Examination of Witnesses (Questions 280-295)
MR KEITH
JOWETT, MR
MIKE TOMS,
MS ROWENA
BURNS AND
MR IAN
HALL
18 JANUARY 2006
Q280 Chairman: Are you secure in
the knowledge yourself that two parts of the same organisation
are not giving you contradictory signals?
Mr Hall: I am absolutely convinced
about that because the permissions that we sought under the CP2
for investments in safety improvements and so forth were agreed
and the costs that we put in there for increase in ATCO numbers
and so forth of the CP2 were also approved under this process.
I am quite satisfied it is balanced.
Q281 Mr Donaldson: The Airport Operators
Association has questioned the need for the CAA to earn a rate
of return of capital of 6% arguing that this ultimately puts UK
airports at a competitive disadvantage. Is your preferred solution
a reduction in the rate of return or a fundamental change in the
funding arrangements such that the taxpayer bears part of the
cost?
Mr Jowett: I think there is such
a long history of the charging arrangements in the UK that it
would be invidious to propose costs going back on to the UK taxpayer.
However, we are certainly not on a level playing field with our
continental peers and it needs to be recognised that aviation
is an international activity and it would be ever so easy, increasingly
in this day and age, for activity to relocate itself to the continent
in many cases if the costs here became prohibitive. Our concern
is that we are being double penalised. As well as paying all of
the costs of our regulator, which is not the case on the continent,
we are also being charged what essentially becomes a profit margin
to the Government for that regulation. We think that is highly
inappropriate and I believe that has already been brought to your
attention. It represents an assumed risk on capital of about 3
and a half percent over and above inflation, and we cannot see
that this business, in terms of revenue flows to the Government,
has any risk at all relating to it.
Q282 Mr Donaldson: Do any of your
colleagues want to add anything to that?
Ms Burns: No.
Q283 Mr Donaldson: Do you think moving
to a system in which the Government part funds the CAA might help
alleviate perceptions amongst some that the CAA is not independent
of the bodies it regulates?
Mr Hall: I suppose an argument
could be posited that way. I do not suppose it would have much
credence with the industry itself particularly or with the public
in general. It would be nice if that was the case but it is not
something we are advocating.
Q284 Mr Donaldson: Why do you say
it would not have much credence with the public?
Mr Hall: I believe the public
perception of the CAA is that it is a highly professional regulator.
Amongst all the regulators, both aviation regulators across Europe
and one might argue amongst regulators here in the UK of other
utilities, it is probably the best regarded in terms of its independence
and professionalism of its activities. The costs of it and the
potential for double regulation are matters which concern us but
I do not think those would impact upon public consciousness or
concern.
Q285 Mr Donaldson: Manchester Airports
Group and the Airport Operators Association have argued that the
CAA's cost base must be kept under close scrutiny. We have heard
from others that regulatory costs in the UK are higher than elsewhere.
What view do you take of the current level of costs?
Mr Hall: We would argue that there
is opportunity for the CAA to re-examine its budgets, staffing,
resources and to use them more efficiently, particularly in the
growth of the continental regulator for aviation safety. That
was not an argument that the Government should bear some of those
costs, it was an argument that the CAA should look more carefully
at its own resourcing.
Q286 Mr Donaldson: Who do you think
should perform the role of scrutinising the CAA's cost base? Should
it be the CAA itself, the regulated organisations or an independent
body?
Mr Hall: I have not taken a view
on that personally. I think there could be a case for the National
Audit Commission to consider the matter but it should be developed
through further work. Perhaps I will ask my colleagues if they
have a comment to make?
Ms Burns: Madam Chairman, only
this in the case of Manchester, which is the most important thing
is for transparency in the costs. A considerable amount of work
has been done in recent years to improve the transparency of costs
from the CAA to its regulatees. I think there is more scope to
go further with this work and I would much prefer that approach
than to introduce a third party into the process which in the
end will merely add more costs somewhere.
Q287 Chairman: Is that a yes or a
no for the NAO?
Mr Hall: I think it is a no.
Q288 Chairman: Are you saying yes
if the NAO is cheaper, no if it is more expensive?
Ms Burns: No, if it is more expensive.
Q289 Chairman: No if it is more expensive
but that is the only objection. You are not saying we should not
have an independent scrutiny, you are saying only if it does not
cost anything?
Ms Burns: I am certainly not saying
we should not have an independent scrutineer. I think the obligation
in the first instance is for the CAA to convince both its airlines
and its airports that it is conducting itself in a cost-effective
manner.
Mr Jowett: I would like to concur
with my colleagues on that.
Q290 Chairman: In which case, forgive
me, we are going to move on because we are running out of time.
I am going to ask you finally if any other of you have got any
comment on the National Audit Office and the need for it to investigate
the CAA as opposed to its existing scrutiny systems?
Mr Toms: My understanding at the
moment is that the National Audit Office does not have the power
to scrutinise the CAA's finances.
Q291 Chairman: We are not suggesting
it has but that does not mean to say that we could not recommend
it. We write the laws, you know, we sometimes rewrite the laws,
sometimes we have been known to rewrite the rewrite!
Mr Toms: While you are contemplating
rewriting of the rewriting of the rewriting, our normal predisposition
is not to suggest additional layers of regulation, and what we
do not want is the guards guarding the guards guarding the guards
in this situation. Cost control of an organisation is normally
best done by its owner, and I think there is a question which
may be addressed here about in what form the DfT itself, as the
sponsoring department for the CAA, wants to make sure that it
is satisfied as to the cost levels in the organisation.
Q292 Chairman: Have you looked at
the CAA's Regulatory Impact Assessments?
Mr Toms: I have not seen any.
Q293 Chairman: Anybody else?
Mr Jowett: No, Madam Chairman.
Ms Burns: No.
Q294 Chairman: You have not had occasion
to look at those. Are you all in favour of the recommendations
of the Hampton Report?
Mr Jowett: In broad principle,
Madam Chairman, yes.
Q295 Chairman: In broad principle.
Do you think an increasingly light touch approach to regulation
might compromise the CAA's safety standards?
Mr Jowett: The CAA talk about
a light touch approach to regulation, we would not, from the industry
side, always perceive it that way. Certainly in terms of standard
setting and regulation compared with some of our continental neighbours
or with North America it would not be deemed that way. Progress
and movement towards further, as the CAA would say, light regulation,
we would endorse. We do not believe that there would be a safety
issue. Safety is at the forefront of our minds. It must not be
compromised but we believe further moves in that direction would
not so compromise it.
Chairman: On that note, Mr Jowett, Madam,
gentlemen, may I thank you for your attendance. We are very grateful.
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