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Mr. Gerald Howarth: On the RIA, the CAA has been judge and jury in its own cause. The Minister will know
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from her postbag, let alone from what we are telling her tonight, that there is an overwhelming feeling that there must be a proper assessment of the impact on the general aviation. The CAA has undoubtedly been forced to accept that it cannot introduce all the increases in one go and they have been phased. Annual increases have been capped at 25 per cent. but I gave an example of an increase of 100 per cent. over three years. Helios is right; there should be a regulatory impact assessment and the CAA should not be judge and jury in its own cause.

Ms Buck: I understand the hon. Gentleman's strength of feeling, but I have set out the reasons that the CAA has given, which I am minded to accept. However, we shall meet to discuss the matter further.

The hon. Gentleman made a point about what he sees as inequity in VAT and taxation policy. Our policy position in that field is derived from long-standing international agreements. The International Civil Aviation Organisation's policy is that fuel used for international aviation should not be subject to tax. The European members of ICAO have succeeded in getting it recognised that the policy has been called into question in some member states that impose taxes on other transport modes and other sources of greenhouse gases. However, the great majority of ICAO's member states oppose any change to a policy enshrined in many hundreds of bilateral air service treaties.

The last detailed point that the hon. Gentleman raised was the CAA's 6 per cent. return on assets. As he is aware, the CAA is a self-financing public corporation and its financial environment is governed by the Civil Aviation Act 1982 and guidance from Her Majesty's Treasury. The Act requires the CAA to set its charges to recover the costs that it incurs in undertaking its regulatory functions. Specifically, the CAA is required to achieve the greater of a 6 per cent. rate of return on all activities before interest and corporation tax charges or break even after interest and corporation tax charges. That has been the case for more than 20 years.

The criticism of the rate of return seems to be based on the thinking that if the rate of return were lower, the level of charges could be lower. In other words, the CAA could continue for longer with its current charging regime. That misses the point. The issues driving the need for change, including that of cross-subsidy, need to be addressed regardless of the rate of return.

The rate of return itself is used to pay national loan fund interest, national loan fund repayments, funding of capital and taxation. It is also anticipated that it will be used to fund the transition from the UK basis of regulation to the European Aviation Safety Agency model, and this has been approved by the Treasury. It has also been pointed out that the UK is the only country in Europe that requires its aviation industry to pay the whole of its regulatory costs. That is true, and it has been the policy of all successive Governments since the CAA's inception in 1972.

On the broad issue of the charging policy, the CAA began on 10 June 2005 a formal public consultation with the aviation community, including general aviation, about plans to revise the way that it charges for its safety oversight activities. Because of the significance of the proposals, the CAA provided for a 12-week consultation to obtain industry comments, rather than the usual five weeks. The consultation period closed on 5 September 2005, and 220 responses were received.
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Of course, no set of charging schemes is going to be universally welcomed by all the very different aviation sectors that pay the charges. That is why it is important that the CAA endeavours to set its charges fairly and properly, in accordance with its statutory objectives. The CAA is considering all the responses to its charging proposals and is committed to publishing the results on its website in late October.

The charging proposals will cover a 15-month period from the start of 2006 to the end of March 2007. They will include transition arrangements to allow greater clarity on the impact of work transferring from the CAA to the European Aviation Safety Agency. These increases will not come into force all at once. As a result of concern about the impact of the charging proposals on smaller operators and the general aviation community, measures to ease the transition to the new charges have been incorporated by the CAA into the proposals. Therefore, increases will be phased in over a minimum of three years for personnel licensing, airworthiness regulation and the general aviation scheme.

For the air operator's certificate scheme—together with aerodrome and air traffic controller licensing, en-route air traffic services regulation and aerodrome air
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traffic services regulation schemes—structural changes will take at least five years fully to introduce. Proposed price increases have been capped to ensure that no holder of an air operator's certificate faces an increase above 25 per cent. In addition, there will be more specific fees rather than variable charges and a banded structure of charges for air operator's certificates has been proposed that would reduce the burden on smaller operators.

By these means, we hope that the impact on the general aviation community can be kept to a minimum as far as possible. The CAA has rightly made it clear that, although it will continuously seek to minimise its cost base and reduce its fees, this will not be at the expense of safety, which must remain its top priority.

In conclusion, the Government will await the published results of the CAA consultation process, and I will then consider carefully the recommendations put to me by the CAA. In the meantime, I am sure that we will have an opportunity to meet and discuss the matter further.

Question put and agreed to.

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