New Clause 2 - CAA general financial duties

Civil Aviation Bill – in a Public Bill Committee at 4:15 pm on 13th March 2012.

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‘In section 8 of the Civil Aviation Act 1982 (General financial duties) after subsection (4) insert—

“(5) It shall be the duty of the CAA to conduct its affairs in such a manner as to fulfil a general duty of efficiency in the use of its financial resources.”’.—(Jim Fitzpatrick.)

Brought up, and read the First time.

Photo of Jim Fitzpatrick Jim Fitzpatrick Shadow Minister (Transport)

I beg to move, That the clause be read a Second time.

The new clause is straightforward and would introduce a duty of efficiency, in line with a Select Committee recommendation which the Government have not accepted. We do not follow Select Committee recommendations slavishly, as we indicated earlier today, but we agree with this one.

A number of those who gave evidence to the Select Committee on Transport suggested that the Civil Aviation Authority does not currently operate in the most efficient way possible. For example, British Airways noted in its written evidence:

“No measures to encourage efficiency are included in the Bill and there has been no consultation on this…the CAA should be given the same ‘better regulation’ duties as in section 1 of the Bill (the airport regulation section)…We think the CAA should be given a duty to consider the efficiency of airport processes when imposing obligations and a requirement to consult affected parties.”

BA also states on the record that

“the CAA has scope to make significant improvements in efficiency” and should have a

“duty to operate efficiently; and…A requirement that any charge should recover only the CAA’s costs allocated to the relevant activity.”

In order to keep costs for airlines and passengers as low as possible, and to minimise the charges, it is essential that the CAA adopt efficient ways of working and modern technology where possible. Higher costs for airlines arising from CAA charges have the potential to damage the competitiveness of major UK airports compared with alternative operators abroad. It would be helpful if the Minister explained why the Department has declined to adopt the express recommendation of the Select Committee, because it looks relatively  straightforward to us. In Committee, the Minister quoted from the indicative licence produced by the CAA for BAA and Heathrow:

“Condition 7 requires the licence holder to operate the airport efficiently”.––[Official Report, Civil Aviation Public Bill Committee, 1 March 2012; c. 205.]

The same rule should apply to the regulator.

I leave the last word to Dr Barry Humphreys, in yesterday’s e-mail, which I mentioned earlier:

“The CAA is a regulator which is required to operate independently of government. The Bill will increase the extent of independence, which from our perspective”— that of BATA, the British Air Transport Association

“is to be welcomed. However, it is surely wrong that with respect to running its business and spending the money provided by stakeholders, and in the absence of competitive pressures, the CAA should be wholly unfettered. We have seen in relation to financial services how important it is that regulators are monitored effectively. We have been unable to discover any other UK regulator which is not subject to regular NAO-type audit. British Airways has pointed out in its submission to the Scrutiny Committee”,

which I mentioned,

“that in the Financial Services Bill currently progressing through Parliament, the Government has proposed to subject the Financial Conduct Authority and the Prudential Regulatory Authority to clear requirements to discharge their duties with due regard to the need for efficiency and to subject them to audit by the NAO. It would be extraordinary if a similar safeguard was not imposed on the CAA.”

Clearly, monitoring and efficient operation of the regulators is very much Government policy, which we support. We stood some criticism for not regulating the financial services industries when we were in government, although I seem to recall that the Opposition at the time were calling for less regulation, but I will not split hairs. The Bill seems to be going in the reverse direction. We are keen to hear the Minister’s explanation for not accepting the Transport Committee’s recommendation, which we are keen to support.

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

Sadly, the shadow Minister will think me hard-hearted, because I cannot support new clause 2 either. I did not succeed in reassuring him on the NAO point, but perhaps I will be more successful on the current one. I recognise the concerns but am confident that the Bill delivers a framework that requires the CAA to operate efficiently and to keep its costs down in exactly the way he would like to see. I note the concerns expressed on Second Reading and those to which he referred in the report of the Transport Committee. I understand and sympathise with the points made, but I do not believe that a new clause is necessary to deliver the desired result. I hope I can reassure the Opposition that the Bill already deals with the points raised and that it already places a legal requirement on the CAA to act in an efficient way.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Given that the Minister is supportive of the new clause’s intention, what is the disadvantage of having it in the Bill? My hon. Friend has expressed the concerns of eminent people.

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

There is no need to put the new clause in the Bill because the measures are already provided for in the Bill. Clause 1(3) and (4) already require the CAA to carry out its economic regulation functions under part 1 of the Bill

“in a way which is transparent, accountable, proportionate and consistent”.

Those subsections also state that the CAA’s regulatory activities

“should be targeted only at cases in which action is needed”.

To meet its statutory obligation to act in a proportionate way and to target activity only in cases where it is needed, the CAA is obliged to act in an efficient way and to have regard to the costs and benefits of its activities. So, clause 1, which we have debated at length, already delivers the efficiency duty sought by the new clause before us.

Better regulation principles also apply to the other functions conferred on the CAA by the Bill, such as the consumer and environmental information, guidance and advice functions we debated this morning.

Photo of Pat Glass Pat Glass Labour, North West Durham

I am listening carefully to what the Minister says. I am not aware of any other public organisation that does not specifically have a duty to act efficiently. That duty is often a useful backstop in the courts when public organisations are pressed to provide expensive services that they feel they do not need to deliver. It is normal for public bodies and is incredibly useful sometimes, particularly in the courts.

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

I can only re-emphasise that my understanding and interpretation of the Bill is that it does indeed require the CAA to act in an efficient way.

Clause 92 requires the CAA to consult on and publish a statement of its policy on how it intends to use the functions that we discussed in relation to sections 83 and 84, and expressly requires it to have regard to the general principle that the benefits of regulatory activity should outweigh the costs. The Legislative and Regulatory Reform Act 2006 also requires any person exercising a regulatory function to have regard to a statutory code of practice when determining general policies or principles. This code—the statutory Regulators’ Compliance Code—requires that regulators

“should be accountable for the efficiency and effectiveness of their activities, while remaining independent in the decisions they take”.

The Secretary of State for Transport writes to the CAA chair, setting objectives for their term. The most recent such letter, which is a published document, states:

“I…expect you to…lead the Authority in such a way that it: is run efficiently and effectively, thereby minimising the cost on the aviation sector, and providing value for money, taking account of the Government’s policy on remuneration”.

Section 15(1) of the Civil Aviation Act 1982 requires the CAA to keep proper accounts and records and prepare for each accounting year a statement of accounts. In addition, the Secretary of State has a number of powers with regard to the audit of CAA activities—as I set out for the Committee in the debate on new clause one—including the appointment of the CAA’s independent auditors and presentation of their accounts to Parliament. This oversight, combined with the work of the CAA’s auditors, gives strong incentive to secure value for money, and offers accountability to Parliament.

Additionally, the CAA consults on its charges and fees, giving the aviation industry the chance to raise any concerns it has. It is robust in protecting its interests in those matters. Of course, it has judicial review as a potential means to follow up serious concerns where appropriate.

I hope I have reassured the shadow Minister. If he wishes to press the new clause to a Division, I must ask my colleagues to oppose it.

Photo of Jim Fitzpatrick Jim Fitzpatrick Shadow Minister (Transport) 4:30 pm, 13th March 2012

I am sorry to say that the Minister has not reassured us. We have two concerns about her response. The option of judicial review seems a heavy-handed and expensive way to correct something that could be addressed in the Bill. She said that clause 1(3) lists what the CAA is required to “have regard to”, which we accept and understand, but our new clause 2 states that

“It shall be the duty of the CAA to conduct its affairs” efficiently, in relation to its financial resources. That sounds as if we are splitting hairs, but in reality, new clause 2, which is allied with new clause 1, is a very important initiative that would compel the Civil Aviation Authority—with its new powers and responsibilities, and the additional staff to fulfil them—to act much more efficiently than it would if it only needed to “have regard to” the requirements. We have not been persuaded by the Minister, and we want to press the new clause to a Division.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 8, Noes 13.

Division number 13 Decision Time — New Clause 2 - CAA general financial duties

Aye: 8 MPs

No: 13 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.