Draft Transport Act 2000 (Designation of Transferee) Order 2001

[back to previous text]

The Chairman: I do not want to draw you too sharply to order, Mr. Foster, because I recognise the relationship between your remarks and the order under discussion. However, I would ask you to be as brief as possible, because the terms of the order are tight.

Mr. Foster: I am grateful to you, Mr. Pike, and I shall be very brief on each of my points, but the issues are important. The Government must deal with many criteria. In the case of the Novares bid, there are some worrying issues, on which the Government should divulge their approach. If Novares wins the bidding process, an American company will be in charge of our skies. The Government will recall their famous phrase, ``Our skies are not for sale.'' Our skies are now being sold to the United States. That may not worry some people, but—I do not want to be accused of being a little Englander—what is the Government's opinion of an American company seeking to expand the work of NATS into Europe? Do they believe that, if an American equipment manufacturer were the main component of NATS, that would make it more or less easy for NATS to develop business there? What would France or Germany think of an American-based company using American equipment to control their air space? It would be useful to know how significant the Government believed that factor to be in judging whether to go ahead.

Even in the United Kingdom, there could be a conflict of interests. Lockheed Martin is the main supplier of equipment for NATS. If the company becomes part of NATS No. 2, will the air traffic service not be able to benefit from the possible advantages of competitive tendering for new equipment? Will it automatically have to use Lockheed Martin's equipment? Will the Minister assure us that when NATS No. 2 requires new equipment, it will be put out to competitive tender? It should not be assumed that the equipment will automatically be provided by Lockheed Martin. What assessment has the Minister made of whether a link between Lockheed Martin and NATS No. 2 might be challenged by the European Union in respect of procedures for the acquisition and purchase of equipment?

The project management of the Novares bid should be called into question, given the significant overruns on the new en-route centre referred to by the hon. Member for Ayr. With a record like that, questions must be asked about the likely impact on NATS.

I asked a moment ago whether we had evidence that the Airline Group had a long-term commitment. What evidence is there of Lockheed Martin having a long-term commitment, given that less than 2 per cent. of its sales are to do with air traffic control? Is it sufficient for the Government to say that the Novares bid is for the long term?

Why have the Government allowed a bid that involves the Airways Corporation of New Zealand? That group's activities in air traffic control are the equivalent of running an operation smaller than Prestwick. I have a copy of a report carried out by the Auditor-General of New Zealand into the probity of ACNZ's activities in respect of this deal. I and, I suspect, many other members of the Committee would like to know whether the Government know the outcome of that inquiry and what impact it will have on their analysis of that bid.

Will the Minister confirm or deny what was reported in a national newspaper in New Zealand? The ``Sunday Star-Time'' of New Zealand said on 7 May 2000 that ACNZ allowed a partially sighted person to act as an air traffic controller. Is that evidence of the operational standards that he expects from NATS?

Finally, I come to the third bidder, which has been put together predominantly by SERCO. The Committee is aware of the considerable concern expressed by the staff of NATS and by the unions, because of the management style and the approach towards staff that has been adopted by SERCO. Despite that, rumours—I hope that they are wrong—are circulating that SERCO may be the preferred bidder.

In a minute, the Minister will assure us that safety is the No. 1 track-record requirement for any of the bidders. If that is so, I hope that he will take into account three matters. First, SERCO does not have its own comprehensive safety management system—certainly not one of the type that is operated by NATS. Secondly, as he will be aware, SERCO was involved in the Queen's Flight incident in November 1997, in which the royal family had to make an emergency landing after the aircraft developed faults in three of its four engines. The maintenance contractors, SERCO, refused to comment at the time. Finally, the Minister will know that an independent board judged that the high work load of a controller was the most likely cause of a mid-air collision of two training aircraft over Oxford airport last year, where SERCO was the operating company. I understand that such things can happen, but we want safety to be the paramount consideration and I am sure that the Committee wants assurances that things have improved.

Assurances that SERCO's air traffic control experience is of the relevant type are also necessary. I accept that it has some significant experience. Indeed, one of its bases is in my constituency, although I noted from my newspaper three days ago that it is has just decided to go elsewhere. I hope that was not because of anything that I said. We know that its management style is highly decentralised. Questions must be asked about whether that management style is appropriate for something as complex as NATS. Concerns already exist about its safety culture, and a highly decentralised approach bears no obvious relation to a good safety report.

The Chairman: Order. Perhaps I may bring the hon. Gentleman back to the matters that the Committee is debating, as he is going rather wide.

Mr. Foster: I am grateful to you, Mr. Pike and shall bring my remarks about SERCO to a close. I am worried that its aggressive approach elsewhere, including a willingness to reduce staff numbers and increase profitability, is not necessarily appropriate for an organisation that will form a major part of the NATS No. 2 body. It is a relatively small organisation with a high gearing, dependent on a strong share price and with a tendency towards high-risk projects. I hope that, if successful in its bid, it would not take the sort of approach I have described.

My point in considering all three bids has been to point out that, before I can remotely consider supporting what is proposed in Committee today—how I wish that we had had the opportunity to debate it on the Floor of the House—I need clear and precise assurances from the Minister about the criteria by which the successful bidder will be chosen. In what order of importance will those criteria be placed, and what weighting will be given to them? Finally, in the light of the assurances that we were given by the Minister for Transport in another place, that a three-month consultation period would be allowed, precisely who has been consulted, and by whom? What are the Government's plans to report on what was said, and to enable both Houses of Parliament to debate the results of the consultation? If the Minister does not have that information to hand, will he write to all members of the Committee with it?

I apologise to you, Mr. Pike, and to the Committee, for speaking for a long time. I assure you that it would have been much longer were it not for your ruling, as I had hoped to raise many other serious questions. Your fair, just and stern chairmanship has led me to reduce the number of my remarks to considerably fewer than there might have been. None the less, the issue is extremely serious.

The Chairman: I can assure you, Mr. Foster, that if the debate had been on the Floor of the House, it would not have been as wide ringing as I have allowed this debate to be.

5.15 pm

Mr. Geoffrey Clifton-Brown (Cotswold): I, too, welcome you, Mr. Pike, to your first Chairmanship of a Committee in this House. I wish you many happy hours in Committee. I also congratulate the Under-Secretary. I had dealings with him in his previous capacity, and am delighted to see that he has been elevated. I hope that I shall follow in his place after the general election.

Mr. Foster: I for one was extremely disappointed that, because of the prevarications of the right hon. Member for Bromley and Chislehurst (Mr. Forth), the Minister did not have the opportunity to reach the Dispatch Box during our debate on the Homes Bill last week. We wish him well.

Mr. Clifton-Brown: All things come to he who waits. The trouble is that the Liberal Democrats may have to wait a little longer.

The order sounds innocuous until one reaches the detail, and I have several serious detailed questions for the Under-Secretary. We have been told that, as of 31 March, the shares owned by the CAA will be transferred to a new company, which will be designated NATS No. 2. We are told that 46 per cent. of the share-cut capital of the old company will be sold, and that 5 per cent. will in some way be allocated to the employees. My hon. Friend the Member for Poole has probed about that 5 per cent. a little, but I want to do so further.

Will the employees be able to sell their shares to the 46 per cent. purchaser? If so, the Government will effectively be selling a majority share—51 per cent.—so the PPP will be a PPP only in name, and will really be an old-fashioned privatisation. If the trust will prevent the employees from selling their shares to the new purchaser, they will be barred from receiving the best value for those shares, and a reference to the European Court of Human Rights may follow. We need to know what restrictions will be placed on those employees.

Will the Under-Secretary tell us how much consultation has taken place with the existing employees on, for example, pensions? Are they being assured that their pension fund in the CAA will be fully protected? The last thing that we want is for the company to be sold to an unknown bidder which then robs the pension scheme, or takes a pension fund holiday. We have often seen that before, and the employees and their unions are entitled to full promises from the Under-Secretary that such interests will be protected.

I want to probe the Under-Secretary about the transfer of the shares in the CAA. What is the CAA's level of indebtedness? What level of debt will be written off in the transfer? What proceeds will amount from the transfer? Answers to those questions would allow us to see whether the taxpayer was receiving good value for money.

I served on the Public Accounts Committee and, as a result, I am aware that, during privatisations, companies repeatedly bought old nationalised industries cheaply and sold them on for huge profit. The question regularly arose of whether the Government should have built in a clawback arrangement when they sold off the public assets. Will such an arrangement be built into this sale? If so, how will it provide an incentive for the new company to grow? After all, a clawback arrangement can act as a disincentive, unless it is done in tranches over a sensible period of time—in which case, it can provide a new company with an incentive. The hon. Member for Bath (Mr. Foster) referred to that issue. It is clearly in the Government's, employees' and taxpayers' interest that the company is successful and continues to expand, in not only this country and Europe but the rest of the world. The many parallels between this sale and that of BAA have not been mentioned, but that company has been outstandingly successful.

Will the Minister say something about the incentive, and what tranches of profits will be included in the incentive over what period? For example, what will happen to property sales? Some formerly nationalised industries have been sold off and huge profits have been made immediately from property sales—as, I suspect, will be the case with the sale of the dome.

I want to discuss the control that the Government will exert on the new company through their special share. The Minister briefly referred to what that special share is designed to achieve, and my hon. Friend the Member for Poole said that the European Union would have a say in how that share will operate.

In the light of his comments, will the Minister tell us how many Government directors there will be in the new company? Will those posts be properly advertised—as recommended by the Neill committee in respect of such public appointments? Will he tell us how many non-Government directors will there be, so that we know whether the Government directors will hold a majority, and who will take the chair?

As another aspect of the special share, the Government want to control dividend policy. However, if they want to maximise the return to the taxpayer, they will have to provide an incentive so that sensible dividends can be paid. The Airline Group says that it will not pay a dividend; if the Government accept that bid, how will the 51 per cent. share holding be paid a dividend and the 49 per cent. holding not be paid? In addition, if they want the special share to control dividends, what incentive will be provided for the new company to invest? Any new company that invests will want to ensure that it receives a realistic return, if not immediately, over a period of time through capital growth and income return.

Will the Minister tell us, too, why paragraphs (b) and (c) of the explanatory note are contradictory? Paragraph (b) states that it is the duty of the Secretary of State

    ``to ensure that the Crown does not dispose of shares in the company unless the Crown holds at least 49 per cent. of the issued ordinary share capital before disposal and will continue to do so immediately after disposal''.

That is clear, but paragraph (c) contradicts it, in stating that it is also the Secretary of State's duty

    ``to ensure that at any given time the Crown holds at least 25 per cent. of the company's issued ordinary share capital''.

I know what the Minister wants to say, but the explanatory note does not say it. I think that he means that up to 75 per cent. of any subsequent sale of shares could take place, provided that at least 49 per cent. of the enlarged share capital remained in the hands of the Government. Perhaps he could clarify it for us. The company should be given an incentive to apply more share capital—to go to the market and raise more money. If the company is to be successful, and if it is to build and maintain the enlarged facilities at Prestwick, it will need to go the market and raise more capital.

I hope that the Under-Secretary will be able to answer those detailed questions today, because he introduced this serious order, and is asking the Committee to approve it. Whether my hon. Friend the Member for Poole and I decide to let the order go through without a Division will depend on his answers. The order was introduced with a cursory speech, as is the custom in the House. I can understand that. I am almost surprised that the Under-Secretary did not introduce it formally. Had he done so, we could have been away from the Committee in five minutes. We need detailed answers from the Under-Secretary on the important questions. I am not getting at the Under-Secretary personally, but he introduced the order. My hon. Friend the Member for Poole and I need answers, to decide whether or not we will cause the Committee to be divided.

5.26 pm

Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2001
Prepared 12 February 2001