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Clause 1 - CAA’s general duty

Civil Aviation Bill – in a Public Bill Committee on 28th February 2012.

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Amendment proposed (this day): 10, in clause 1, page 2, line 14, leave out ‘and’ and insert—

‘(ea) the need to work with NATS, the Secretary of State and air transport service providers towards meeting the United Kingdom’s carbon reduction obligations,’.—(Jim Fitzpatrick.)

Question again proposed, That the amendment be made.

Photo of Linda Riordan Linda Riordan Labour, Halifax

I remind the Committee that with this we are discussing the following: amendment 11, in clause 1, page 2, line 14, at end insert—

‘(ea) the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates,’.

Amendment 16, in clause 2, page 3, line 5, leave out ‘and’ and insert—

‘(ca) the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates, and’.

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

I am delighted to see you in the Chair, Mrs Riordan. As I said at the end of the last sitting, the debate on this group of amendments has been good. We heard a thoughtful contribution from my hon. Friend the Member for Cambridge, who has great expertise on transport matters and a strong focus on the environment. I will, of course, consider carefully all the points that he made.

Other insightful contributions came from the hon. Members for North West Durham, for Blackley and Broughton, for Scunthorpe, for Bolton West and for Feltham and Heston, with pithy interventions by my hon. Friends the Members for Amber Valley and for Finchley and Golders Green. Although I cannot ask the Committee to support the amendments, it is not because I consider regulatory intervention on environmental issues unnecessary. I am unable to support the amendments because economic regulation is not the right vehicle for pursuing the important goal of reducing aviation’s environmental impact.

We heard this morning from the Opposition Front Bencher that the last Government took a different approach from the present Government. However, the differences are perhaps not quite as great as Opposition contributions suggest. The previous Government did consult on including text along the lines proposed in  amendments 11 and 16, which we are considering in this group, but after a mixed consultation response, they decided to restrict themselves to a duty on the Civil Aviation Authority to have regard to airport operators’ legal obligations to comply with applicable environmental and planning law. Hence, before they left office, the last Government ended up broadly in the same place as the much more limited amendment 12, which we debated earlier.

For reasons that were discussed when we considered the last set of amendments, the current Government decided that the supplementary duty proposed had no substance. Such a duty is not needed, because the Bill already gives the CAA the power to authorise appropriate investments to meet environmental and planning law obligations. That is why the then Secretary of State decided in July 2010 not to include that duty in the Bill.

The previous Government did not advocate the wider, overarching environmental duty for which some Opposition Members expressed support; nor did they propose empowering the CAA to use economic regulation as a means of imposing environmental obligations on airports where those are not consistent with the primary duty or the attempt to replicate a functioning market. Ultimately, by the time they left office, they did not support amendments of the sort that we are considering in this group. Neither the last Government nor the present one considered that to be the right approach.

We accept fully the importance of addressing both the positive and negative externalities associated with airports’ activities. A number of hon. Members rightly highlighted the quality of life and health concerns relating to noise and, of course, the importance of addressing climate change and air quality issues. We believe that such issues must be addressed appropriately in relation to all airports, not just those that happen to be subject to economic regulation.

Environmental impacts are present at every airport, and it is fairer, more rational and more efficient to consider the aviation sector across the board when deciding what regulatory intervention is needed. For example, the European Union emissions trading scheme covers the whole airline sector in the European Union, and restrictions on noise are imposed at a range of airports around the country, some of which are subject to economic regulation and some of which are not.

As Dr Barry Humphreys from the British Air Transport Association pointed out in his evidence to the Committee, the CAA undertakes a number of functions, in addition to economic regulation, where it can and does have regard to environmental matters. An important example is provided by its work with NATS on airspace management. The Transport Act 2000 explicitly requires it to take into account environmental guidance from the Secretary of State, which she gives to the Civil Aviation Authority. If there is a case for imposing an environmental regulation on an airport, it is worth doing regardless of whether that airport happens to have substantial market power and falls within the scope of those airports subject to economic regulation.

I particularly want to respond to concerns raised by the shadow Minister on what I dub the Brian Ross point, highlighted by Brian Ross of AirportWatch and the Stop Stansted Expansion campaign. It is important to consider carefully the issue around voluntary investment in measures to mitigate the environmental impact of  airports—the sort of market support schemes that the shadow Minister referred to. The Bill allows the CAA to authorise appropriate investment in measures that mitigate environmental impact, even where they are voluntarily undertaken.

That view was confirmed by the CAA. As the CAA commented clearly in its evidence, a system that safeguards the interests of end users and seeks to replicate a functioning market can and does embrace appropriate investment in environmental measures. That is because, as Iain Osborne of the CAA pointed out, unregulated airports across the world invest in environmental measures. Environmental investment has been allowed under the current rules despite the CAA having no explicit environmental duty in relation to economic regulation. That has been allowed even where the schemes in question are voluntary, as the examples presented to the Committee by the shadow Minister have evidenced.

Neither the current system nor the proposals in the Bill would impose on the CAA a requirement for investment on environmental matters that goes beyond the kind that could be delivered in a competitive market. That kind of environmental requirement should be applied fairly and evenly across the sector, taking on board the impact of different airports, regardless of whether they are subject to economic regulation. Such requirements should come with the sanction of Parliament and Ministers, rather than being delegated to the CAA in its capacity as economic regulator.

We already have an example of how the Government are using the Bill to apply a measure that goes across the airport and aviation sectors in a fair way—a measure that we believe will provide important environmental benefits that are much more significant than those delivered by an environmental supplementary duty in economic regulation, which we do not feel is the right way to address the question. An example of such a requirement is set out in clauses 83 to 93. The Government propose to take forward an information requirement that we consider to be more concrete and of more practical benefit to the public than the provisions in the amendments, and to provide a more realistic and sensible way to deliver environmental goals.

We will come to this in more detail in the later stages of the Bill, but the Bill gives the CAA a role in promoting better public information about airline and airport performance, the environmental impact of aviation, and the travel choices made by consumers. We believe that provision of that information will prove a useful addition, enabling the consumer to make informed choices and helping to drive up standards of service delivery. That has been strengthened in several ways since the 2009 consultation carried out by the previous Government. For example, the CAA may publish guidance and advice with a view to reducing, controlling or mitigating the adverse environmental effects of civil aviation in the UK.

We very much share the aim of addressing the local and carbon impact of aviation, but I am not convinced that the amendments in this group are the right way to deliver that. We believe that they are significantly flawed and not consistent with what the previous Government proposed to do before they left office. However, that does not mean we will not carefully consider the points made in today’s debate, or that we are not prepared to consider the matter again. We are particularly conscious  of the points made in evidence given by the environmental groups. We will continue to keep the matter under careful consideration.

Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton

I have been listening carefully to the Minister, but I do not think she has answered my point about whether there will be a change in the regulatory asset base that the CAA uses.

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

The framework is designed to give the CAA significant flexibility, so I cannot guarantee that absolutely everything that is currently in the regulatory asset base will stay there permanently. If the hon. Gentleman could remind me of whether he referred to a specific element of the regulatory asset base, I might be able to give him a clearer pointer.

Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton

Yes and no. Although environmental expenditure could be considered to have been in the regulatory asset base and has been in the past—that was the Government’s point when they were considering the overall environmental impact—the Committee was concerned about whether that would disappear.

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

It is difficult to give advice on the RAB generally. However, there is every reason to believe that Heathrow Express, for example, which is a key part of the surface access to the airport and is currently on the regulatory asset base, will continue to be on the RAB. A common-sense understanding of what is in the passengers’ interests shows that it is in the passengers’ interests that a surface access project of that nature should continue to be part of the RAB. Indeed, the Bill also contains important transitional provisions to provide some assurance for investors about the continuity of financial arrangements from the old regime to the new regime. The combination of those factors makes me confident that things such as the Heathrow Express are likely to continue to be on the RAB under the new regime, just as they are now.

I conclude by saying that if the Opposition are not prepared to withdraw their amendment, I must ask hon. Members to oppose it.

Photo of Jim Fitzpatrick Jim Fitzpatrick Shadow Minister (Transport)

It is a pleasure to see you presiding over business this afternoon, Mrs Riordan. We look forward to your chairmanship of the next few sittings.

We feel strongly about the three amendments, as has been made clear by my hon. Friends’ earlier contributions. We appreciate the endorsement by the hon. Member for Cambridge of the principle, if not of the actual words or, indeed, of his votes—one day, perhaps.

The Minister and the CAA accept that the CAA has a role to play in environmental matters—it had that role previously, and will continue to have it. However, the difference is that we are moving the goalposts in the Bill. We are changing the environment and creating a primary statutory duty to put the passenger at the centre of the CAA’s policy. On the rejection of our suggestion for a supplementary or secondary duty for airlines, the Minister rightly pointed out that the new appeals procedure has a much better way of dealing with regulatory price fixing and so on for airports. We accepted that as an amendment, and we agree that it  will lead to an improved situation. However, there is no such right of appeal in respect of environmental matters. Certainly, we have clauses 84 and 85 on information reporting, and they are very welcome.

When the hon. Member for Amber Valley says that our amendments do not cover airlines, just airports, he misses the point. With respect to him, clause 68 defines airport operator services widely. If he looks at that, he will see that it clearly covers all aspects of airport operation, including take-off, landing and the rest. I hope that he accepts that we are in tune with the Bill’s definition of civil aviation. I have heard the Minister’s explanation, especially regarding the view of the previous Government.

Photo of Julian Huppert Julian Huppert Liberal Democrat, Cambridge 4:15 pm, 28th February 2012

We want to see the environmental work done, and I am afraid that the amendments do not do it. Unfortunately, clause 68(4) specifically excludes air transport services and air traffic services, which are defined in clause 69, so there is a technical problem with the hon. Gentleman’s amendments. I hope that he will withdraw them, so that we can have correct amendments that do what they are intended to do.

Photo of Jim Fitzpatrick Jim Fitzpatrick Shadow Minister (Transport)

I hear what the hon. Gentleman says. We believe that our amendments are in line with our aims, and we will press them to a vote. I accept entirely that expectations are placed on the CAA in respect of environmental matters. As I said earlier, we fully support clauses 84 and 85 on information and publicity, but passenger choice of airport is determined not by green credentials but by convenience and price. We welcome the Minister’s commitment to keep the matter under careful consideration, but I regret to say that we are not persuaded either by that reassurance or that our amendments would not do the job that they were drafted to do, so we want to press them to a Division.

Question put, That the amendment be made.

The Committee divided: Ayes 10, Noes 12.

Division number 2 Decision Time — Clause 1 - CAA’s general duty

Aye: 10 MPs

No: 12 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment proposed: 11, in clause 1, page 2, line 14, at end insert—

‘(ea) the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates,’.—(Jim Fitzpatrick.)

Question put, That the amendment be made.

The Committee divided: Ayes 10, Noes 12.

Division number 3 Decision Time — Clause 1 - CAA’s general duty

Aye: 10 MPs

No: 12 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment proposed: 14, in clause 1, page 2, line 14, at end insert—

‘(ea) the need to promote due consideration on the part of each holder of a licence under this Chapter of issues arising out of surface transport links to and from airports,’.—(Jim Fitzpatrick.)

Question put, That the amendment be made.

The Committee divided: Ayes 10, Noes 12.

Division number 4 Decision Time — Clause 1 - CAA’s general duty

Aye: 10 MPs

No: 12 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Photo of Linda Riordan Linda Riordan Labour, Halifax

I understand from Sir Roger that the Committee has had a very wide-ranging debate on the amendments to the clause. I therefore expect the clause stand part debate to be short. Members should not attempt to go over ground that has already been covered in previous discussions.

Question proposed, That the clause stand part of the Bill.

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

Abiding by your advice and guidance, Mrs Riordan, I do not propose to rehearse the reasons why the Government do not believe that supplementary duties on the environment and in relation to airlines are  appropriate additions to the clause. I would like to focus on some other parts of the clause that have so far not been examined in detail by the Committee.

As we have considered, the clause delivers the primary duty to end users of air transport services, which is at the heart of the regulatory regime. Subsection (1) provides that the CAA must carry out its functions under chapter 1 of the Bill in a way that it considers will further the interests of passengers and owners of cargo, both present and future,

“regarding the range, availability, continuity, cost and quality of airport operation services.”

“Airport operation services” are defined in clause 68.

The proposed primary duty will be supplemented by a set of further duties to which the CAA must have regard in performing its primary duty, which cannot individually or collectively be overturned. The proposed duties replace the four equal duties imposed on the CAA under the present legislation governing airport economic regulation, which has been criticised both by the industry—by airports and airlines—and the Competition Commission. By replacing those with a primary duty, we will provide greater clarity on how the CAA is to discharge its economic regulation functions, and we will put consumers’ interests at the heart of the regulatory framework, as part of our agenda to improve our airports and international gateways.

I turn to the factors that the CAA must consider when performing its primary duty. First, subsection (3)(a) states that the CAA must have regard to

“the need to secure that each holder of a licence… is able to finance its provision of airport operation services”.

Although the CAA must promote the interests of end users, that supplementary duty confirms that the CAA has the power to encourage efficient and economic investment by allowing a reasonable return over time. It does not require the CAA to ensure the financing of regulated airports in all circumstances. It is likely to base its approach on the needs of a reasonable and efficient airport operator. That is achieved in a number of ways.

For example, the CAA has an equal supplementary duty to promote efficiency on the part of the licence holder. Furthermore, the financing duty is subordinate to the primary duty of furthering the interests of passengers. Increasing the price cap to enable an inefficient licence holder to obtain sufficient return to finance the airport is unlikely to be consistent with the duties to safeguard end users.

Secondly, subsection (3)(b), another part of the clause that we have not yet considered, requires the CAA to have regard to the

“need to secure that all reasonable demands for airport operation services are met”.

Subsection (3)(c) requires the CAA to have regard to

“the need to promote economy and efficiency” by licence holders in the provision of airport operation services. Those duties aim to reflect the ultimate aim of economic regulation, which, as I mentioned this morning, is to seek to replicate the outcomes of a competitive market, where airports provide the services demanded by passengers at minimum cost.

Thirdly, subsection (3)(d) provides that the CAA must have regard to any guidance issued by the Secretary of State when carrying out its functions under chapter 1 of the Bill. That ensures that the Government’s views are considered by the CAA.

For the reasons that I have set out and discussed in relation to the amendments, I hope that the Committee will be able to support the clause.

Photo of Jim Fitzpatrick Jim Fitzpatrick Shadow Minister (Transport)

When the discussion opened this morning, I was concerned about ensuring that all our points would be covered, and I asked Sir Roger for a stand part debate in case the amendments did not give us the opportunity to make them. However, we have registered during the discussions of the amendments that the Bill could go further, especially on environmental matters.

The majority of Committee members are clearly happy with the clause as it stands. Notwithstanding our efforts to add duties for the CAA to clause 1, we support the Bill. As I mentioned earlier, the framework contained in clause 1 and its six subsections will bring aviation regulation into the 21st century, and we support that.

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

I have nothing further to add to my remarks. I agree that we have had an extensive debate. Clause 1 has been rigorously scrutinised.

Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton

This is a small question, but its answer may prove useful on Report. Subsection (3)(c) mentions the requirement to “promote economy and efficiency”. The Audit Commission always has three “e”s—economy, efficiency and effectiveness. Why is effectiveness not there?

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

That is because we expect it to be in the interests of an airport to be as effective as possible. We are seeking to remedy those points where the market pressures on airports are not sufficient to deliver the desired outcomes, hence the emphasis on efficiency.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.