years in the form of privatisation. As we have made clear time and time again, we consider complete privatisation to be unacceptable in a service which is as strategic and sensitive as air traffic control.

My Lords, I am slightly confused. The Minister is concerned about the airlines carrying the risk. But that concern is not only not shared by airlines in this country, which have gathered together to form a not-for-profit consortium, but in Canada the airlines seem to be extremely content with their model, in which the Minister suggests that they have all the risks and none of the controls. So if the airlines on both sides of the Atlantic, which are the main customers, are content, that seems to me to be something that we may want to consider further in terms of that model. The Minister seems to be suggesting that the airlines may be stupid in taking that risk, which they are not. They have found a way of doing this. It is interesting that no airline whatever seems to want to have a for-profit model.

My Lords, I said earlier that I am ready to accept that airlines will be involved in a not-for-profit bid, and that will be judged on all-fours with all the other bids involved. I am simply saying that in the scope that we offer in the competitive processes of the PPP, it will be possible for other strongly founded bids to be brought forward.

My noble friend Lord Hoyle compared the PPP proposal for NATS with that for rail privatisation. There really is no similarity. The railways suffered from many years of under-investment and, by the recent admission of the party opposite, were imperfectly privatised. We are introducing a PPP precisely because we believe that it will secure the finance and management skills to maintain the position of NATS as a world leader in state-of-the-art air traffic control systems.

So it is not a privatisation as practised previously. It is a public/private partnership with a strong role for the Government.

My Lords, I hear what my noble friend says. But is it not true that immediately afterwards the Government shareholding in the company will be diluted? Will that not bring about fresh fears? It may be very unfair, but at a time when rail safety has been put at risk because of privatisation, will not this measure be seen as a partial privatisation by the public? If any accident did occur, however unfair it may be, we should stand condemned if we go down this road.

My Lords, I believe that it is misleading of my noble friend to imply that we intend instantly to dilute the Government's share. We have said that if the company in due course decides to raise more money, and in that way wishes to go out into the marketplace, then we should be prepared to see the Government's share go down from the original 49 per cent. But that would in no way undermine the controls that were exercised on the company. There would simply be a dilution of the share in what might perhaps be a much more valuable company in due course.

If we thought for one moment that there was any read across from the tragic events on the railways last week to our policy for NATS and the PPP, then we should not be asking your Lordships' House to press ahead with that policy. I assure your Lordships that there is no connection between the two.

The noble Earl, Lord Russell, asked whether the private sector has delivered safety without the benefit of competition, presumably at any time or at any place. I should have preferred more notice of that question but I should have thought that in de facto terms, if you take the British Airports Authority, which is a de facto monopoly in many areas, that has been run with conspicuous safety since its privatisation.

As regards the contribution of the noble Lord, Lord Smith of Clifton, the PPP will benefit from a very solid credit rating and will be well able to finance its business in a cost-effective manner. Of course, it comes with other benefits which I have described. I cannot speak for the National Audit Office's work programme but I believe firmly that we can demonstrate that value will be produced by this PPP for the public. I have no doubt that the NAO will make its views known in due course.

I turn now to some of the issues raised by my noble friend Lord Brett. There are some similarities between NavCanada and the PPP. Both clearly provide for a measure of stakeholder scrutiny. The PPP model provides for a good measure of stakeholder scrutiny; for example, through the stakeholder council, about which I spoke earlier, and through the employee shareholding. But because capital is at risk, the scrutiny of shareholders can act more powerfully than that of stakeholders.

The Government therefore believe that shareholder participation will be particularly effective in helping NATS to improve its performance in terms of safety, meeting customer demand and efficiency. Shareholders will also be more inclined to have a view as to the wider interests of the business than might some stakeholders.

In addition, the PPP accountability framework will have a number of features in common with the NavCanada model--government-appointed directors, consultation on charges, safety regulation by a public sector authority and government emergency powers of direction.

But the PPP will benefit also from a direct line of accountability to the owners of the business--the strategic partners, the employees and the government--and that accountability to the owners of the business strengthens the incentives to meet customer needs and improve the performance of the business.

Nor do we believe that the trust or NavCanada model would provide a platform to bring in a committed, world-class strategic partner to inject complementary expertise into NATS' operational skills or that it would provide sufficiently strong incentives to improve its performance.

The final area of doubt relates to the ability of that trust model to compete effectively in what we believe will be a liberalised world market for air traffic control. A trust set-up would lack the motivation, initiative, skills or credibility to compete effectively and thus would deny the United Kingdom a key role in an expanding world market.

My Lords, if one looks at the four proposed strategic partners, two are major equipment suppliers, one is a management company with some considerable experience of managing swimming baths and light railways. Two of them have an international approach. Would it not be the case that if one of the multinationals were chosen to be the strategic partner and it then formed a partnership in Holland or in another part of the world, it would have precisely the same relationship with that country that it had with NATS in the PPP here? Therefore, it would not see as a priority the expansion of the British interest. We have seen that with dam construction and similar major projects, consortia are created within countries. That would include the strategic partner but it would not include the British Government or the other partners within the PPP. That is my view.

My Lords, I hear what my noble friend says. I do not want to say anything which would in any way prejudice any of the parties which might put themselves forward to compete for the role of strategic partner in NATS. I stress again that among the companies which have come forward there clearly is complementary expertise which we believe would strengthen the company which we are moving to create.

The proposed new clause and its associated amendments are unnecessary and we invite noble Lords to withdraw them. The purpose of the proposed new Clause 36 is to require Parliament to approve a made transfer scheme before it can be put into effect, after a draft has already been approved under new Clause 35.

It also requires the Secretary of State to produce a progress report on the development of NATS' facilities before any secondary legislation can be considered. This new clause and its associated amendments would result in an extremely time-consuming and cumbersome mechanism. Proposed schemes will be subject to consultation with those concerned.

They will be designed to achieve the complete separation of regulation from service provision. Double parliamentary approval for each scheme is entirely unprecedented and could jeopardise the PPP timetable.

The requirement for the Secretary of State to produce a report on the development of the facilities connected with National Air Traffic Services is also entirely unnecessary. I assume that that has been inserted in order to place on the face of the legislation some commitment to the Prestwick centre. That commitment will be contained in the strategic partnership agreement and will also be a licence condition. In addition, the Government accepted an amendment in another place which will reinforce these commitments on the face of the legislation. The amendment is now Clause 51(3) of the Bill.

The main purpose of Clause 56 is to ensure that the Secretary of State and the Treasury are not regarded as shadow directors of NATS and its new subsidiaries for the purpose of certain provisions of the Companies Act 1985. The purpose of Amendment No. 66 is to remove that protection.

Shadow directors are persons who have not been appointed to the office of director of a company but who are treated by the Companies Act as de facto directors. The obligations imposed by the Companies Act on shadow directors fall broadly into two categories - those which are intended to reveal to the public the persons who are directing the company from behind the scenes, and those which are intended to protect shareholders from directors taking financial advantage of the company.

As the Secretary of State's interest in NATS and its subsidiaries will be public knowledge, the provisions of the Companies Act are not necessary in the context of the PPP. Removing Clause 56 would expose the Secretary of State to administrative inconvenience in complying with the Companies Act without any corresponding public benefit.

In any event, there is precedent for a provision of this nature. Similar provisions are to be found in the Commonwealth Development Corporation Act 1999 and other legislation dealing with government assets.

I have dealt at length with a number of proposals for new clauses and for other amendments to the Bill. For the reasons I have given, I urge noble Lords to reject all the amendments proposed.

My Lords, before the Minister sits down, perhaps I may ask him to reflect on two points. First, bearing in mind the announcement about BSE today, and all that has been said, can he be certain in his own mind that the advice he has been receiving is what he wishes to do? This is a major issue of safety. He has to be absolutely certain about his own views on the subject and not perhaps pay too much attention to the expert advice he might be given.

Secondly, will the Minister always remember that what originates from the Treasury--I think that the Treasury has quite a lot to do with this--is not always correct?

My Lords, given his experience both in government and business, I listen to the noble Lord, Lord Prior, with great respect. As I said earlier, we are going forward in the belief that the investment of £1.3 billion, which we believe will be unlocked over the next 10 years, will create a higher and safer platform of technology which will enable air traffic services in the United Kingdom to continue to lead the world in safety, and, indeed, where possible, to export that expertise in safety, not only to Europe but around the world.

My Lords, I thank the Minister for his reply. I pay tribute to the large number of speeches in support of our amendment from all sides of the House and, on occasion, from unexpected quarters. We have been debating this amendment for 57 minutes. I shall resist the temptation to rehearse the arguments. I believe that the number of people who spoke on our behalf and on our side of the argument fully justifies my testing the opinion of the House.

On Question, Whether the said amendment (No. 15) shall be agreed to?

Their Lordships divided: Contents, 59; Not-Contents, 94.

Division number 1

See full list of votes (From The Public Whip)

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 16 to 18 not moved.]

Clause 8 [Duties of licence holders]:

[Amendment No. 19 not moved.]

Clause 12 [References to Competition Commission]:

[Amendment No. 20 not moved.]

Clause 17 [Commission's duty as to modifications under section 16]:

moved Amendment No. 21:

Page 12, line 18, at beginning insert--

("(A1) The Competition Commission must exercise its functions under section 16(2) and (3) so as to maintain a high standard of safety in the provision of air traffic services; and that duty is to have priority over the application of subsections (1) to (4).").

On Question, amendment agreed to.

moved Amendments Nos. 22 to 26:

Page 12, line 18, leave out ("Competition").

Page 12, leave out lines 33 to 35.

Page 12, line 36, leave out from beginning to ("interests") in line 39 and insert ("The only interests to be considered under subsection (1)(a) are").

Page 12, line 46, leave out from ("must") to ("as") in line 1 on page 13 and insert ("apply them in the manner it thinks is reasonable having regard to them").

Page 13, line 2, at end insert--

("(5) The Commission must exercise its functions under section 16(2) and (3) so as to impose on licence holders the minimum restrictions which are consistent with the exercise of those functions.").

My Lords, I spoke to these amendments with Amendment No. 1. With the leave of the House I shall move them en bloc. I beg to move.

On Question, amendments agreed to.

Clause 27 [Air traffic administration orders]:

[Amendment No. 27 not moved.]

Clause 38 [Directions in interests of national security etc.]:

moved Amendment No. 28:

Page 24, line 32, at end insert--

("(3A) In exercising his powers under subsections (1) to (3) the Secretary of State must have regard to the need to maintain a high standard of safety in the provision of air traffic services.").

On Question, amendment agreed to.

Clause 39 [Directions relating to the environment]:

[Amendments Nos. 29 to 33 not moved.]

Clause 41 [Meaning of transfer scheme]:

[Amendment No. 34 not moved.]

[Amendments Nos. 35 and 36 not moved.]

Clause 43 [Transfer schemes made by CAA]:

moved Amendment No. 37:

Page 29, line 8, at end insert--

("( ) No direction to make a transfer scheme shall be given under subsection (1) before the first Session of the next Parliament after that in which this Act is passed.").

My Lords, in moving Amendment No. 37, I shall speak also to Amendments Nos. 43 and 46. The purpose of these amendments is to delay the coming into effect of a scheme to transfer NATS to a public/private partnership until after the next election.

It must be clear to everyone that the privatisation--public/private partnership as the Government prefer to call it--is highly controversial. Noble Lords will be glad to know that I do not propose to rehearse all the arguments again that we heard at Second Reading and in Committee in this House, and indeed that we heard on the last amendment on which we have just voted. Nor shall I remind the House once more of the attitude of the Labour Party when in opposition and the famous quotation from the then transport spokesman that "our air is not for sale".

We heard this afternoon a powerful case for the Canadian trust model, as was said, a model favoured by the Transport Select Committee in another place. An amendment to that effect in another place caused the third largest rebellion so far from the Government Benches there.

In short, there seems to be more than enough controversy in the Government's proposals and such an enormous about-turn from what they were saying before the last election that we believe the electorate should have a chance to see these proposals in the Labour Party Manifesto before the next election.

There is a precedent for this kind of delay. In 1982, during the passage of the Telecommunications Bill, the then Secretary of State for Trade and Industry, now my noble friend Lord Jenkin of Roding, said,

"but neither the transfer of the assets and obligations to the new company nor the issue of shares to the public will take place before the next general election. We are content that the public should decide whether or not this important step should be taken".--[Official Report, Commons, 29/11/82; col. 39.]

In other words, because the BT privatisation proposals had not been in the manifesto, and because it was then a controversial issue, the Conservative government of the day thought it only right and proper to put the issue before the electorate.

In his Statement on Tuesday to another place on the Hatfield derailment, the Deputy Prime Minister reminded us that in opposition in 1992 he suggested that we did the same with rail privatisation. He said:

"In fact, our argument was that the then Government waited to sell British Telecom until after the election, so they could have done the same with Railtrack".--[Official Report, Commons, 24/10/00; col. 151.]

In other words, the idea of a delay was at that time in the mind of the now Deputy Prime Minister.

The NATS proposal is every bit as controversial as were those relating to BT and Railtrack. But the big difference is that, whereas the BT privatisation was something people would have expected from a Conservative government, the privatisation of NATS is the very last thing anyone would have expected from a Labour Government. That is all the more reason for the proposal to appear in a manifesto before being acted upon.

The Government will no doubt argue that the industry urgently needs the investment. Indeed, there is a need for investment. These amendments do not stop any of the preparations taking place, as they did not with regard to BT. But I believe that the Government plan the PPP to happen by spring next year. Everyone is expecting an election next spring, too, so the delay need be only a couple of months at most.

That is not really the point. The point is that the proposal is controversial and it should be put before the electorate in a manifesto. I beg to move.

My Lords, before the noble Lord sits down I want to ask him a question. He has argued only that the Government should do nothing precipitate at this stage. Has he considered the alternative to what the Government are suggesting because he has not mentioned one word about it? He has argued only that there should be a delay.

What are the Conservative Party arguing for? It is not for delay but that we should continue with the full privatisation of the NATS. Is that the case.

My Lords, procedurally, the Question should be put on my amendment and I shall answer the noble Lord's points when I respond to the debate.

My Lords, with such complicated legislation, it is difficult to keep fully abreast with all the amendments before us. I must confess that when a short time ago I went into the Lobby in support of the Liberal Democrat amendment I thought that it was the only practical alternative to the thoroughly repugnant proposals in the Bill.

However, I had overlooked the excellent suggestion that is now before us. I am much in favour of the status quo; I believe that we have a wholly successful NATS which has a marvellous record of efficiency and safety. It also enjoys full public confidence. It might just be improved by the separation of the CAA as a regulatory body; one which examines it rather than being part of it. Apart from that, the status quo is excellent. Here, we have an amendment which suggests that we maintain the status quo for the next two or three years.

I find the proposal most acceptable for an additional reason which I want to mention to the House. Well within the next few months we shall have a new system for regulating air space in Europe. The common European sky proposals have been nurtured by the Commission during the past year, with all their implications for the control of British air space and of access to our airports by other nations. All of that will become plain and the implications within the new framework of a strategic partner for the United Kingdom will at last become obvious. All the bogus nonsense about being unable to finance our present virtually self-financing system will be put in the dustbin where it belongs.

Therefore, I greatly welcome the amendment. I would not wish to align myself further with the thinking of the Conservative Party on the future of NATS but I welcome the excellent opportunity to have a delaying period in which all will become plain.

My Lords, I follow my noble friend Lord Shore because I have been invited to repeat what I said in my intervention. It was, frankly, that I do not trust the Tories and I never have. And I do not trust them on this issue in particular. The Tories entertain a belief that they will win the next election. They had better disabuse their minds of that, particularly in the light of today's opinion poll.

Whatever the position of the Tories may be, I come to much the same conclusion as my noble friend Lord Shore. I believe that the Government can do nothing but benefit from a delay. They will not have an opportunity to carry out their proposals before the next general election. It may be May, September or October, but they have no reasonable chance of carrying out their proposals.

Secondly, I do not believe that the Government have any intention of carrying out their proposals. Whatever may be said by the Minister today, the fact is that the Government go through the motions of passing the Bill, as we expected of them, but they do no more than that.

Thirdly, we should carefully test what the skies of Britain need. It may be the European approach, which my noble friend completely discounts. It may be a system which closely resembles the present NATS--I do not know. However, whatever it is, it is entirely acceptable to the Government because I believe that, whatever my noble friend says here tonight, the Government have no intention whatever of doing anything for £1,300 million over 10 years.

That being the case, why does my noble friend get so up-tight about it? There is no reason for it. I entirely dismiss the Tories from this argument because they have no chance of winning the next election. But why is my noble friend so uptight about it? It is not as though the Government somehow pin their hopes on the economic benefits of the scheme. No sensible person believes that. That being so, why does my noble friend use every opportunity in this debate to colour badly that which the opposition on this side of the House proposes?

My noble friend waxed eloquently about the situation in Canada--he may be right or wrong--but one thing we do know is that NATS has served this country well. Does my noble friend dispute that? The main point raised by my noble friend Lord Shore is that over the past 30 years NATS has served the people of this country well. Why should the Government interfere with that?

My Lords, I am president of the Popular Flying Association and am myself an occasional user of airspace services. Therefore, I have a personal interest in this matter in two regards. I am not opposed in principle to privatisation, but the arrangements for continued access to airspace by general aviation are not yet properly in place. While the Civil Aviation Authority is anxious to secure adequate and proper arrangements, there is some very disquieting evidence from senior officials of NATS that they will resist them. I shall deal with that in more detail at a later stage of the Bill.

In the light of those considerations, I believe that it is better to delay the implementation of these provisions, as my noble friend Lord Brabazon proposes. I should like to see these provisions postponed until after the next election. That will give us a delay of perhaps a few months and allow the views of the Civil Aviation Authority in this matter to prevail over those of NATS, which I regard as less than helpful.

My Lords, we shall support these amendments should the noble Lord press them to a Division. We do so very much in the same spirit as the noble Lord, Lord Shore, enunciated at the beginning of this brief debate. We are totally against the views of the Conservative Front Bench, whose ultimate aim is the total privatisation of NATS. However, we believe that a pause would be of benefit to the Government in enabling them to think again on the subject. It will ensure that they achieve a structure for NATS which responds not only to the demands for efficiency and so on but those placed upon it by the public. I refer to the safety culture to which the noble Lord, Lord Hoyle, spoke.

Another minor but nevertheless significant consideration is that a pause will give NATS, as it is now, additional time to make progress with modernisation of its technological base and the creation of the new centre at Swanwick. That is undoubtedly needed to meet the timetable of 2002, which is already six years late. That timetable may well be disturbed during the process of the part-privatisation. For those reasons, we shall join the Conservatives today if they decide to press the matter to a Division.

My Lords, as the noble Lord, Lord Brabazon of Tara, said, these amendments are intended to defer the making or approval of any transfer schemes until the Session of Parliament following the one in which the Bill before us receives Royal Assent. As the making of transfer schemes is a prerequisite to the establishment of the NATS PPP, this would inevitably lead to delays in the PPP timetable. I am sure noble Lords appreciate that there needs to be a degree of flexibility in the timing of the proposed sale. The necessary legislation (in the form of Part I of this Bill) must be in place so that ownership of NATS can transfer to the Secretary of State, who can then proceed to effect a partial sale. This in itself has acted as a constraint on the speed with which the NATS PPP can come into effect.

I believe that the restrictions which noble Lords opposite suggest go too far. They would lead to an unreasonable delay in implementing the transfer scheme provisions, and hence the sale, and I do not believe that that would be in the best interests of the various parties involved. We need to resolve the future of NATS once and for all and put an end to the uncertainty which has been hanging over staff and management for years.

My noble friend Lord Shore referred, with unexpected optimism, to the speed with which a single European sky might be achieved. My understanding of the importance of those proposals is that they would lead to better communication in overly congested airspace in Europe so that it could be managed more effectively. The technology suggests that the dozens of national jurisdictions across Europe could be reduced to five or six. As I have said before in your Lordships' House, in that consolidation lies the opportunity for a strong British company to become a world leader in selling safety and efficiency across Europe and the world. We believe that our PPP is entirely compatible with any likely outcome of the European initiatives that are in place.

My noble friend Lord Clinton-Davis again asks about our commitment to NATS. He suggests that perhaps in some way we disparage its safety record. That is not so. I have congratulated NATS on its very good safety record. The noble Baroness, Lady Thomas of Walliswood, referred to the problems of Swanwick. She might also have referred to the problems arising from investment in Prestwick. It is clear that project management of the kind of investment that we believe is needed in this industry is not best carried out by the structures which have been in place to date.

My Lords, I am grateful to my noble friend for giving way. I said earlier that one of the partners that had been considered was Lockheed Martin, which is more responsible than anyone for delay at Swanwick. Can my noble friend explain how, if Lockheed Martin is successful in this matter, the situation will be improved?

My Lords, I do not want to enter into assertions about responsibility in this case. It is accepted by the management of NATS itself that it does not have the expertise to run these kinds of projects as they should be run and that it is years and years behind in investment. We believe that, if we look to a decade of further investment, that is best achieved with the kind of expertise to be found in the right strategic partners in the private sector. For those reasons, I ask noble Lords to support us in advancing the PPP. I invite noble Lords opposite not to press these amendments.

My Lords, I am grateful to the Minister for his reply, although I do not believe that he takes account of what the amendment seeks to achieve. The amendment does not prevent the rest of the legislation passing into law but merely asks the Government to do exactly what we did with British Telecom in 1982; namely, to delay it until such time as it has a mandate from the people.

I am grateful to those who have spoken to and supported the amendment. In particular, I agree with the noble Lord, Lord Shore. Whatever happens as a result of this matter, the separation of the regulator (the CAA) from the operator (NATS) is a good thing, and all sides of the House are agreed on that.

The noble Lord, Lord Clinton-Davis, asked me at the beginning what we on this side of the House would do. He then went on to say that we had absolutely no chance of winning the next election. Therefore, I am not quite sure why he was so concerned about what we might or might not do. We do not yet know what the outcome will be. We do not know what shape NATS will be in after the Bill is enacted. I can assure noble Lords that our proposals for National Air Traffic Services will be clearly set out in our election manifesto. Those proposals will take into account all the debates which have taken place both in this House and elsewhere on the issue. The noble Baroness, Lady Thomas, assumes that we will go forward with privatisation of NATS. I cannot say that we will; I cannot say that we will not. But I cannot say that the matter is yet decided. The point is that our decision will clearly be set out in our manifesto.

My Lords, some of us were listening very carefully to the noble Lord. He will seek, I suspect, to divide the House. We need and require clearer guidance from the noble Lord. It is right and proper that the noble Lord should come out in the open and state where he stands.

My Lords, as I said at the beginning of my remarks, we do not know. It depends entirely on what happens to the passage of the Bill. NATS will either go ahead with the PPP or not before the next election. We cannot possibly say at this stage what state NATS will be in at the time of the next election. That is not really the point at issue. The point at issue is that the Government should delay this PPP so that their views and proposals can be put in their manifesto before the next election. The proposals before us today were certainly not in the manifesto for the last election.

As I said in my opening remarks, no one would have believed that the Labour Party would go forward with a privatisation of this kind. I do not intend to go over all the issues of the PPP. Those were more than amply covered in the debate on the previous amendment. It would be a good idea for the Government to delay this matter until after the next election. Therefore, I seek to test the opinion of the House.

On Question, Whether the said amendment (No. 37) shall be agreed to?

Their Lordships divided: Contents, 112; Not-Contents, 90.

Division number 2

See full list of votes (From The Public Whip)

Resolved in the affirmative, and amendment agreed to accordingly.

Clause 44 [Effect of scheme made by CAA]:

[Amendments Nos. 38 to 42 not moved.]

moved Amendment No. 43:

Page 29, line 28, at end insert--

("( ) No approval of a transfer scheme shall be made under subsection (2) before the first Session of the next Parliament after that in which this Act is passed.").

On Question, amendment agreed to.

Clause 45 [Transfer schemes made by Secretary of State]:

[Amendments Nos. 44 and 45 not moved.]

moved Amendment No. 46:

Page 29, line 41, at end insert--

("( ) No transfer scheme shall be made under subsection (2) before the first Session of the next Parliament after that in which this Act is passed.").

On Question, amendment agreed to.

Clause 47 [Accounting provisions]:

[Amendment No. 47 not moved.]

Clause 48 [Accounting provisions: interpretation]:

[Amendment No. 48 not moved.]

Clause 49 [Issue of securities]:

[Amendment No. 49 not moved.]

Clause 50 [Government investment in securities]:

[Amendment No. 50 not moved.]

Clause 51 [Crown shareholding]:

My Lords, in calling Amendment No. 51, I should point out that if it is agreed to, I cannot call Amendment No. 52 owing to pre-emption.

moved Amendment No. 51:

Page 34, line 1, leave out subsections (4) and (5).

My Lords, in moving this amendment, I wish to speak also to Amendments Nos. 52, 54, 55, 61 and 65 to 67.

These amendments are similar to the ones we moved in Committee. They concern the sale of NATS and the percentages that are to be kept by the various parties. We do not see the logic of including the 49 per cent limit when that can be diluted down as far as 25 per cent. We find that a little difficult. In Committee we suggested that 26 per cent would make more sense as it would at least give the Government the right to block any measure that required a special resolution. The Minister disagreed with that premise. My understanding is that a 25 per cent holding does not enable a shareholder to stop the passing of a special resolution but that a 26 per cent holding does. I should like some clarification from the Minister on that point.

We are also concerned that a disposal should be by means of competitive tender. The identity, competence, honesty and reliability of the private partner are vital to the effective performance of air traffic services, yet the Bill gives the Government carte blanche as to how the partner is selected, a process that could give rise to accusations of cronyism and abuse if the procedure is not transparent and open. That is the purpose of Amendment No. 52.

Amendment No. 54 concerns the designated company's articles of association. There is little point in having rights attached in the articles of association to the golden share unless they include the right to object to any change in those articles. A 25 per cent shareholding would not itself enable the Government to prevent a change in the articles of association without the power to do so being included in the articles of association.

Other amendments in this group are along similar lines. Similar amendments were moved by me at the Committee stage. I do not propose at this stage to go into the detail of all the amendments. Suffice it to say, I shall be interested to hear what the Government have to say to some of the points I have made. I beg to move.

My Lords, Amendment No. 51 would have the effect of removing the obligation of the Secretary of State to hold at least 25 per cent of the ordinary share capital in the designated company and not to dispose of more than 51 per cent. That would remove the Government's current obligation to proceed by establishing a public/private partnership and would instead pave the way for full privatisation. The Government remain convinced that the outright privatisation of NATS to which the previous government were committed would be a mistake.

The Government have considered at great length the other options for the future of air traffic control and the issue has been debated at length. We remain convinced that a public/private partnership is the appropriate solution. Our aim is to facilitate the development of a major British-based company, successfully going out and working in air traffic control in the UK and in countries around the world, and delivering safety for those countries and for the airlines which serve them.

It is the Government's view that the PPP will provide a secure vehicle for the major investment programme--estimated by current management to be in the region of more than £1 billion over the next 10 years--which everyone agrees is essential. That investment will secure the two-centre strategy for NATS. The PPP will achieve that and the Government's interests will be protected by a wide range of measures so that the Government, as a major shareholder, will have to give their consent for any significant actions by the strategic partner. The Government will have the right to appoint a number of non-executive directors to the board of NATS and retain a special share in the company. These partnership arrangements will ensure that the Government can continue to protect the taxpayer's financial interest as a minority investor in NATS and that NATS continues to act in the public interest.

The noble Lord asked about 25 per cent as a blocking share. But what matters here are the terms of the strategic partnership agreement. That document, which governs the relationship with the strategic partner, remains fully effective with 25 per cent. We believe that the PPP will give NATS the freedom it needs in the private sector to invest in the latest systems and safety equipment and to develop the business.

Noble Lords have expressed concerns that the PPP will compromise safety. I hope that they will accept that we have listened to those concerns by tabling the amendments which we debated at the start of today's proceedings. However, perhaps I may stress again that we shall have robust powers through the Bill, through the licensing regime and through the strategic partnership agreement.

As regards Amendment No. 52, Clause 51(4) seeks to ensure that the Crown cannot sell shares in NATS where to do so would result in the Crown holding less than a 49 per cent stake. Amendment No. 52 seeks to impose a further restriction on the Crown selling its shares in NATS by requiring it so to do only by way of competitive tender.

This amendment adds nothing to the protections that are already in place. The Government have always made it plain that they intend, as part of the PPP, to sell down the Crown's stake in NATS to 49 per cent (and it will do so by competitive tender). But I need to make it clear that this does not simply mean selling to the highest bidder. The strategic partner will be selected with a number of criteria in mind, covering safety, national security, management capability and commitment, financial credibility and capacity, quality of strategic planning and satisfactory solutions to any real or potential conflicts of interest. This being so, for so long as Clause 51(4) is in force, the Government will not be able to sell any further shares in NATS, whether by competitive tender or by any other process, and whether to a strategic partner or to anyone else. For that reason, I invite noble Lords to withdraw the amendment.

Amendments Nos. 54 and 65 seek to create a statutory requirement to prevent any change in the designated company's articles of association. I can assure your Lordships that these amendments are unnecessary. It is and always has been the intention of the Government that the PPP company's articles of association will be subject to protection to prevent changes to the key rights, such as the special share. Once enshrined in the articles of association, the special share cannot be removed or changed. Draft articles of association have been laid before this House. If noble Lords care to consult them, they will find that they do include this right. In the circumstances, there is no need to make legislative provision and I invite noble Lords opposite to withdraw these amendments.

Amendment No. 55 seeks to remove the right of the Secretary of State to amend or repeal Clause 51 by order. I can understand the concern of noble Lords that, on the face of it, these powers may seem rather wide-ranging. However, I believe that I can assure noble Lords that adequate safeguards have been put in place. Under the provisions of Clause 102(6) an order under this clause cannot be made without the approval of both Houses of Parliament; in other words, the affirmative resolution procedure will apply.

I should also like to draw the attention of noble Lords to the deliberations of the Select Committee on Delegated Powers and Deregulation. In its report on the Bill, the committee commented that it did not regard this power as inappropriate and saw the affirmative procedure as providing appropriate control over its use.

I should additionally mention that subsection (12) of Clause 51 is not without precedent. A similar provision has been made in Section 18 of the Commonwealth Development Corporation Act 1999, dealing with matters relating to the minimum Crown shareholding. That section contains a power enabling the Secretary of State to amend or repeal it by order, and again the affirmative resolution procedure will apply.

I hope that noble Lords opposite will accept that proper safeguards have been put in place as regards the use of these powers and I invite them to withdraw the amendment.

Amendment No. 61 tabled by the noble Lord builds on one he tabled during our earlier consideration of the Bill. I appreciate the noble Lord's wish to ensure that Parliament is kept fully informed about sums paid out and received under this guarantee.

The amendment suggests that the Secretary of State must disclose the reasons for the default on repayment of sums paid out under the guarantee where he knows the reasons for default, unless he is not permitted so to do because of a duty of confidentiality. Although the Government might be aware of the reasons for the default, there could be circumstances where disclosure could prejudice the Government's ability to recover moneys paid out under guarantee, even where there is not an explicit duty of confidentiality.

The second part of the amendment requires the Government to outline to Parliament any steps they take to recover the sums in question. Again, to reveal such a course of action could place at risk the Government's strategy for recovering the moneys--even if they were under an explicit duty of confidentiality. There may, for example, be a number of competing claims for funds of the company. For the Government to reveal the action they are taking could compromise commercially confidential negotiations and give other creditors an advantage.

I can assure the noble Lord that, in resisting this amendment, I am in fact seeking to protect the interests of the Exchequer rather than wishing to be less open with Parliament. The clause already sets out requirements for the Secretary of State or the Treasury to lay statements before Parliament when the guarantee is given, when payments are made under the guarantee, and if the default occurs on repayment. Should such a default occur, the noble Lord would of course be able to probe Ministers of the day through the usual parliamentary processes.

I hope that this will offer the noble Lord comfort on the matter and that, in the circumstances, he will agree that it is appropriate not to make the suggested amendment. I therefore invite the noble Lord to withdraw his amendment.

Noble Lords opposite tabled Amendment No. 67 at Committee stage. Obviously, the explanation that I gave last time in defence of retaining subsection (4) of Clause 57 was not sufficient, so I shall make another attempt at it.

The subsection is essentially a protective measure. The direction to which it relates is one which requires the CAA to release NATS from debts which the latter owes to the CAA, in readiness for the establishment of the PPP. Once NATS is classified to the private sector it will not be able to borrow from public sources. However, it is not the intention that the Government will simply write off these debts. NATS' current debt to the National Loans Fund--approximately £300 million--can be dealt with in a number of ways. A likely course of action will be for NATS to take out a commercial loan at the time that the PPP is effected, which would be used to repay its debt to the National Loans Fund. Therefore the private sector and not the Government would be responsible for the debt. The precise mechanism will be decided nearer the time of the PPP, in conjunction with the strategic partner.

However, in complying with this direction, the CAA could be said to be acting in contravention of other duties placed upon it. It might be argued that the CAA was not furthering the interests of its users by releasing NATS from its debt, even though it was acting in accordance with a direction given to it by the Secretary of State. The CAA would then be placed in an intolerable position; the subsection is designed to prevent that from happening.

I must make it clear to noble Lords, as I did last time, that this subsection is not a means by which important matters such as safety can be circumvented. It is simply to prevent the CAA from being subjected to frivolous and vexatious claims. I hope that noble Lords opposite will accept this explanation and withdraw their amendment accordingly.

My Lords, I am grateful for the Minister's detailed response to the amendments. I am bound to say that they comprise rather too big a group. I should probably not have agreed to such a large grouping.

The Minister's opening remarks almost took the form of a Second Reading speech and were a commercial for the PPP proposal. The noble Lord need not worry so far as I am concerned. I am well aware of the need for investment in this sector and I am well aware of the absolute paramount need for safety. As I said earlier, we are grateful for the government amendments moved at the beginning of our deliberations.

As regards the detail of some of the amendments, I shall need to read most carefully what has been said by the noble Lord. However, I am bound to say that I remain puzzled by the argument over a 49 per cent stake and a 25 per cent stake. If it is proposed that the government holding should be reduced to 25 per cent, why mention 49 per cent in the first place?

So far as concerns the golden share--or the special share--I am sure that I shall come back to this at Third Reading. Since the Committee stage, we have heard a judgment in regard to the BAA situation. The whole status of golden shares in privatised companies is in some doubt. I do not intend to take up further time on these issues. As I said, I shall read carefully what the Minister said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 52 to 56 not moved.]

moved Amendment No. 57:

Before Clause 52, insert the following new clause--

:TITLE3:VOTING RIGHTS OF CROWN SHAREHOLDER, EMPLOYEE PARTICIPATION, ETC

(" .--(1) This section applies if any property, rights or liabilities are transferred under a transfer scheme to a transferee which at the time of the transfer is--

(a) a company which is wholly owned by the Crown;

(b) a company which is wholly owned by the CAA;

(c) a company which is a wholly owned subsidiary of a company falling within paragraph (a) or (b).

(2) The Secretary of State may by order designate such a transferee for the purposes of this section.

(3) The Secretary of State must ensure that, in relation to members' resolutions of the designated company, the proportion of votes exercised by the Crown shareholder, as a proportion of the total votes available to all shareholders, shall be in direct proportion to the proportion of shares in issue held by the Crown shareholder.

(4) The Secretary of State must ensure that the Crown shareholder must appoint a number of Directors to the Board of the designated Company, so that the proportion of its appointees on the Board is equal to the proportion of shares in issue held by the Crown shareholder.

(5) The Secretary of State must ensure that at least 5 per cent. of the designated company's issued ordinary share capital shall be held by an Employee Share Trust on behalf of employees.

(6) The Secretary of State must ensure that a representative of the Employee Share Trust is appointed to the Board of Directors of the designated company.").

My Lords, the amendment deals with the detail of the strategic partnership, which is lodged in the Library and is not on the face of the Bill. That makes matters rather difficult.

We first raised this matter in Committee. This is an unusual PPP, and the question arises of what view the House should take about the strategic partnership agreement. One can readily acknowledge that there is a tension between, on the one hand, giving potential bidders the reassurance they seek regarding their capital investment, and, on the other hand, a cluster of features of the industry, about which we have heard, which circumscribe that.

Perhaps I may begin with the formula under which 49 per cent of shares will be retained by the Government, 46 per cent will be for the strategic partner to purchase, and 5 per cent will be for the employees. In his reply at Committee stage, my noble friend said that the Government have always made it clear that the strategic partner will have operational control of NATS. He said that to oblige the Government to retain voting rights equivalent to their proportionate shareholding would effectively deprive the strategic partner of voting control. Of course it would--but what was the point of the 49 per cent, 46 per cent, 5 per cent split in the first place?

One of my noble friends referred earlier to PPPs in sectors such as the National Health Service and described how well they operated. Perhaps I may take that as an analogy and demonstrate why this particular PPP is not a normal one. Is it the case in the National Health Service that a PPP would operate on the basis that strategic control of a trust would be vested in a private sector partner even when that private sector partner had a lesser shareholding than the Government? Perhaps my noble friend will comment on that when he replies.

It has been pointed out that we are talking about an area of rapid structural change, which will increase in the coming years. That is an argument which cuts both ways. The Minister's speculation, which he has reiterated, is in the context of half-a-dozen centres dealing with the lion's share of air traffic over the whole of Europe. We look forward to the report of a high level group on the single European sky. That will be the start of the process my noble friend referred to as a tremendous opportunity for the UK air traffic control industry, NATS specifically.

In some respects, it is rather unfortunate that the European dimension will become clear only after the Bill has passed all its stages. But, depending on the amount of water that will have gone under the bridge by then, can the matter not be adjusted, if necessary, by looking again at the strategic partnership agreement, both in terms of further relations with the bidders and in terms of the European dimension? Perhaps there was a hint of that in the Minister's earlier comment.

The second element in the amendment concerns employee interests. The key issue is found in subsection (6), which seeks to build on the proposal in subsection (5) that the 5 per cent of the shares earmarked for employees should be reflected in the appointment of a director. This would be minimum recognition of the fact that we are talking about a partnership between the different stakeholders. In this regard, perhaps my noble friend will reconsider the nature of the objection he advanced in Committee when he said that he does not believe that representatives can sit on a board because of a conflict of interest. I paraphrase. That is the last argument the Minister should use. If that is his argument, I should point out that there are conflicts of interest all over the place.

We are talking about a new style of partnership. My noble friend is to be congratulated on trying to innovate. But he says that this is one area in which he cannot innovate because of his experience in Glasgow 30 years ago. We have all had experiences. He said that in those days workers' representatives could not sit on both sides of the fence. We are now talking about innovation and about a stakeholder board, in effect. Life has moved on in the past 30 years. I hope that my noble friend will feel able to revisit his philosophy on these issues.

My Lords, perhaps I may refer again to my "Gulliver's travels" to Canada. I raised with the people I met in Canada the role of the trade union directors--there were two trade union directors on the board--and I asked the airline representatives whether there was a conflict of interest. They said that one of the reasons for the success of the trust was both the choice of the partners--the board of directors--and the quality of the people. They said that they found it a great advantage to have trade union representatives--this was not the trade union representatives speaking but the other directors--because they knew directly that they represented an influence; that is, the staff. They felt that in the planning process and some of the difficult decisions they had to take, that allowed for a greater understanding and a greater confidence in the workforce than otherwise would be the case.

They have a stakeholder council similar to that envisaged in the PPP. They said that they did not believe that holding the trade union representation at that level would have provided anything like the value of having trade union representatives on the board of directors. I hope that the Minister will take that into account in his consideration of this issue.

My Lords, I support the amendment on behalf of myself as president of BALPA. I do not speak on behalf of BALPA but on behalf of myself.

As my noble friend Lord Brett said, there is an advantage in ensuring a proper reflection of the point of view of employees. The amendment does not state that the employee must be a representative of a particular union; it involves the idea that the employees have a contribution to make. Of course they have. There is no way other than representation through the official trade union that they can make that contribution.

I know of people who have been elected because they are members of BALPA and involve themselves in policies which are important to them and important to the people from whom they have come. But it does not seem to me imperative that they should represent individual employees per se.

The amendment encapsulates the idea that employees should have a voice--no more, no less. I entirely agree with the views of those who are in favour of the amendment.

My Lords, Gulliver's Travels was referred to by my noble friend Lord Brett; but perhaps we are talking about "Brett's travels". We owe my noble friend a debt of gratitude. On so many of the issues raised in our debates today he has ascertained whether there are practical advantages in what is being said.

To take up a point made by my noble friend Lord Lea, perhaps my noble friend the Minister did have some experience in a Glasgow shipyard years ago, but the idea of not being able to serve two masters has a ring of Marxism about it rather than of partnership with new Labour. Matters have moved on. We are talking about continuous partnership between employer and employee. As we are breaking new ground, the amendment offers a unique opportunity to put an employee representative on the board.

As always, my noble friend the Minister has approached us to see whether we could reach agreement that there should be consultation with the trade unions, of their being instrumental in advising on the appointment of a director and having the same director as on the board of trustees. However, in the words of the TUC, having a trustee director on the main board could lead to a conflict of interest. As I say, it is a substitute for the employees either being directly represented or having a representative on the board.

I turn to an equally important point. We must give the employees confidence in the changes that are taking place. At present, they lack confidence and trust. They are concerned about what is happening. The way to bring them along with us is to make sure that they are directly represented on the board.

I hope that my noble friend the Minister will take this point on board and that he is prepared to break the necessary new ground. My noble friend means what he says; there is no doubt that he would consult with employers in relation to the appointment of directors. But there will be Ministers other than my noble friends who may belong to different parties with a different philosophy. Even given what my noble friend has said, a provision needs to be written in to the Bill. If consultation is to take place, we must ensure that it does not merely take place with this Government or this Minister but with other Ministers in future governments.

I hope that my noble friend will say that employees can have direct representation. However, even given his own method--namely, consultation--I hope he will agree to consider a provision on the face of the Bill to ensure that, whichever method is chosen, it will also happen in the future with governments of a different political hue.

My Lords, the new clause proposed in the amendment, which has already been laid once at Committee stage, seeks to do four things, and I shall deal again with each in turn.

Turning to the first of these objectives, on the subject of voting rights, the Government have always made it clear that the strategic partner will have voting and operational control of NATS, except in relation to certain key areas where the approval of the government-appointed directors, or in some cases the Secretary of State, will be required.

In reply to the noble Lord, Lord Lea, let me say that obliging the Government to retain voting rights equivalent to their proportionate shareholding in NATS would effectively deprive the strategic partner of operational control of NATS, as its share of the votes would be less than that of the Government. That would jeopardise NATS' private sector classification, which would ultimately deny it access to private sector capital--one of the key objectives of the PPP. Perhaps I may remind the House that NATS will face a huge investment programme over the next 10 years. The inability to give the strategic partner voting control would undermine its confidence in its investment, possibly reducing the value of the NATS shares that the Government, and ultimately the taxpayer, will receive.

With regard to the second objective--namely, to ensure that the Government can always appoint a proportionate number of directors to the NATS board--this would deprive the strategic partner of board control, thereby again placing NATS' private sector classification at risk and rendering an investment in NATS unattractive to potential strategic partners. Furthermore, it would most likely result in the Government and the strategic partner having an equal number of directors, creating the potential for deadlocks at board level--something that could jeopardise not only the commercial future of NATS but also the ability of NATS to put in place the systems and procedures necessary to guarantee the ongoing provision of safe air traffic services. Having a clear line of direction, albeit with proper checks and safeguards, is essential to a successful future for NATS.

Turning now to the third objective, namely to ensure that 5 per cent of NATS' share capital is held by an employee share trust, the Government have always made it clear that employees will be entitled to participate in NATS through holding up to 5 per cent of the ordinary share capital. This policy has not changed. It is inappropriate to attempt to prescribe the details of a complex employee share participation arrangement in primary legislation. The amendment proposed would have the effect of requiring the shares to be owned, both legally and beneficially, by the employee share trust. This would deprive employees of the full benefit of the shares (that is, the receipt of dividends and proceeds from their sale).

Finally, the amendment seeks to secure employee representation on the board of NATS. It would be highly unusual for a major UK company to have employee representation on its board, particularly in the case of a company which is intended to be operated along the lines of a listed company. I say to my noble friends that I spoke as much from my experience as a director and chairman of a number of listed companies as I did from any trade union experience. An employee representative could face a conflict of interest between the protection of the rights of employees and the best interests of the company. This would create tensions at board level which could hamper the effective management of the company and could increase the risk of deadlock.

My Lords, will my noble friend give way? There are ample examples of employee representatives, or people advanced by their trade union, who are already directors. Is he saying that they are always beset by problems of conflict of interest?

My Lords, I did not say "always". I said that this could create tensions at board level, that it could hamper the effective management of the company and could increase the risk of deadlock. For that reason, we do not think it appropriate to put such--

My Lords, I had not intended to intervene in this debate. However, I am puzzled as to why one type of employee representative would be prejudicial to the board's performance, when the presence of other employees who are directors of companies is not damaging to the board.

My Lords, it is for the simple reason that a board director would have a fiduciary duty to the interests of the company. If such people were seen as representatives of trade unions and employees, it would be difficult for them in some circumstances to perform that fiduciary duty without a conflict of interest being perceived by those who thought that they had been appointed to represent their interests, not the interests of the company. We do not believe that it would be appropriate to include such a prescriptive clause in primary legislation. However, if following discussion between employee representatives and the strategic partner, the strategic partner felt it appropriate and beneficial to put an employee representative on the board, the Government would not oppose that. I can tell the House that we intend to facilitate such discussion. Once we have established a short list of bidders, we shall arrange meetings between them and staff representatives to discuss bidders' plans for the future of the company.

I must also point out to noble Lords, as I have before, that we have endeavoured to give employees a voice on the stakeholder council that is to be created. It will be an influential body whose views will carry considerable weight. More importantly, it will allow representatives of NATS' employees and users of aviation access to direct involvement in the company.

The council will offer a forum for discussion and influence on NATS' plans and arrangements for the provision of air traffic services. It will also offer the opportunity for any member of the council to raise an issue regarding the provision of these services by NATS and its subsidiaries, and for this issue to come to a resolution. The council will pay particular attention to areas such as major investment projects, safety issues, standards and service provision, long-term investment plans and the development of new technology.

I should also remind noble Lords that the Government will have the right to appoint two or perhaps three "partnership directors" to the board of the PPP company. The Government will also have the right to appoint a trustee to an employee share trust. We are proposing that we should consult staff representatives about the criteria that we shall use in selecting these appointees, so that staff can feel comfortable about the appointments. We are also proposing that the government trustee be appointed as one of the partnership directors. This person, although bound by the rules of both appointments, would be uniquely well informed on matters of interest to staff. I am confident that that unique position could helpfully inform the board as it takes key decisions.

I hope that noble Lords will agree that these measures, together with staff representation on the stakeholder council that I mentioned, will go a long way towards addressing staff concerns and provide sensible working arrangements that will be of benefit to all the parties involved. These matters are essentially--

My Lords, before my noble friend concludes, perhaps he could answer my query on his proposals regarding how we can ensure that consultation will take place in the future; that is to say, when he is no longer the Minister with such responsibility.

My Lords, if noble Lords study the documentation that we have produced for the PPP, they will see that the partnerships that we have talked about are entrenched as far as possible. In any future situation, it seems unlikely that a government would transfer their right to have directors appointed away from themselves and in that way deny themselves the opportunity to have the strategic role that we presently propose.

These matters are essentially for the partnership documentation--that is where we have already undertaken to place them. Therefore, they would be out of the place on the face of the Bill. In view of that explanation and the reassurances that I have given, I invite my noble friends to withdraw the amendment.

My Lords, I thank my noble friend for his clarification on the matter. However, I have two points to make. First, this is clearly not just a normal plc; it is a PPP and, inherently, a partnership multi-stakeholder model. In effect, the Minister is seeking a third way. Indeed, he mentioned the stakeholder council, as well as many other innovations that would be on the agenda in that respect.

Secondly, I should just like to point out that the board that is emerging is a two-tier concept; it is not a traditional unitary board in the sense that we have always understood. We are innovating as we go along. I shall withdraw my amendment, but I should like to consider the position further before we reach the final stages of the Bill. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Clause 52 [Loans]:

[Amendment No. 58 not moved.]

Clause 53 [Guarantees]:

[Amendments Nos. 59 to 61 not moved.]

Clause 54 [Grants]:

[Amendment No. 62 not moved.]

Clause 55 [Trustee investments]:

[Amendment No. 63 not moved.]

Clause 56 [Shadow directors]:

[Amendments Nos. 64 to 66 not moved.]

Clause 57 [Extinguishment of liabilities]:

[Amendment No. 67 not moved.]

Clause 62 [Exercise of functions through nominees]:

[Amendments Nos. 68 and 69 not moved.]

My Lords, in place of Amendment No. 70, I call Amendment No. 70A.

moved Amendment No. 70A:

After Clause 64, insert the following new clause--

:TITLE3:PENSION ENTITLEMENT OF PRESENT AND FORMER EMPLOYEES OF NATS

(" .--(1) In this section--

"NATS employer" includes NATS, any designated company which succeeds to the business of NATS and any employer other than a designated company which succeeds to or acquires any part of the business of NATS;

"NATS" is National Air Traffic Services Ltd whose air traffic services are to be transferred under the provisions of this Act;

"protected beneficiary" includes--

(a) any person who, on the transfer date, is employed by NATS and is an active member of the Scheme;

(b) any person who is employed by NATS on the transfer date, but is then too young to join the Scheme, and who subsequently joins;

(c) any person who is not an active member of the Scheme on the transfer date but who is subsequently entitled to rejoin as a NATS employee without a break in their continuity of employment;

(d) any person who is not an active member of the Scheme on the transfer date, but who is entitled to accrued pension rights under the Scheme at that date; and

(e) any person who is prospectively or contingently entitled to benefit under the Scheme on the death of a person covered under (a) to (d) above;

"relevant scheme" means the Scheme or any other scheme of a NATS employer that covers protected beneficiaries, and that provides benefits in respect of the protected beneficiaries which are at least equivalent in value to those applicable to the protected beneficiaries as at the transfer date;

"Scheme" means the Civil Aviation Authority Pension Scheme;

"transfer date" means the date of the transfer of NATS to the public-private partnership.

(2) NATS (or, if appropriate, the designated company) shall, subject to the consent of the Pension Schemes Office of the Inland Revenue, participate in the Scheme as a non-associated employer.

(3) If NATS (or the designated company) does participate in the Scheme as a non-associated employer, a proportion of the total assets of the Scheme shall be segregated for the benefit of the protected beneficiaries and the share of assets so segregated shall be equal in proportion to the proportion that the Scheme liabilities in respect of the protected beneficiaries bears to the Scheme's liabilities as a whole.

(4) If NATS (or the designated company) is unable to participate in the Scheme, that NATS employer shall instead make available a relevant scheme for the benefit of the protected beneficiaries.

(5) If the shares or business of NATS (or the designated company), or any part of that business, is transferred to a NATS employer other than NATS or a designated company, that NATS employer shall become a non-associated employer in the Scheme and if that is not possible that NATS employer shall instead make available a relevant scheme for the benefit of the protected beneficiaries.

(6) For the purposes of subsections (4) and (5), if a NATS employer is to make available a relevant scheme other than the Scheme, a share of the assets of the Scheme (or of the previous relevant scheme if not the Scheme) shall be transferred to the receiving relevant scheme, calculated on the basis described in subsection (3).

(7) If a protected beneficiary transfers to the employment of another employer that also participates in the Scheme but which is not a NATS employer, that beneficiary shall remain a protected beneficiary for the purposes of the benefits to be provided to and in respect of him under the relevant scheme and if that beneficiary subsequently transfers back to the employment of a NATS employer he shall still remain a protected beneficiary.

(8) For so long as a NATS employer remains as a participating employer of the Scheme in respect of protected beneficiaries, one trustee of the Scheme shall be a member representative selected from amongst the protected beneficiaries, and one trustee of the Scheme shall be an employer representative of the NATS employer.

(9) The NATS employer shall contribute to the relevant scheme at no less than the rate recommended by that scheme's actuary as being sufficient to secure the accrued rights from time to time of the protected beneficiaries in full by the purchase of annuities and the NATS employer shall not be entitled unilaterally to suspend or terminate its contributions to the relevant scheme except upon its insolvency.

(10) On the full winding-up of a relevant scheme, or on a partial winding-up which involves protected beneficiaries, any shortfall in the assets required to buy out the accrued rights at that time of the protected beneficiaries shall be met in full by the relevant NATS employer and shall be treated as a debt on the employer.

(11) If, on the full or partial winding-up of a relevant scheme, as described in subsection (10), the trustees wish, rather than securing benefits by the purchase of annuities, to pay a bulk transfer to another scheme, that other scheme shall be a relevant scheme and the transfer value payable in respect of the protected beneficiaries shall be sufficient to secure a buy out of their accrued rights if the receiving scheme were to be wound up immediately following the transfer.

(12) The NATS employer shall provide future benefits in the relevant scheme which, in respect of the protected beneficiaries, are at last equivalent in value to those available under the Scheme at the transfer date.

(13) No amendment may be made to a relevant scheme which would result in a reduction of the accrued or future rights of protected beneficiaries, nor in an increase in the contributions payable by protected beneficiaries who are active members.").

My Lords, I should explain that this amendment is simply a rather clearer version than Amendment No. 70, which we originally tabled.

I shall begin my remarks by quoting my noble friend Lord Whitty on Second Reading, who said that,

"the staff [of NATS] are absolutely key. The future of NATS depends on the quality and commitment of its staff".--[Official Report, 5/6/00; col. 1027.]

The noble Baroness, Lady Thomas of Walliswood, moved an amendment in Committee, the terms of which were similar to those in our amendment. The express purpose of both amendments is to protect the pension rights of such vital and committed staff. When responding in Committee, my noble friend told the House that the amendment was "not justified", and went on to present a detailed explanation in support of that contention. He claimed that it would burden the PPP with an unnecessary framework. My noble friend also rejected comparison with the position of London Transport workers, whose pension provisions are protected in a later part of this Bill.

However, my noble friend offered to meet us and those other noble Lords who were concerned about the matter. Such a meeting has taken place. Alas, the Government's position remains that such a clause is unnecessary in their view. Accordingly, we now submit a similar amendment for your Lordships' consideration. We believe that such an amendment is required for two reasons. First, as my noble friend Lord Hoyle mentioned, there is a very real need to give confidence to the staff. Such confidence comes in many ways, but none more so than in protecting those pension rights that they have accrued over many years. We believe that there is a strong political reason for giving the staff confidence, if only because they see little merit in the overall PPP proposal as it stands.

Even if my noble friend the Minister were correct to say that adequate protection already exists within the trust deed, that, in itself, will not convince the staff as long as the Government refuse to provide equal treatment within the Bill as that provided for London Transport staff. Indeed, whether or not it is necessary, there is a very real belief in the minds of the staff that if such provision is not on the face of the Bill they will not be in a protected position.

This amendment is required for a substantive as well as a political reason. That is evidenced by the decision of the trustees of the CAA pension scheme, who have determined that they will pursue legal action against the Government if they fail to provide the assurances sought by way of this amendment. I understand that the authority has earmarked up to £1 million for that task, so it is obviously not a decision that it has taken lightly. However, staff also wish this amendment to be incorporated into the Bill because it would guarantee the following--and this is where I believe some misunderstanding may have arisen in Committee.

We wish to ensure that a new NATS employer, or a successor employer, would be required to contribute to the scheme at a level that would protect the accrued rights and benefits of members--not simply the level provided by minimum funding requirements; that future owners would have to provide benefits in the scheme that were at least as good as those in the present CAA scheme; that sufficient funds should be set aside within the CAA pension scheme to reflect its liabilities to pensioners; and that NATS employees be guaranteed the right to remain in the CAA pension scheme in the event of there being subsequent transfers of ownership down the track. In that sense, I believe that the Minister pointed out in Committee that the trust deed is a powerful document and one that is not easily changed. However, even though such matters are subject to the trust deed, the truth is that the employer has considerable responsibility for--and, indeed, considerable control over--the funding of any pension scheme.

Therefore, as I said on the previous occasion, if we are not able to secure an assurance on the face of the Bill, we shall have to divide the House on the issue. I hope that my noble friend the Minister will be able to consider the matter yet again. I trust that he will give us reason to believe that the confidence that we need to give the staff is the very same confidence as my noble friend Lord Whitty expressed on Second Reading when he spoke about the quality and the commitment of the staff being absolutely key to the future of NATS. If we do not protect the pensions of the staff, we shall not get that confidence; and that quality and commitment will be at risk. I beg to move.

My Lords, I support the amendment, as I did at Second Reading. However, I do not propose to repeat the arguments which I advanced then. I have considered many of the arguments proposed by my noble friend the Minister for Transport. I am sorry that he is not present at the moment to hear the points I make.

Throughout my noble friend's comments in favour of the PPP he has spoken most passionately on occasion in favour of providing the strategic partnership with the opportunity to spread itself into the rest of the world, certainly into Europe. A number of people are therefore convinced that changes will come about through the European open skies policy and that there is a case on those grounds for a new structure to be put in place. It is interesting to note that every air traffic control organisation throughout Europe--the new PPP may wish to enter into partnerships with those organisations--is state owned. Indeed, one of the PPPs which is bidding to take over NATS is being advised by three state-owned organisations, all of which will have state funded pension arrangements.

If the organisation appears attractive from a business point of view, it may seek to link up, or merge, with other European organisations. Those European organisations will bring civil servants, or people who enjoy broadly Civil Service terms, to the negotiating table. Their employees will have pension arrangements backed by their respective state or country. I believe that we ought to have on the face of the Bill similar arrangements in the strategic partnership in terms of conditions of employment so that we present broadly comparable terms and a more appealing and attractive proposition for those employees in other European countries who might be reluctant to contemplate joining strategic partnerships or mergers. If we adopt a common approach on pension arrangements to include ultimately backing from the state if anything goes wrong, that would present a better business case with which to go forward in the future.

This is a new argument which I advance, having listened to the passionate and compelling points made by the Minister for Transport. I hope that in view of the points which I and the noble Lord, Lord Brett, have made, we shall receive a more sympathetic response from the Government than we have received hitherto.

My Lords, my noble friend the Minister is normally extremely sympathetic to our arguments. However, his response to this matter on the previous occasion we discussed it contained much Treasury "double speak" rather than a consideration of the needs of the employees. The employees need to be reassured on this matter. I believe that my noble friend Lord Brett said that the trustees of the pension scheme are so concerned about the matter that they are prepared to go to the High Court and spend up to £1 million if the assurances that are sought are not included on the face of the Bill. That shows the tremendous concern that people feel about this matter. Nothing concerns people more than the prospect of losing the benefits of a good pension scheme. They have reason to be concerned because, despite all the assurances given by my noble friend the Minister on a previous occasion--he spoke of this agreement and that agreement which do not allow changes to be made--I must remind him that the National Bus Company pension scheme did not stand the test of time. The workers of that company were sold down the river. That experience must not be repeated.

We are not asking for the moon or for something that has not been granted before. All the relevant safeguards were put in place at the time of the electricity privatisation. People will not understand--not just Members present in the Chamber tonight--the fact that an undertaking is already on the face of the Bill for those who work on the Underground.

On the previous occasion we discussed this matter my noble friend said that there might be fragmentation and the employers might change. That is why we are trying to reassure the employees. I believe that he used the words "more complex". But what could be more complex than the open skies policy if we are to merge with organisations in a number of different countries? Some people think--the workers in the industry think this and that is the important point--that there might already be proposals to fragment NATS as it exists at present. I hope that my noble friend will agree that these are good and extremely logical reasons why the assurance we seek should be included on the face of the Bill. Those involved in the industry cannot understand why an assurance can be included on the face of the Bill for those who work on the Underground but not for air traffic controllers. That is beyond me. I hope that my noble friend will be sympathetic to my arguments and will agree that the assurance we seek should be included on the face of the Bill.

My Lords, I entirely accept the arguments put forward by the noble Lord, Lord Hoyle. If my noble friend adduces the argument that this proposal has been put forward without adequate consideration--although I am not sure that he will-- I assert that that would be entirely wrong. The lawyers who have advised those who have tabled the amendment have said specifically that the proposal is perfectly all right. Therefore my noble friend puts forward that argument at his peril. I take the view that it is important that the employees should have confidence in the Government. The proposal is the way to ensure that. There is no other way. That being the case, I hope that my noble friend will accede to the arguments which have been forcefully made by my noble friends tonight.

My Lords, the noble Lord, Lord Brett, in moving the amendment, reminded the House that in Committee a similar amendment was tabled in my name. I continue to think that he received rather better advice in tabling his amendment than I did. That is why I have not resubmitted it. It is right and proper that we should support him in his endeavour. I do so because it is a matter of justice. Those whose working conditions are altered through no desire of their own should have protected one of their most valuable assets; namely, their pension. That should be clearly stated on the face of the Bill. I hope that we can convince the Government that that is the correct approach to take in this case.

My Lords, I support the amendment. I pick up a point made by my noble friend Lord Hoyle about the National Bus Company employees. I recall that when my right honourable friend the Deputy Prime Minister was an opposition transport spokesman he campaigned long and hard against the Tory plan which many of us felt sold the pensions of those employees down the river and allowed the fund to be raided on privatisation. The fact that it has taken my right honourable friend three years since the election to achieve anything in this regard shows how hard he has tried. My gut feeling is that is probably because the Treasury fought long, hard and perhaps "dirty" to stop that happening. I believe that employees are suspicious of the Treasury not wanting the measure we are discussing. However, as my noble friends have said, the amendment seeks to safeguard the pensions of a valuable set of employees at a time of great uncertainty and should be taken extremely seriously. As I say, I support the amendment.

My Lords, I am grateful to the noble Lord, Lord Brett, for explaining once again his amendment on this issue. I well remember the subject of pensions being discussed during every privatisation. I sat through a good many of them when I was on the other side of the House. Therefore, for the life of me I cannot understand why the Government are so resistant to putting an amendment such as this on the face of the Bill.

Furthermore, I am most grateful for some briefing that I have received from the IPMS, the union responsible for air traffic controllers, which, like the noble Lord, Lord Hoyle, and others, is so concerned about this matter. The trustees of the Civil Aviation Pension Scheme are prepared to make available up £1 million for legal action as regards this issue. It must surely be an issue of major concern to the Government.

I do not intend to rehearse all their arguments, but I have received a detailed response rebutting many of the points made by the Minister in Committee. I look forward with great interest to what the Minister has to say in reply to this amendment. My inclination is to support the noble Lord, Lord Brett.

My Lords, my starting point now, as at Committee stage, is entirely consistent with what the noble Lord, Lord Whitty, said at Second Reading. Nobody can value the staff of NATS more than we do; nobody can feel more strongly than we do that they deserve proper treatment in every respect, not just as regards pensions. However, they deserve proper protection in particular for their pensions.

We have reflected on the points made in Committee. I can assure noble Lords that we have done so in great detail. Pensions affect us all. I can well understand why the issue is so important to NATS employees. We fully support the need to protect the pensions of NATS staff and we would not do anything to put them at risk.

I understand the issue of confidence to which the noble Lord, Lord Brett, refers; namely, that these fears were very real throughout the privatisations of the 1980s and early 1990s. If I were the noble Lord, Lord Brabazon, I would not refer to them in quite such a cheerful way. During those years tens of thousands of public servants passed from the public sector to the private sector without adequate reassurance about how their pensions would be protected. Sometimes they were denied access to a pension scheme as good as the one they were leaving. Sometimes they were confronted by invidious choices about what to do with their accrued service in the public sector pension scheme, which meant that one way or the other they would loose.

In three privatisations--coal, electricity and rail--the previous administration used primary legislation to give statutory protected person rights to employees in those industries regarding their access to occupational pension schemes after transfer to the private sector. In every other case no such protection was given and the range of outcomes was extremely variable. Noble Lords will remember the privatisation of London Buses. I take that as a particular example of the bus industry generally to which the noble Lord, Lord Berkeley, referred. London Transport staff were forcibly separated from their pension scheme with no effective safeguards as to the quality of its replacements.

That was the legacy we inherited in 1997. We set to work on reform. In 1998 interim new guidance was issued by the Cabinet Office under the title "Better Quality Services". This re-emphasised the importance of protecting staff pensions in restructuring involving private sector partners and required that the quality of that protection should be a factor in assessing bids for partnership. Then, in June 1999, the "wicked" Treasury issued definitive guidance under the title "A Fair Deal for Staff Pensions" which was subsequently incorporated into broader guidance on the treatment of staff by the Cabinet Office at the beginning of the year.

The object of these reforms was perfectly simple: to take the fear out of public sector reform and sales as far as pensions were concerned and to set a common standard of protection which all projects should pass. What we have now is a comprehensive framework of protection which represents a huge improvement in the standard of treatment of staff. It is a fair deal not only for the staff, but also for the private sector businesses bidding to enter into partnership to deliver public services.

That is the background against which we have looked at the NATS employees. Our common goal is to reassure NATS staff about the pensions they have a right to expect in their retirement. I believe that I can give the reassurance which is needed without the need for amendments to the Bill.

Perhaps I may explain how. The Civil Aviation Authority Pensions Scheme is to be amended in order to make it possible for staff employed by the PPP to remain members of that scheme. Technically, the CAAPS is already a centralised scheme for non-associated employers because Highlands and Islands Airports Limited is a non-associated employer within it. Amendments to the scheme are necessary to reflect requirements such as the elimination of cross-subsidy which is now much more relevant given the much greater size which the NATS PPP section would have within CAAPS.

That means that staff will continue to enjoy the benefits that they currently receive. They will be able also to enjoy such new benefits as are agreed from future surpluses. They may also draw some comfort from belonging to an excellent public sector scheme, one that is very comfortably funded. For example, at the most recent evaluation of CAAPS on 31st December 1998, the minimum funding ratio was in excess of 190 per cent. Since the MFR represents what I might call the statutory floor for the funding of pension schemes, a funding ratio of 190 per cent represents a substantial excess. As regards benefits, pensions in payment are index-linked and pension benefit is calculated not just on base salary, but includes overtime and certain other fluctuating remuneration.

Perhaps I may digress to cover the position of current pensions and deferred pensioners. I can assure the House that the position of those two groups will remain unaffected by the PPP. They will remain in CAAPS; they will be in the CAA section of the scheme, which will also include current CAA staff. They will continue to receive benefits in the same way as they do now.

Returning to the NATS public/private partnership, we have made it very clear to all those bidding to be our strategic partner in the PPP that securing that current staff can continue to participate in CAAPS is a fundamental condition of being considered for that role. In addition, we will put into the strategic partnership agreement a binding commitment, enforceable at law, that guarantees the continuation of that right on terms at least as favourable as those now existing.

Then there is the protection of pensions that exists under the law of the land, such as the pensions Acts of 1993 and 1995. These provide, among other things, protection for accrued benefits and funding levels.

A further level of protection exists in the CAAPS trust deed and rules to which my noble friends have referred. These are unusually restrictive and protective of members' interests. Although it may not always have been the case, it is now universally accepted and buttressed by statute that accrued rights--that is to say, the pension which an individual has earned by each day at work--cannot be adversely affected by amendments to pension schemes. By contrast, it is entirely usual for the sponsoring employer of a pension scheme to have the ability to reduce the level of benefits for future service such as prospective benefits. However, no employer who participates in CAAPS has that power because of the restrictive power of amendment in the trust deed which provides that amendments cannot be made to reduce accrued or prospective benefits. When this restrictive power is allied to the continuing interest of the Government in the PPP as shareholder, quite apart from the express contractual provisions in the strategic partnership agreement, I believe that the House will agree that there is a very substantial set of protections for the current NATS staff.

Those who argue for statutory protection--additional protection on the face of the Bill--accept these points. But they go on to make two other claims: first, that it would have the value for NATS staff of offering them firmer assurances than those that I have just outlined; and, secondly, as has been argued tonight, that the proposal is precedented in past privatisations and indeed in Clause 243 of the Bill for Underground railway staff in London. That is true, but it is not the whole story. Let me deal with the issue of London Underground.

The case is much more complex than that of NATS. In the case of NATS, we are arranging for a once-and-for-all transfer of the company to the private sector. There is no break-up of the company. There is no reorganisation of the industry into a number of parts, so there is no need for provision to deal with the subcontracting that occurs in the railway industry. There is no provision for the return of some parts to the public sector. Nor are the trust deeds of the two schemes or the arrangements for changes to those deeds comparable--the power of amendment to the London Underground deed is not as restrictive as with CAAPS. In particular, unlike CAAPS prospective benefits could be adversely changed.

My Lords, I am grateful to the Minister for giving way. My question relates to the PPP a year or two down the track. A policy of the strategic partner of the PPP might be to shed responsibility for some of the airports on the ground that they are the less profitable parts of the NATS empire. If that related, for example, to Aberdeen, Edinburgh or Glasgow, the staff therein are likely to find themselves required to become employees of the new employer. Where would they fit? That is exactly the shedding the Minister described in respect of London Transport.

My Lords, I shall come to that. It is a significant point.

Let me deal with the issue of protection beyond the PPP and the TUPE issue, which I believe is what my noble friend refers to. Yes, there is ultimately the possibility of transfer of staff beyond the PPP. But, first, we fully intend to remain a partner in the PPP. Secondly, we are obliged to do so by the terms of the Bill. Thirdly, if that position were to be changed in the future it could be done only with the express authority of Parliament. In other words, it would have to be the affirmative resolution of both Houses. Finally, for as long as the Government remain a partner, the PPP remains intact and the protections on pensions remain intact.

Because CAAPS is a centralised scheme for non-associated employers it is perfectly possible--it would be our intention--that any disposal of the kind to which my noble friend Lord Brett refers would be on the basis of the new organisation being a non-associated employer on the same basis, and with the same terms and conditions, as exist at present. I hope that that is a full reassurance.

I turn now to what my noble friend Lord Brett said at the conclusion of his speech. I am sorry to take so long but it is clearly important and everyone is rightly concerned about this. He divided his arguments into the political and the substantive. He said that even if everything I said was right, it would not convince the staff. Everything that I have said is right and it is, of course, our responsibility and everyone's responsibility to seek to convince the staff.

He went on to say that even if everything I said was right, there are substantive issues. He talked about the fund of £1 million which the trustees have to challenge the issue in the courts. I understand that. It is a highly unusual procedure but they are entitled to do it. I do not for a moment say that they should not. I am not claiming that that would delay or hinder the delivery of the PPP. That is not my argument. My argument is that on each of the four points which the trustees challenge--my noble friend Lord Brett set them out rather quickly and I am relying on my notes--I can give an assurance that the existing Bill without amendment meets those points: first, that the employer contributions are sufficient to provide the protection which is required; secondly, that the benefits are protected--I have made that clear on existing and prospective service; thirdly, that the funds are available to meet the liabilities--I made that clear when I talked about minimum funding requirement--and, finally, that the rights would remain on transfer of ownership. I have made that commitment as well in what I have said.

So on what my noble friend Lord Brett calls the substantive points, as well as the political points, the Government believe that the employees of the National Air Traffic Service are fully protected. I have tried hard today to explain the Government's position. There is nothing between us on the aims of our policy. We all want to safeguard the pension entitlements. We have looked in detail at the statutory route as we promised the House we would do. We do not think that it is necessary to have an additional statutory protection on the face of the Bill because there are safeguards in existing legislation. Our commitment stands to the policy in the Fair Deal document, in the CAAPS trust deed and in the strategic partnership agreement. My noble friends have asked for a conspicuous and unambiguous assurance. I hope that they will feel that I have given it unambiguously.

My Lords, I am grateful to the Minister for that detailed explanation. I am grateful for his attempts to reassure the staff of NATS. As we speak there are probably some 300 NATS staff on duty at the West Drayton centre and Heathrow. As I listened to the Minister's explanation I tried to think how they would react. As the noble Lord rightly says, we have a responsibility to convince them, whatever the substantive arguments might be.

The Minister began by going through the litany of previous pension issues which had created this fear--and the fear is real. I apologise for having broken the flow of his contribution by asking what happens with sell-ons. It seems to me that that puts staff in a similar position to London Transport staff, who are being given on the face of the Bill protection not available to NATS staff. I heard the reassurances. It will clearly not cost the Government anything to put this provision on the face of the Bill given the strength of the assurances.

Air traffic controllers speak even more quickly than I do but with rather less volume; they talk to pilots in clipped sentences. The phrase "He protesteth too much" comes to mind. I am sure that my noble friend will say that this is a piece of legislation of no cost to the Government and of reassurance to the staff. The only element of cost arises from the £1 million set aside for a legal challenge, the response to which is bound to cost the taxpayer several million pounds. Air traffic controllers are very logical individuals. I am not convinced that they would not say in sum total that there is no problem in putting such a provision on the face of the Bill. I heard no reason why it should not be on the face of the Bill. I feel, therefore, that I should be doing a disservice--

My Lords, before my noble friend finally makes a decision, I hope that he will do so on the content of the argument rather than on the issue of confidence. He will recall--I spared the House this today--that his amendment contains a series of conditions included in subsections (1) to (13), previously annotated (a) to (m). I went through those in Committee and demonstrated one after the other why each was unnecessary. Does my noble friend want me to repeat that as an intervention in his speech? Let me assure my noble friend that that argument is as true now as it was then.

My Lords, if the Minister were to do so, my colleagues on these Benches, or noble Lords from the Opposition Benches, might wish to quote extensively from a document in rebuttal which has been circulated. That would simply extend the debate considerably.

The Minister's final two sentences persuade me that we have to take the opinion of the House.

On Question, Whether the said amendment (No. 70A) shall be agreed to?

*Their Lordships divided: Contents, 78; Not-Contents, 77.

Division number 3

See full list of votes (From The Public Whip)

Resolved in the affirmative, and amendment agreed to accordingly.

My Lords, I beg to move that consideration on Report be now adjourned. In moving the Motion I suggest that the Report stage begin again not before 8.57 p.m.

Moved accordingly, and, on Question, Motion agreed to.