Civil Aviation Bill

Memorandum submitted by Hacan Clearskies (Heathrow), Gatwick Area Conservation Campaign (GACC) and Stop Stansted Expansion (SSE) (CA 13)

Introduction

This submission has been jointly prepared by the local community groups at London’s three main airports, namely Hacan Clearskies (Heathrow), Gatwick Area Conservation Campaign (GACC) and Stop Stansted Expansion (SSE). Further details about our organisations can be found on our websites [1] . This submission has also been endorsed by AirportWatch, the umbrella body which brings together national environmental organisations and airport community groups across the UK. Note that Heathrow, Gatwick and Stansted are the only three UK airports currently subject to economic regulation and the most likely to be subject to economic regulation in the future.

Issues

1. The Civil Aviation Bill, in its present form, fails to give the economic regulator (the CAA) any meaningful environmental responsibilities.

This is contrary to earlier Government promises and creates the risk that the CAA will in future be powerless to prevent airport operators from cutting back on measures which reduce or mitigate the effects of their operations upon local communities and the environment.

2. Moreover, since the CAA will in future have a clear primary duty focused on the end users of airport services (i.e. passengers and users of freight services), airlines would be able to legally challenge any CAA decision which allowed airports to recover, in their airport charges, any environmental expenditure other than the minimum necessary to comply with the law.

The CAA needs a statutory environmental duty to allow it to take a balanced view without fear of a legal challenge from airlines.

3. The DfT press release of 23 November 2011 on the publication of the Draft Bill mistakenly stated that it included a duty upon the CAA ‘to have regard to the effect on the environment and on local communities of activities connected with the provision of airport services’.

This is exactly the obligation that the Bill should include and its inclusion in the DfT press release suggests that the environmental obligation was removed very late in the day.

4. The Transport Committee’s report on the Draft Bill shares our concern in relation to the absence of an environmental duty for the CAA:

"Without giving the CAA a supplementary duty on the environment in relation to its economic regulation role, there is some risk that airports may be reluctant to invest in improving environmental performance. Whilst, as the Minister says, there may be absolutely no doubt" about measures taken to comply with statutory environmental obligations, there remains a doubt about whether the costs of discretionary measures, such as improved public transport access, can be recovered by airports in charges to airlines." [2]

In short, if the CAA has no legal obligation to consider the environmental effects of a regulated airport’s operations there is a significant risk that London’s three main airports, under separate ownership and in competition with one another, would engage in a race to the bottom in relation to environmental standards, setting an example which other UK airports may follow.

Amendments sought

The Civil Aviation Bill should be amended in two places as follows:

Clause 1(3): Matters which the CAA must have regard to:

Replace existing (d) with:

"the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates"

Existing (d), (e) and (f) to become (e), (f) and (g), respectively.

Clause 2(4): Matters which the Secretary of State must have regard to:

Replace existing (d) with:

"the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates"

Existing (d) to become (e).

Background

The current regulatory regime for UK airports was established 25 years ago by the Airports Act 1986 and there is general agreement that it needs to be updated. The last Government started the process of updating the regulatory regime in 2007, commissioning Sir Joseph Pilling to carry out a strategic review of the CAA, and, in 2008, appointing Professor Martin Cave to lead an advisory panel to review the economic regulation of airports in the UK.

One of Sir Joseph Pilling’s main recommendations was that the CAA should have a general statutory duty in relation to the environment. The main recommendations of Professor Cave’s advisory panel were that, when carrying out its economic regulatory role, the CAA’s primary duty should be towards passengers and that the current regulatory arrangements should be replaced by a licensing regime to allow the CAA greater regulatory flexibility.

In March 2009, the then Secretary of State for Transport (Geoff Hoon) brought together the Pilling and Cave recommendations in a Parliamentary Statement announcing the start of a formal public consultation entitled: ‘Reforming the framework for the economic regulation of UK airports’. He described the key features of the proposed new regime as follows:

· "I want economic regulation to be targeted, flexible and efficient. I am therefore proposing the introduction of a licence-based scheme of regulation, similar to that which exists already in other regulated sectors. Only the very largest airports – those with over 5 million passengers per annum or with significant market power – would require a licence" [3]

· "It is also essential that airports take fully into account the environmental consequences of their operations. I intend to give the CAA an environmental duty with respect to its economic regulatory functions. This will ensure that, when operating as an economic regulator, the CAA will consider the environmental consequences of its decisions."3

· "Those proposals are designed to put the interests of passengers at the heart of a new regulatory regime, ensuring that airports make the best use of existing capacity while also having regard for the environmental impact of their operations." [4]

The March 2009 consultation proposed that in addition to the CAA’s primary duty to promote the interests of passengers it should have a number of supplementary duties, the first of which was:

· "To have regard to the effect on the environment and on local communities of activities connected with the provision of airport services."

Another consultation on the subject was launched in December 2009 and this reaffirmed the commitment to require the CAA to have regard to environmental considerations:

· "By giving the CAA a specific environment objective we aim to make environmental consid- erations a ‘mainstream issue’ for the organisation and a strategic priority for its Board." [5]

           The Bill, however, does not require either the CAA or the Secretary of State to have any regard to the environment or local community effects of airports. In fact there is no mention of the word ‘environment’ in the clauses which define the duties of the CAA and the Secretary of State.

Counter arguments

1. Requiring the CAA to have regard to environmental and local community effects would distort competition because the CAA, as economic regulator, can only directly influence airports which have dominant market positions (currently Heathrow, Gatwick and Stansted).

The proposed amendments merely seek to protect the CAA’s flexibility to make a balanced judgement and distortion will arise if the CAA is not given an environmental duty. This is because a non-regulated airport would not need CAA approval to recover environmental expenditure through airport charges but a regulated airport would need CAA approval and the CAA would not be able to give this approval other than where the expenditure was necessary to comply with applicable environmental and planning law;

The CAA could apply an environmental licence condition to all UK airports handling over 5 million passengers per annum and thereby cover 84% of the UK market for air travel. [6]

2. Requiring the CAA to have regard to environmental and local community effects would risk confusing the CAA’s role as economic regulator and create the risk of the CAA developing environmental policies of its own, resulting in additional obligations upon airport operators.

The proposed amendments merely seek to protect the CAA’s flexibility to make a balanced
judgement. The CAA has been making such judgements for many years and has
considerable experience in attaching appropriate weight to relevant issues;

Moreover, the CAA will in future have a clear primary duty focused on the end users
of airport services (i.e. passengers and users of freight services) whereas the duty to have regard to environmental and local community effects would be one of several supplementary duties which, as the Government’s policy paper states: "...cannot, individually or collectively, override the primary duty. Rather they aim to set out factors that the CAA should consider in giving effect to its primary duty." [7]

Other regulators’ statutory duties

ORR"to have regard to the effect on the environment of activities connected with the provision of railway services" and "to contribute to the achievement of sustainable development." [8]

Ofgem"[to] have regard to the effect on the environment of activities connected with the generation, transmission, distribution or supply of electricity", "to have regard to any [social and environmental guidance] issued [by the Secretary of State]" and "to contribute to the achievement of sustainable development." [9]

Ofgas – "[to] have regard ... to the effect on the environment of activities connected with the conveyance of gas through pipes" and "to contribute to the achievement of sustainable development." [10]

Ofwat"to have regard to any [social and environmental guidance] issued [by the Secretary of State and Welsh Assembly]" and "to contribute to the achievement of sustainable development." [11]

Annex A provides examples to illustrate the reasons for current concerns.

Civil Aviation Bill Annex A
Briefing Note

Example 1: Homeowners around Heathrow whose properties were threatened by the third runway were offered a ‘Property Market Support Bond’ by BAA, to mitigate the blight. Similar arrangements were introduced by BAA for homeowners around Stansted Airport in 2004 threatened by a second runway. In both cases, the arrangements were supported by the 2003 Air Transport White Paper but they were nevertheless voluntary. Under the present economic regulatory regime airport operators can include the costs of such arrangements in the regulatory asset base (‘RAB’) for each airport, which enables the costs to be recovered from airlines through airport charges. If, however the CAA’s primary statutory duty in economic regulation is towards the passenger and there is no duty upon the CAA to have regard to environmental or community effects, airlines could challenge the legality of any CAA decision which sought to allow such ‘discretionary’ expenditure to be included in the RAB.

Example 2: In submitting development plans for airport expansion, airport operators generally include measures to mitigate environmental and community effects, e.g. improved public transport provision, landscaping and energy efficiency measures. If planning consent is granted, some of these measures will be defined as formal planning conditions, e.g. those which are not considered contentious and/or are seen as an integral part of the proposed development and/or where there is not considered to be any significant risk of the developer not providing the promised mitigation. Under the new arrangements, any mitigation measures not formally defined as planning conditions and not required by law would be deemed to be voluntary and therefore inadmissible for the purposes of setting price caps. And if airport operators could no longer rely upon the CAA to allow environmental/mitigation expenditure in the RAB, this would deter them from doing anything more than the bare minimum required. At present the CAA has flexibility to make a judgement as to the reasonableness of the expenditure when considering its admissibility for the purposes of the RAB and operating costs – the key determinants of the price cap. This flexibility would be lost: the CAA would only be permitted to allow cost recovery where there was an absolute requirement for the expenditure arising from environmental or planning law.


Example 3: As well as planning conditions, approval of a development is invariably accompanied by a Section 106 Agreement (TCPA 1990) consisting of additional obligations which the developer voluntarily agrees with the planning authority. For airports, many of these will relate to reducing and minimising the effects on the environment and local communities. S.106 agreements tend not to be written in robust legalistic language and often relate to process not substance, relying upon the airport operator’s good faith to fulfil the spirit and not just the letter of the obligation. Many s.106 obligations can have significant cost implications for the airport operator. Hitherto, the operators of designated airports (i.e. subject to CAA price regulation) have been able to recover the costs associated with honouring the obligations in spirit and not only to the letter. If, however, the CAA’s primary statutory duty in economic regulation is towards the passenger with no statutory duty (or right) to consider environmental or community effects, airlines could challenge the legality of any CAA decision which sought to allow an airport operator to recover costs incurred in relation to s.106 obligations.

February 2012


[1] www.hacan.org.uk ; www.gacc.org.uk ; www.stopstanstedexpansion.com .

[2] ‘ Draft Civil Aviation Bill: Pre-Legislative Scrutiny ’ , House of Commons Transport Committee, Jan 2012, para 38 and ‘Conclusions and recommendations’ , para 3.

[2]

[3] Hansard, 9 Mar 2009, Col 5WS. Note: 10 UK airports exceeded 5 million passengers throughput in 2010.

[4] Hansard, 10 Mar 2009, Col 149.

[5] ‘Consultation on Proposals to Update the Regulatory Framework for Aviation’ , DfT Dec 2009, para 1.24 .

[6] CAA airport statistics, www.caa.co.uk/default.aspx?catid=80&pagetype=88&sglid=3&fld=2010Annual .

[7] Draft Civil Aviation Bill, Volume 1: Policy Paper, DfT, Nov 2011, para 2.14.

[8] Railways Act 1993, as amended, Sections 4( 1 )(b) and 4(3)(b) .

[9] Electricity Act 1989, as amended, Sections (2)(c) and 3A.

[10] Gas Act 1988, as amended, Sections 4A A and 4A B.

[11] Water Industry Act 1991 , as amended, Sections 2(A) and 2(3)(e).

Prepared 28th February 2012