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Clause 1 - CAA’s general duty

Part of Civil Aviation Bill – in a Public Bill Committee at 4:15 pm on 28th February 2012.

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Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport 4:15 pm, 28th February 2012

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.