Clause 15 - Granting licence

Civil Aviation Bill – in a Public Bill Committee at 10:15 am on 1st March 2012.

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Photo of Jim Fitzpatrick Jim Fitzpatrick Shadow Minister (Transport) 10:15 am, 1st March 2012

I beg to move amendment 17, in clause 15, page 11, line 3, at end insert—

‘(c) include an impact assessment by the CAA for the licence conditions imposed on the airport.’.

This should not take long as it is a simple and straightforward probing amendment in line with the Transport Committee report. The amendment calls for an impact assessment of how licence conditions will affect airports.

On Tuesday, when he was articulating his advocacy of a free-market solution for airports, which appeared to those Government Members who engaged with him to be a possible way forward, my hon. Friend the Member for Blackley and Broughton raised the question of whether the Bill adds regulatory burden to the aviation industry, rather than removing such burdens.

BAA raised some points on the draft licence:

“The draft licence as it stands is extremely vague…and so is open to wide interpretation and thus uncertainty.”

The indicative licence on the CAA’s website looked very clear to me. The second page reads “page left intentionally blank”. The page is deliberately blank—it is not a mistake—and there is nothing to be missed. The cost formula for the price controls outlined on page 9 states that:

“Where: Mis the maximum average…yield per passenger…M=£13.134(1+(Bt/100)) – (TRIGGERt/Qt) – Kt”.

That is absolutely clear; I do not understand how BAA could possibly fail to understand that 49-page document. However, I do not want to sound too flippant.

My hon. Friend the Member for Blackley and Broughton raised the question of the regulatory burden, about which the Transport Committee has misgivings. In her response to a previous discussion at column 154 of the Official Report, the Minister gave a clear assessment that economic regulation will save the industry some £150 million. Given that the Transport Committee recommended that the Bill include a CAA impact assessment of the licence conditions imposed on airports, with this probing amendment I ask the Minister to address the Transport Committee’s recommendation so that we may make a judgment.

Photo of Pat Glass Pat Glass Labour, North West Durham

Like my hon. Friend, I want to raise whether the Bill has a correct balance of regulation on airports, which are a vital source of jobs and growth. I have looked at the Transport Committee’s recommendations, and I note that BAA Airports and Gatwick Airport Ltd both touched on those recommendations. As my hon. Friend said, BAA highlighted the risk that the draft licence conditions could add significant regulatory burden and cost to its operation. It told the Transport Committee:

“The draft licence as it stands is extremely vague, obliging the licensee to operate an ‘efficient and reliable airport’. While unobjectionable as an idea, it is not useful as a legal obligation because it is unclear what, specifically, it means and so is open to wide interpretation and thus uncertainty.”

Gatwick Airport stated:

“The operational resilience licence condition could be taken to imply that the regulator should have oversight of all parties at an airport, using the vehicle of the airport operator's licence to do so. We believe that care needs to be taken to ensure that it is properly drafted.”

The Transport Committee said:

“We welcome the intention to improve the financial and operational performance of airports. There is a risk, however, that licence conditions, and their associated costs to airports, may not be proportionate to the benefits delivered to the users of air transport services. We recommend that the bill be amended to require the CAA to provide impact assessments for the licence conditions imposed on airports.”

We can see why, with the best of intentions, the CAA may well require gold-plated provision, which ultimately would not greatly benefit passengers but would have a negative impact through costs.

Will the Minister explain precisely what she means as regards the draft licence conditions, as the wording is unclear and risks confusion in its interpretation by airports and thus a vastly different application? There does not seem to be a clear, coherent framework, and we know from bitter experience that law that is not absolutely clear is ultimately good only for lawyers.

How does the Minister think the licence conditions will impact on airports? What does she see as the risks of imposing such licence conditions on airports? How does she think airports will handle the changes to the licence conditions while remaining competitive and not impacting negatively on passengers through costs? Without an impact assessment, is it possible to understand fully the possible consequences of the proposed regulation?

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

I welcome the contributions made by the shadow Minister and the hon. Member for North West Durham. They are both correct in that it is extremely important that we ensure that the economic regulatory framework proposed in the Bill is proportionate and takes proper account of its cost impact on the airport and aviation sector. As the shadow Minister mentioned, yesterday I reported to the Committee the Government’s assessment of the overall impact of the Bill as a whole and that is, as I have said, a net reduction of £150 million net present value over 20 years. That includes a reduction in costs, as a result of economic regulation, of £160 million, but because of various other provisions in the Bill there are some additional costs in relation to security. So the net figure is £150 million. It is a reduction following on from the assessment that the Government have done on this matter.

That is an important starting point. I would also completely agree with what has been said; it is important that the CAA conducts high quality and proper analysis before making its decisions on licence conditions. The Government fully agree with that sentiment. I hope I can reassure both hon. Members that that kind of analysis is already required by the Bill. The provision proposed by the Transport Committee, while understandable, is not necessary.

Photo of Jim Fitzpatrick Jim Fitzpatrick Shadow Minister (Transport)

I am grateful to the Minister. She has given us the reassurance that we were seeking. The Minister has reiterated the figure I cited—an £150 million overall saving in economic regulation to the industry. The amendment is specifically about airports and the  impact of the licence elements. We would not challenge the fact that there is an overall reduction in the assessment, but is it proportionate to all the different elements of the industry?

The Chairman adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at One o’clock.