Clause 44 - Amount of penalty: fixed amount

Part of Civil Aviation Bill – in a Public Bill Committee at 12:15 pm on 6th March 2012.

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Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport 12:15 pm, 6th March 2012

Like my hon. Friend, I am not convinced that amendments 46 and 47 seek the right changes, so I hope that they will not be pressed to a vote. I also hope I am able to provide some reassurance in response to the shadow Minister’s questions.

Like the shadow Minister, I propose to address the amendments in the round as they both seek to raise the maximum penalty for contravening a licence condition by 50%. Amendment 46 seeks to raise the annual penalty from 10% to 15% of an airport’s annual turnover and amendment 47 seeks to raise the daily fine from 0.1% to 0.15% of annual turnover.

In response to my hon. Friend the Member for Amber Valley, I should say that the qualifying turnover referred to in subsection (7) is total revenue, so it does include revenue in addition to landing charges.

Looking at airports currently subject to economic regulation is useful when considering the impact that the Bill and the amendments would have in practice. At Heathrow, amendment 46 would increase the potential maximum 10% fixed-penalty from £186 million to £278 million; at Gatwick, the maximum fine would go up from £46 million to £69 million; and at Stansted, the maximum fine would go up from £22 million to £33 million.

I listened carefully to what the shadow Minister said. I agree that there are convincing arguments in favour of setting the maximum penalties for contravening airport economic regulation at high levels. Such arguments are applicable across many spheres of competition law, where the 10% and 0.1% figures, contained in the clauses, are also employed.

The shadow Minister asked what the rationale was for selecting those figures. They are in use in other contexts—for example, in relation to important aspects of European competition law. We need high maximum  fines in this regard because breaching rules on competition and economic regulation can sometimes be profitable. That is why the maximum penalties need to be substantial enough to hurt, in the event that the regulator chooses to impose them.