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Mr. Tam Dalyell (Linlithgow): What rate of return is expected on the large sums that will have to be provided for the necessary capital projects?
Mr. Prescott: That has not yet been established, as bids must be made by companies interested in operating as a strategic partner. Let us be clear about one thing: whatever the rate of return, the price will be determined by the regulator--the CAA--which can already take into account a sensible rate of return, as in the case of the BAA. That is its obligation. There will be regulatory control, as there is in comparable industries.
Air traffic control is all about safety--
Mr. James Gray (North Wiltshire):
I am extremely grateful to the right hon. Gentleman for giving way. Will he explain how the risk transfer will take place, with regard to the privatisation of NATS, and in particular, what will happen to the company's current debt of £300 million?
Mr. Prescott:
I am surprised that the hon. Gentleman asks such a question. When the Conservative party was in government, it was well practised in--[Interruption.] Hon. Members should listen to what I am about to say. The debt can be treated in the way that I outlined in my reply to the hon. Member for North Essex (Mr. Jenkin). We have made it clear that a mistake was made in the double calculation of debt. The return from the sale of the proportion of shares that we propose must take into account the level of debt, the level of income, and the price that is likely to be obtained. The company's debt will be transferred and paid over a longer period, which will be negotiated as part of the contract. [Interruption.] If hon. Members consider the price, it is a balance between debt and equity, and there is an assumption by the company about the income stream that can be achieved by that. Debt is only a small part of the proposal and it will be taken into account in the negotiations that will take place after the House has agreed the proposal.
Air traffic control is all about safety, which must be paramount. Hon Members rightly want to ensure that safety is maintained, and I am happy to assure the House that safety will continue to be the overriding priority. The company is--and will continue to be--regulated to a high standard of safety by the CAA.
Once the PPP is effected, the company will also be subject to a licence while ensuring that its service standards are maintained. The Secretary of State and the CAA will be able to take enforcement action if the licence conditions or statutory duties, including maintaining a
safe service, appear at any time to be compromised. In the event of a severe breach of a licence, a comprehensive special administration regime will safeguard the delivery of those services.
The concern that the profit motive will undermine safety is not proven. At the moment, the CAA is the public regulatory body that regulates companies--be it the BAA or airports authorities--with clear profit motives. In those circumstances, the BAA and the airports authorities are controlling companies that have a profit motive but maintain a high standard of regulatory safety.
Mrs. Gwyneth Dunwoody (Crewe and Nantwich):
It is important to register that if the CAA or the BAA want to expand, the BAA could offer more commercial opportunities in shops. Although NATS can offer management elsewhere, it is impossible for it to expand on a commercial basis in the way in which my right hon. Friend suggests. He is not comparing like with like.
Mr. Prescott:
I agree. It is not proposed that NATS should be involved in the commercial operation of opening shops and creating extra income flows. We want to ensure that safety standards are maintained; that there is proper equipment and that the staff are properly trained. The CAA has established that. It has a safety functionas well as a regulatory and economic function. The authorities have spelt out to the Transport Sub- Committee, which my hon. Friend chairs, the sort of checks and controls that they undertake. I believe that they meet the safety requirements. Safety regulation is safer than previously, because we adopted the Committee's recommendation.
The CAA's safety regulation group, which is relevant to the matters that we are discussing, will retain safety oversight of the 35 United Kingdom air traffic service providers, including NATS. The Bill will give the Government power to issue directions to NATS in the interests of national security. The licence conditions will also lay that down. We intend, through the PPP, to secure a long-term strategic partner, which will commit to investing in and delivering an air traffic control system for the next century. The new PPP company will have a proportion of directors appointed by the Government, with the Government holding a special golden share and having a separate partnership agreement with the strategic partner.
Those two instruments will protect the Government's interests in key areas such as the business principles of the company, the transfer, issue and disposal of shares and the completion and maintenance of major projects such as Swanwick and the new air traffic control centre at Prestwick. While I am on the subject of Swanwick, I can confirm that NATS expect the centre to meet its operational target date of winter 2001-02.
The new Scottish centre demonstrates our commitment not just to maintaining safety, but to enhancing it. That commitment also underlies our decision to proceed with a PPP.
Mr. Jenkin:
I am most grateful to the right hon. Gentleman for giving way. Can he explain the use of a golden share that he is obviously planning to get rid of?
Mr. Prescott:
There is clear provision for fast-tracking on national security matters, but the golden share will define those conditions in which the directors acting on behalf of the Government will be able to intervene and uphold those conditions of national interest that we have laid down. That is not unusual. I believe that the previous Administration used the golden share in a similar way, and we have made it clear that that is how we will maintain control in the company. No doubt the hon. Gentleman will be able to press those points in Committee.
Mr. Michael Portillo (Kensington and Chelsea):
Will the right hon. Gentleman give way?
Under our proposals, the main strategic decisions of the NATS board will require a unanimous vote of all directors, including those who will be appointed by the Government. Moreover, by retaining a substantial shareholding we can ensure that the Exchequer--and hence the taxpayer--shares in the future profits of the company. That is an important point in respect of the priorities of public expenditure. Chancellors have many pressures on them to invest in education, health, pensions and all such areas. A special role can be played by those public sector industries with an income stream that can raise their own investment requirements instead of adding to the pressure on the Exchequer, and it is right for them to do so.
Mr. Prescott:
I believe that that is a proper consideration to take into account regarding the priorities of public expenditure. [Hon. Members: "Give way!"] No, no.
My right hon. Friend the Minister for Energy and Competitiveness in Europe set out the Government's preferred option in July. Under those proposals, the Government will retain a 49 per cent. stake in NATS, while NATS staff will have a 5 per cent. share. A private sector strategic partner will take the remaining 46 per cent. We are having discussions with the parties concerned and will be reporting back to the House on the detailed conclusions. The House will have an opportunity to vote on the shareholding arrangements of the company, as about every decision on this matter. I can reassure the House that it will not be a rushed sale without the safeguards that we were used to seeing under the Conservative Government.
Finally, part IV relates to our proposals to improve the railways. The House has, of course, seen those provisions before and the Railways Bill, which I introduced to the House during the summer, has undergone scrutiny by the
Transport Sub-Committee of the Environment, Transport and Regional Affairs Committee. In its report, the Committee said:
Dr. Norman A. Godman (Greenock and Inverclyde):
I am grateful to my right hon. Friend for giving way. On part IV, may I point out to him that many members of the passenger transport executives are deeply concerned about the present wording of clause 215? Their fear--which I believe is legitimate--is that their rights to set local railway services may be diminished by the Strategic Rail Authority. Will he look again at the serious complaint that they make?
"amend or repeal this section"
of the Bill. If the golden share is so important, why is there a fast-track provision to enable him to rid of it?
"We welcome the Railways Bill, which we believe is a practical way of addressing the problems of a restructured railway."
As ever, I am grateful to its Chairman, my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), and her Committee. As a result of the Committee's hard work, I believe that we have a better Bill that enjoys considerable consensus of agreement, both inside and outside the House, with the exception of the Opposition, who once again have adopted the more extreme position.
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