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

Yes, certainly. My example is article 23 of Council regulation EC No. 1/2003 of 16 December 2002 on the implementation of the rules on competition, which applies, as I said, to maximum penalty levels of 10% return on the financial liability of businesses. That is a fundamental plank of European competition law.

The reality is that the maximums in the Bill are high; I do not see a case for raising them further. A fine of more than £180 million is tough enough to be a genuine deterrent, even for a company as large and successful as BAA. None of the witnesses who gave oral evidence to the Committee asked for that change and it was not requested, so far as I know, in written evidence. Indeed, the Airport Operators Association said to the Transport Committee, during pre-legislative scrutiny, that the proposed levels were too high.

The cap of 10% of turnover for a fixed penalty represents the maximum threshold available to other regulators, such as the Office of Fair Trading under section 36(8) of the Competition Act 1998. We have already covered the use of the same 10% threshold in European law. It is worth hon. Members recalling the points made by Iain Osborne of the CAA when these matters were raised with him. In his words, it is rare—almost unheard of—for fines to hit that high 10% figure. In many ways, we seek to provide a deterrent.

It is worth drawing the Committee’s attention to the reputational effect of having been fined at all. The reputational effect of the fine, apart from its financial impact, is an important means of ensuring that management teams change their behaviour and remedy the non-compliance. Undoubtedly, we have a tough penalties regime and we have the balance about right: it would provide an effective deterrent and I do not see the need to raise the thresholds in the way that the shadow Minister advocates. I hope that he asks to withdraw his amendment.