Examination of Witnesses (Questions 100
- 119)
WEDNESDAY 1 DECEMBER 1999
MR PAUL
NOON, MR
IAIN FINDLAY,
MR ROBIN
MORRIS MR
TERRY ADAMS
AND MR
PAUL LEWIS
100. Yes, because I mean I cannot see that,
quite frankly?
(Mr Morris) The fact is that the pressures on air
traffic controllers every day in their jobs are brought about
by the pressures on the pilots from the companies to achieve certain
targets and the controllers every day are acting as the arbiter
between all these and trying to give an unbiased service at all
times to the pilots who are under enormous pressures to cut corners.
"Why have I been held for 20 minutes, why this, why that,
why the other". Now they operate without any pressure from
NATS management to change that. There is no reason to change that
because they are there just giving the service. They are not required
to return a profit. The pressure is not there to move more aircraft
per minute through a sector because a manager suddenly decides
that there should be more traffic moved through a sector. What
we are saying is that pressure will start at the top because the
requirements will be to produce more profit, more profit can be
produced by moving more aircraft through a sector. Therefore the
orders will go down the line, we believe—
101. You only believe it?
(Mr Morris) Well, how can we say. It does not exist
at the moment.
102. It gets us back to the question that Mr
Stevenson asked you where in your submission you related to Ladbroke
Grove. This is just scare-mongering?
(Mr Findlay) If I could say, we do not think it is.
Our members, air traffic controllers, will do their level, professional
best whether this service is in the public sector or the private
sector. There is no doubt about this. I mean, we recognise the
realities of life and we know the Government has a majority. We
do not want is going to happen with the Bill, that is not our
job; we are trade union officials, not politicians, but if it
were to go through then our members, the air traffic controllers,
would do their level, professional best to meet the highest safety
standards. But again, what we are concerned about is that there
would be greater pressure on them, there would be greater pressure
to take costs down to the business and that would be an ongoing
process. Part of the reason why we mention what has happened on
the railways is because that is an example of privatisation of
a transport service and that is part of our members' concerns.
103. Could I perhaps move you on a little bit
and ask you what your opinion is about whether you think the introduction
of private sector management and direct access to investment funds
would have made a difference at Swanwick?
(Mr Findlay) I think there are a lot of lessons to
be learnt from what happened at Swanwick.
104. About six years' worth, was it not?
(Mr Findlay) About six years' worth and this Committee
has gone into it in great depth and in great detail. I think there
is no one sector to blame, whether it is a public or private sector,
or indeed the political sector. What happened there was that somebody
made a very optimistic forecast at the very beginning and the
building was delivered on time—
105. Would private sector management have made
it more focused?
(Mr Findlay) There is no reason why private sector
management could not have been brought in to do that. In fact,
in some areas it was, but there is no reason why NATS cannot bring
that in even now, as they have done on the new Scottish Centre.
Chairman
106. Let us be quite honest about it. It was
an American company and then another American company. It was
not a question of a nationalised industry providing the services
at any time at Swanwick, was it? The management certainly was
NATS, but the actual projects were being operated by private companies,
were they not?
(Mr Findlay) I think the fact is that NATS believed
that they would get a system that would plug in place, so to speak,
and that indeed was far more complex. The fact is that there have
been a lot of private sector companies involved in it and no major
computer change has been made in this country without great delays
and cost overrun.
Chairman: Mr Olner?
Mr Olner
107. Finally, Madam Chairman, it has been touched
on, the £1 billion of investment that is going to be needed
within air traffic control. If the private sector does not find
it, do you think the Government will?
(Mr Noon) I do not know. It is very difficult for
us to say. It should be able to because as given before in evidence
all that money would be repaid and it would be repaid with interest.
Sometimes these things are talked about almost as though it is
a subsidy. It is investment; we think it would be a good thing.
(Mr Adams) The investment would be matched by a flow
of revenues. I think the other point that one would make is that
this Government has been extremely successful in limiting the
extent of its public debt and there should be sufficient in the
funds, we believe, to fund this very important part of industry.
Chairman
108. Is this following on the public debt aspect?
(Mr Morris) The fact is that this crisis in funding
was brought about by requiring NATS to pay back the debt that
it had originally. It had a constant debt of around about £500
million which it has been paying back over the last few years
from its revenue stream, so its borrowing each year has been less
and this is what has created the crisis for NATS. It was artificially
brought about and set in train by the last government calling
in the debt. It is like any of us; if we had a borrowing from
a bank we would find it difficult and we would have to go up to
another bank to cover that debt if it was called in by one bank
and it is the Government that has called it in and said that it
is not willing to continue with the loans at the levels they are
at. This is what has caused the crisis, even though it was getting
the 8 percent return on the capital employed.
Chairman: Thank you. Mrs Gorman?
Mrs Gorman
109. Mr Morris, would you say it was the Treasury
who were putting the screws on you then?
(Mr Morris) I would.
110. Very good. Thank you. So may I then ask
indirectly why you have faith in the public sector to impose conditions
on your industry and would you agree with me that there is a complete
difference between the privatisation which took place in the Railways,
which was a PFI initiative—total privatisation—and
the PPP initiative which this Government is proposing that is
public and private. I know you will not have heard the Prime Minister,
but I would like to have your views. He made the point at Prime
Minister's Questions today that the salvation of the London Tube
will be that the private sector will come in and administer the
contracts of restoring modernisation, but they will do that under
parameters set by the public sector. So why do you fear that co-operation
and is that not better than what you have now?
(Mr Morris) You ask why I have faith in the public
side. I have faith because I have seen the improvements in the
safety of air traffic control over the last 25 years, and probably
the greatest improvement in the NATS safety management system
was brought about following Clapham when the Managing Director
insisted that this would not happen to NATS. And that was in the
public sector and that was put in place in the public sector and
we probably have one of the best management safety systems there
is in the country there. That is what I do not want to see attacked.
Now if we go on to the PPP; PPP, had it been structured in another
way, may have worked and it would have been equally capable of
providing what NATS needed as an IPOC or a trust, but the way
the Government chose—with very little consultation, we believe—was
the trade sale, probably again to maximise the income to the Treasury
and we believe that is not the best way to go because it is a
privatisation. The Government says itself it is handing over the
running of the National Air Traffic Control Services to the private
sector and that means instead of it being a safety service it
is going to be a for profit service. Just one point I wanted to
make earlier and that is that a lot of the managers at the moment,
the senior managers, are being taken away on courses preparing
them for the private sector and one of the things they are all
told is: "Remember, when you are in the private sector, it
is different. The first thing you must consider when you are making
a decision is how it will affect your shareholders". Now
to me that is not acceptable and that is what is wrong with this
system of PPP.
Mrs Gorman: That sounds like a bit of black
propaganda by a trade unionist hanging on to an old-fashioned
system. I hope that you will get the opportunity to read what
the Prime Minister said today, because he made it clear that the
public sector would set the parameters, the contract if you like,
and that would include, I would imagine, standards of safety,
but that the private sector would come in to operate and re-fund
the technology and all other aspects of the industry. He was of
course talking about the tubes and which indicated the differences,
I repeat, between what was the PFI, total privatisation, and the
PPP scheme which this Government has adopted. So I wonder whether
you have really got to grips with the fundamental difference between
those two systems.
Mr Olner: Perhaps gentlemen when you respond
you will also tell us the course that these people went on and
who told them that.
Chairman: We would certainly welcome information
about that and I am sure the Prime Minister will be grateful to
Mrs Gorman for her advocacy.
Mr Donohoe: May I ask, do you have the paperwork
of any member who has been on one of these courses which demonstrates
that this is what they have been told about as to the difference
between the public and the private sector? If you have something
like that, that would be useful. I am assuming it would be useful
to other members of the Committee; it would certainly be useful
to me if you could supply it.
Chairman
111. And we would like the name removed so that
no-one can be identified if they are operating under the same
rules as the railway system?
(Mr Morris) We will attempt to get those details,
but I would suggest, because as these courses are run on behalf
on National Air Traffic Services, you might ask the senior management
of NATS.
112. Thank you very much. That is very helpful.
Mr Noon?
(Mr Noon) To answer the point that was made about
the difference between the railways and the PFI and the trade
sale of NATS. Yes, of course we recognise there are differences.
Yes, of course we will talk to the Government about the detail
of the way it is being proposed, but we also see some similarities.
The similarities that we see are that operational control of the
air traffic control would be passed to the private sector and
again we go back to this point that we do not believe that external
regulation of itself will guarantee the safety culture which NATS
has had. We also look at the question of investment and we think
here there is a similarity with the position in the railways,
that just because the private sector can invest it does not mean
necessarily that it will invest.
113. Are you saying, in effect, that if SRG
is separated it will not have sufficient powers or sufficient
control to guarantee a level of safety?
(Mr Noon) Well if it happens we will be the first
people knocking on Ministers' doors saying: "We want more
resources for SRG; we want more people", but we do have concerns
about whether it could operate properly or whether that sort of
external regulation which has already been said, would only set
minimum standards for what we need for air traffic control. We
also go back to the point—and I do apologise; well, I do
not apologise for repeating it really—that what our members
say to us is that what we have got in the United Kingdom is an
air traffic control system with a brilliant safety record where
there has never been a mid-air in controlled airspace and the
decisions being taken, which are essentially financial reasons
on the question of investment, are financial reasons and are being
taken for those reasons which our members are concerned about,
and not primarily safety reasons.
114. Tell us about the Golden Share and why
you think it might be inconsistent in relation to European rules?
(Mr Findlay) The Golden Share has apparently been
outlawed by the EU because it is said it is a restraint of trade
and what they have produced is a document asking the British Government
to answer the questions on the Golden Share as it applies to BAA.
So it looks like they are trying to outlaw Golden Shares and not
just in this country by throughout Europe.
115. There is a major difference though between
the systems in this country and elsewhere, is there not, because
large numbers of European countries still retain complete control
over their airlines for a start?
(Mr Findlay) The fact is that the Golden Share has
never been used in Britain anyway and normally after a while after
privatisation, it is sold or disposed of and we know of no case
where the Golden Share has been used and so therefore we find
it rather hollow.
116. Do you think there is any conflict of interest
between a consortium consisting of airlines who would seek to
take control of a privatised national air traffic service?
(Mr Noon) We have had discussions with the consortium
informally and we welcome their interest. It seemed to us, and
I do not want to put words in their mouth at all, that there motivation
for this was not based on the fact that they wanted to run Britain's
air traffic control system, but they were concerned that a strategic
partner might appear who would not maintain safety standards,
who would not maintain investment standards. The question of whether
there is a conflict of interest I would think ultimately will
be demonstrated by the figures that are there. In air traffic
control, nowhere is there more data on delays or movements to
airlines and that would all come out at the end of it. But that
would essentially be a political decision.
117. Do you think there is any evidence that
a privatised NATS would be inclined to raise its charges in order
to get a better return on its investments?
(Mr Noon) Well I doubt if it would be doing a good
job for its shareholders if it was not, but that pressure would
always be there to try and maximise profit as we see it from the
privatisation.
Mrs Gorman: It is the same argument(?)
Chairman: We are not arguing with our witnesses.
We are seeking some information from them.
Mrs Gorman: We are trying also—
Chairman: Mrs Gorman would like to ask you a
question.
Mrs Gorman: Just a little question. Do you seriously
suggest that a company like Ford would lower its standards of
safety because of a competitive element being present in its industry?
I find your concept of what the private sector would want from
your industry or by injecting funds, i.e. depressing standards
of safety in order to produce a profit, bizarre. Quote me some
examples from the private sector; let us just leave the poor old
railways out of it for the time being?
Chairman
118. Let us not look at the obvious example;
let us think of another one? Just one of you. Yes, Mr Adams?
(Mr Adams) Thank you. We were talking about the strategic
partners and that sort of thing and we would like to draw your
attention to an address given by Mr Robert Ayling, the Chief Executive
of British Airways PLC on the question that you asked. He says:
"Other suitors for NATS will have different expectations
from their investment. They would require a higher and essentially
commercial return on their equity. They will seek profit as their
primary return." It was Mr Ayling who suggested that some
of the people who you may be championing—and I use that
word advisedly—may not be suitable partners for NATS as
strategic partners, because they will see profit as their concern
and motivation and not safety. Those are Mr Ayling's words.
119. Who was Mr Ayling addressing?
(Mr Adams) I do not have that information. All I have
with me is a copy of the address.
Chairman: You could give us that, please? We
need that information.
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