Select Committee on Transport Minutes of Evidence

Examination of Witnesses (Questions 660-679)



  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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