Examination of Witnesses (Questions 660-679)
MS KAREN
BUCK MP AND
MR DAVID
MCMILLAN
1 FEBRUARY 2006
Q660 Graham Stringer: I will resist
saying what I was going to say on that. Perhaps I should not resist.
BAA took a view that they would wait until the Department had
decided where they wanted the next runway in London. I would have
thought if it had been three airports operating separately they
would all have wanted extra runway capacity. Would you not?
Ms Buck: I think this is a slightly
hypothetical question.
Graham Stringer: It would be an odd business
that did not want to grow with extra capacity.
Chairman: Unless it was rail.
Q661 Graham Stringer: My final point
is that I did not quite understand the answer to Mrs Ellman's
question about the 6% return. When there have been no assets transferred
to the CAA for 30-odd years and there is a 6% return still paid
by the industry, is that not an excessive burden when most other
industries would have written off those assets a long time ago?
Is it not an unfair burden on the industry?
Ms Buck: You test my knowledge
to its limits.
Q662 Chairman: Mr McMillan, why does
this Treasury still want to get its sticky fingers on somebody
else's money?
Mr McMillan: I am no accountant
but, as I understand it,—
Chairman: I do not think you have to
be an accountant to understand that theory.
Q663 Graham Stringer: You would not
normally have expected at that rate the assets to be paid off
in less than 20 years.
Mr McMillan: As I understand it,
it does apply to current capital employed. I may be wrong about
that and if I am I will send you a note. The sums involved are
not huge but I do accept that the industry is not content for
those sums to be levied. There have been occasions in recent years
when the requirement to earn that rate of return has been eased
and the rate of return monies which have been generated have been
used for purposes which I think the industry has found generally
beneficial, for example, to pay for some transition costs on EASA
and so on. There are points of principle but there are also points
of materiality here.
Q664 Graham Stringer: Do you think
you could send us a note on that?
Mr McMillan: With pleasure.
Q665 Chairman: I want to bring you
on to assets. The National Audit Office do not have a look at
anything the CAA does and we are told that this is because, of
course, it is sui generis. Why is it different from other
independent regulators who also self-fund?
Ms Buck: As I understand it, the
NAO proposal was not supported by the Government and it is being
strict that the regulator is not funded by public money other
than for very specific tasks that it undertakes for the Government
for which we pay it. There is a wide range, some of which I have
already outlined, of different means by which its work, its financial
structure and so forth can be held to account and external auditors
appointed by the Department to scrutinise its finances, its annual
report brought to Parliament through the Secretary of State and
the Department playing a key role in relation to executive and
non-executive directors. We think that that range of functions
is properly fulfilled at the moment.
Q666 Chairman: There is not any very
clear transparency. Why should they not have a regular independent
review of the charges?
Ms Buck: Charges for what?
Q667 Chairman: NATs, for example,
says that there ought to be scope to reduce costs. The NAO does
not look at this. You are saying that they have an auditors' report.
Well, of course, many companies have an auditors' report but this
particular organisation is fulfilling a very different function
from any other. Why should there not be a totally independent
assessment of how it is operating and its cost base if the Government
is not prepared to accept that the National Audit Office, which
is the normal gatekeeper, should be allowed to come in and ask
the awkward questions?
Ms Buck: They are expected to
be tackling the issue of costs. They have been set a very specific
requirement to reduce costs.
Q668 Chairman: But there is no-one
who checks the basis on which that is assessed.
Ms Buck: I think I would argue
that there is a high degree of transparency in the way this is
conducted, and they are under an obligation to be open and transparent
and industry has not only the opportunity to be involved and to
contribute directly to that but also through this Department.
Q669 Chairman: The CAA has a responsibility
to advise the Government. Do they respond to Government inquiries
or do they routinely tell the Government what is of importance
in aviation?
Ms Buck: Neither and both. It
is a two-way dialogue. There is a constant process by which the
Department at ministerial and official level is seeking reports
on how they carry out a range of functions, which include cost
control, and they advise the Government about how they are going
about that. In addition to that we see representatives of industry
who make their case.
Q670 Chairman: Yes, but British Airways
had a whinge, saying that they go well beyond their formal remit
as an adviser to the Government, It is not clear it has always
been asked for, why should we pay for it?". They did not
put it in quite those terms but that is what it came down to.
Mr McMillan: As the Minister said,
there is a very detailed and very open process whereby the industry
can challenge the CAA in each of the areas of regulation on why
they are spending what they are spending, on why they are deploying
the resources that they are deploying, and if they felt, for example,
in that particular case that the CAA were conducting policy work
on behalf of Government which we were not reimbursing them for,
it is entirely open to industry to challenge that funding with
the CAA, and I have no doubt that they would do so.
Q671 Chairman: You did say at one
point as a Department that you were going to change the system
of mandatory referral to a Competition Commission.
Ms Buck: We did say that and there
was a time at which there was emerging consensus that that might
be an appropriate way to go forward.
Q672 Chairman: So the Government
changed its mind, did it?
Ms Buck: I think the consensus
broke down, to be fair, so that it would probably not be wise
to go ahead if there was not some degree of support for a particular
direction of travel.
Q673 Chairman: But that is the only
reason, that consensus broke down?
Ms Buck: It is the only reason
that I am aware of.
Q674 Chairman: We have, not surprisingly,
heard a number of real worries about the CAA and its environmental
role, whether it is conscious always of the need to include environmental
problems in its assessments, whether it is conscious enough of
its responsibility to keep people informed, whether it takes sufficient
account of environmental affairs. We have also been told that,
of course, in 20 years it is going to be a completely different
organisation. Do you think they are going to get new roles and
powers in terms of minimising and mitigating environmental impacts?
Ms Buck: The CAA is explicitly
required to identify and review significant environmental aspects
of its work. The particular relevance of that is—
Q675 Chairman: It seems to me there
is some ambivalence on its part, is there not? Sometimes it will
account to us and say, Yes, we have an environmental responsibility",
but when it is dealing with individual local authorities perhaps
or others who seek some guidance it tends to give the impression
that it is saying, Not us, guv", in regulator's language,
of course.
Ms Buck: I am very clear that
the guidance we gave to them in 2002 makes it clear that they
should do that. One of the things that I understand they are currently
doing is drawing up their own guidance on the proposals of air
space changes as well, the particular strand of it that is of
concern to people, so that that environmental dimension is drawn
out and emphasised. I am absolutely clear that, as aviation has
grown (and is set to expand in the White Paper) that getting this
right is critically important and that there is not going to be
an opportunity for environmental considerations to slip down the
agenda.
Q676 Chairman: You do not think there
is a conflict between an obligation to ensure that public demand
for air transport services is satisfied consistent with good safety
and their role as an environmental policeman?
Ms Buck: As with previous issues,
I think the fact is that all these things are in tension. There
is an economic benefit to aviation; there is huge public demand
out there for aviation. There is also an absolute bedrock expectation
that safety is paramount and there is a growing and real and serious
concern about the environmental impacts of aviation which has
to be addressed. Those criticisms cannot always be reconciled
to everybody's satisfaction in one policy but all three of them
(and others too) essentially have to be kept in a proper balance
over time.
Q677 Chairman: The CAA does not have
a statutory obligation to keep local authorities aboard and consult
them, does it?
Ms Buck: I do not believe it is
a statutory obligation. It is guidance that we require them to
take account of.
Q678 Chairman: But if the guidance
is not working very well as far as those who are making representations
are concerned, would it not be sensible to at least consider whether
it ought to be part of a statutory obligation?
Ms Buck: The guidance has been
out now for four years and there may well be a time when it is
appropriate to review that, and I am not going to pre-judge how
that might unfold.
Q679 Chairman: Would you also consider
in your review looking at whether the CAA should have powers to
impose sanctions on airports and airlines which do not fulfil
the targets on mitigation of damage to local communities?
Ms Buck: We have introduced, as
I am sure you are aware, Chairman, a number of clarifications
and strengthening powers in these respects in the Civil Aviation
Bill which is currently in front of Parliament. I would not rule
in or out how we would take that forward.
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