Examination of Witnesses (Questions 1-19)
SIR ROY
MCNULTY,
MR JOHN
ARSCOTT, MR
MICHAEL BELL
AND DR
HARRY BUSH
11 JANUARY 2006
Chairman: Good afternoon gentlemen. You
are most warmly welcome. We have one piece of housekeeping before
we begin and that is members having an interest to declare.
Mr Clelland: I am a member of AMICUS.
Clive Efford: I am a member of the Transport
and General Workers Union.
Chairman: I am a member of ASLEF.
Mrs Ellman: I am a member of the Transport
and General Workers Union.
Mr Wilshire: I do not have union membership
but I do have parts of Heathrow in my constituency which might
be relevant.
Graham Stringer: I am a member of AMICUS.
Q1 Chairman: Thank you very much.
Perhaps it would be helpful for those of you who have not been
with us before to say before we start that the microphones in
front of you record your words, they do not project them and so
I am afraid you are going to have to speak up. I should also point
out to you that we have just recently concluded an inquiry into
the financial protection of air passengers so I do not think we
will be questioning any of you on that matter today. May I begin
by wishing everybody a long, peaceful and happy new year. Sir
Roy, I am going to ask you first to identify yourself for the
record and also your colleagues.
Sir Roy McNulty: I am Roy McNulty,
the Chairman of the Civil Aviation Authority. On my far left is
John Arscott who is the Group Director of Airspace Policy, next
to him is Harry Bush who is the Group Director of Economic Regulation,
and on my right is Mike Bell who is the Group Director of Safety
Regulation.
Q2 Chairman: Did you have something
you wanted to say to the Committee before we begin the questions?
Sir Roy McNulty: I have some brief
opening remarks if I may. The CAA is the independent regulator
of UK civil aviation and we believe it is also regarded by many
other regulators as a leader in most aspects of aviation regulation.
We are also in a somewhat unique position as the only aviation
regulator in Europe tasked by its government with recovering all
of its costs including a return on capital employed from the regulation
industry it regulates, a matter which no doubt some of our regulatees"
may have commented to you on in their submissions. Secondly, I
would like to emphasise that safety will always remain paramount
for the CAA. Although, having recently re-looked at it all, our
statutory framework perhaps does not make that very clear, the
paramount importance of safety is very clear in the guidance that
we get from the Government, in all of our Board's policies and
in the day-to-day work of the Authority. We have, as we were requested,
set out in our submission our understanding of the CAA's remit,
structure and powers together with our assessments of what we
do in pursuance of those statutory objectives and functions, our
view on the effectiveness of the regulatory framework and the
effectiveness of the CAA in discharging its duties. We hope we
have been able to make all of that clear, although the fact that
we are only one of the players in a fairly complicated regulatory
scene is a factor in understanding it all. We have also commented
on the effect of growing European involvement in aviation regulatory
matters. Clearly an increasingly important part of our job is
trying to keep track of, and trying to influence, regulatory developments
in Europe. We hope that the four people we have present can answer
most of your questions. However, if we do not have the information
to hand we would like to have the opportunity to provide supplementary
information at a later stage. Finally, I would like to emphasise
that we genuinely welcome this inquiry. We believe that the CAA
does a good job. The UK has a safety record that is second to
none and that is not only due to what we do, but also obviously
the considerable efforts that the Department for Transport makes,
and the efforts that the industry makes in working with us. We
are recognised in Europe as the leaders in economic regulation
and in airspace policy, and our consumer protection regime is
the best developed in Europe, although, as you well know, we feel
this could be even better. However, our statutory framework has
evolved over some 30 years or so and we recognise there are areas
where it could be clearer or perhaps better adapted to today's
world. We also recognise that, although we believe the CAA does
its job well, we are by no means perfect and we are not complacent
and we will welcome any ideas that come out of this inquiry that
can help us further improve the job we do.
Q3 Chairman: Sir Roy, it comes as
a great shock to me to know you are not perfect but I will try
and overcome that.
Sir Roy McNulty: I thought we
should make full disclosure to the Committee!
Q4 Chairman: Very wise. You are not
just unique in the way that you get your money but you are unique
in other ways as well. How do you think the Civil Aviation Authority
is going to look in 20 years' time?
Sir Roy McNulty: I think some
of its roles will be different, particularly in relation to Europe.
Obviously we are embarked on some significant changes in relation
to the Single European Sky, in relation to EASA and other regulatory
matters that the Commission has embarked on or is likely to embark
on. All of those impinge in one way or another on the Civil Aviation
Authority. I would expect that in 20 years' time there will still
be a significant role to play in the implementation of a lot of
that rule making, and there will still be a role for a national
authority such as us.
Q5 Chairman: When did you last undertake
an in-depth review of what you do?
Sir Roy McNulty: We review what
we do annually. As part of the normal planning process we sit
down in June of each year and start from what are the basic main
objectives we are trying to pursue, what are the strategies we
follow for that, what are the plans we have got and what are the
resources we need, but I would accept that we start that planning
process within the existing statutory framework, we do not sit
down and try to invent a different one.
Q6 Chairman: I understand that. Various
people have commented, as you would expect, on the conflicting
demands of four different areas of regulation. As you yourself
said, you have both the economic and the safety without the other
aspects of regulation. Do you think that causes you any difficulty?
Sir Roy McNulty: No. Sometimes
it gives us issues that need to be addressed or managed, but they
are issues which would need to be addressed in some other way
even if we did not have all four aspects of regulation under our
umbrella.
Q7 Chairman: Would it be a good idea
to transfer some of your economic and commercial activities to
a single transport economic regulator for everyone?
Sir Roy McNulty: We do not think
that that is a good idea.
Q8 Chairman: Why not?
Sir Roy McNulty: It has been said
to us and to you on many occasions that the industry sees advantages
in having a one-stop shop for all of its regulation. In a number
of respects the various regulatory activities need to work together,
for example airspace policy and the Single European Sky, and some
economic aspects of that and in our opinion it will work much
better in one place rather than if it was split up in several
places.
Q9 Mr Wilshire: Presumably you would
accept that judgments on economic regulation would require the
people regulated to make decisions based upon what they can charge
and what they cannot charge, so in making economic judgments you
are in the commercial business of what can be afforded and yet
at the same time you are setting safety standards which, I would
have thought, cannot or should not be subjected to economic regulation.
How can you possibly do both of those activities at the same time?
Sir Roy McNulty: If you accept,
as I hope you would, that both of those activities should be done,
I think it is best that they are done in one place where judgments
can be made as to what is done in economic regulatory terms while
at the same time never crossing the line that they would adversely
impinge on safety.
Q10 Mr Wilshire: Would it not be
better done by two independent bodies so that there was no risk
whatsoever of those two activities being confused?
Sir Roy McNulty: I do not think
we confuse them. As I said in my opening remarks, it is very clear
in our minds that safety is paramount. In the legislation for
the NATS PPP that was written into the legislation safety is paramount,
but it is implicit in all of the other things we do as well. We
will always ensure that we do not do anything either in economic
regulation or in airspace policy that cuts across the safety objectives
that we see as paramount.
Q11 Mrs Ellman: Sir Roy, you said
that you are unique in having to recover your costs from the industry
plus your return in capital. Does that not make you over-dependent
on that industry at the expense of environmental concerns or passenger
interests?
Sir Roy McNulty: In some respects
we are completely dependent in that all of our income comes from
that industry. The record shows that it does not influence the
CAA in taking decisions. The decisions we take are without fear
or favour. We seek to make the right safety judgments and the
safety record shows that we have been reasonably successful at
that. We make economic regulation judgments which often the regulatees
do not like at all. I do not think there is a history of the CAA
being unduly influenced or influenced at all by who pays the charges.
Dr Bush: It is also worth adding
that in the economic regulation context it is not unusual for
economic regulators to charge the people in the industry. I think
the uniqueness relates to aviation in Europe.
Q12 Mrs Ellman: What about the position
of general aviation? You have been criticised for not paying enough
attention to that sector.
Sir Roy McNulty: I do not understand.
In what sense related to general aviation?
Q13 Mrs Ellman: We have received
some evidence criticising you and saying that you are more interested
in the major commercial airlines than any other civil aviation.
Sir Roy McNulty: I have heard
that criticism many times. It is probably true that the CAA pays
more attention to the airlines than it does to general aviation.
I would guess that that can be traced back to the original legislation
which has the airline aspect of our activities front and centre
and does not mention general aviation. We are conscious of the
fact that perhaps we should pay more attention to general aviation,
which is why in the middle of last year we embarked on a joint
review together with the GA sector of all the strategic issues
that relate to GA. Perhaps it has not had as much attention in
the past as it should. We are intent on trying to rectify that.
Q14 Mrs Ellman: Why are regulatory
costs in the UK higher than in other countries?
Sir Roy McNulty: As I said at
the beginning, we are the only regulator who has to charge fully
all of its costs. A lot of the activities that we do are done
in France, for example, and no charge is made, they are met from
general taxation. So I do not think you can say that we are more
expensive than the others when we are comparing two completely
different economic systems.
Q15 Chairman: Is that because they
will do more things through the Armee de l'Air in France?
Sir Roy McNulty: They do some
of those things, but even the DGAC, the civil part, does not charge.
As of 1 January they are beginning to introduce some charging
mechanisms, but this is their first step in that direction. In
many of the other countries there are no charges whatsoever. We
are certainly more expensive. If you charge fully all of your
costs you are going to be a lot more expensive than people who
do not charge at all.
Q16 Mrs Ellman: Would you prefer
a different method of funding?
Sir Roy McNulty: There are days
when I could heartily wish it because at times it causes a degree
of disagreement with our charge payers, but I would have to say,
standing back from it, that I think it is for the better because
what it does is place a clear obligation on us to try to deliver
decent value for money. There are a number of consultations and
reviews not least by the Safety Regulation Finance Advisory Committee
which are completely unheard of in other countries. When we have
benchmarked what the CAA does in each of our regulatory activities
it keeps telling us that the CAA as a regulator is relatively
efficient compared to other regulators. That may not be the summit
of one's ambition, but compared to other regulators the CAA does
its job quite efficiently.
Q17 Mrs Ellman: How do we know whether
you deliver value for money? The National Audit Office cannot
scrutinise your finances, can it?
Sir Roy McNulty: The assurance
we have comes from several sources. We review the budgets very
carefully. The majority of the board are non-executive people,
they come mostly from the private sector and have a business background
and we review the budgets very thoroughly every year. We do benchmarking
quite frequently both the regulatory activities and our support
activities and where we find areas that we can improve against
a benchmark population, we go after those things and that is why
our costs for the last four or five years have come down consistently.
Q18 Mrs Ellman: Do you have any proposals
to improve scrutiny to your customers and also to Parliament?
Sir Roy McNulty: I think some
of the lessons we have learned over the last 18 months to two
years from the costs and charges review suggest that the scrutiny
review, consultation, transparency and so on could be improved
further and we will work at those things. Obviously with the general
government drive for better regulation and more transparency and
whatever, we may address other issues whilst working together
with the Department.
Q19 Mrs Ellman: Do you have any specific
proposals for improving scrutiny?
Sir Roy McNulty: Not right now.
What was apparent from the joint review team that we ran for the
past two years was that things that we thought everybody understood
were not well understood by a lot of people. That suggests that
the work, for example, of the Finance Advisory Committee can be
improved and we will be looking at that.
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