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Lord Brabazon of Tara: I do not intend to pursue this amendment. I am very interested in what the noble Lord said in his response. I appreciate that "en route" does not necessarily have a fixed beginning and end, and I accept too the explanation why the noble Lord wishes to retain the wording as set out in the Bill. However, that slightly begs the question of how an exemption could be given within the licensing system, if that is the case. As I have said, I do not wish to pursue the amendment and I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 4 agreed to.

Clause 5 [Licences: general]:

[Amendment No. 18 not moved.]

Baroness Thomas of Walliswood moved Amendment No. 19:

The noble Baroness said: I beg to move Amendment No. 19 and speak at the same time to the other amendments that we have tabled in this grouping. It may be convenient to the Committee if I refer also to our reasons for opposing that Clauses 49 to 51, 55 and 56 should stand part of the Bill because these proposals all fit together.

Amendment No. 19 removes some categories of permitted licence holder from Clause 5 and substitutes,

    "a not for profit company"

covered by company law in Great Britain and Northern Ireland. Here we have reached what, so far as concerns these Benches, is the meat of Part I of the Bill; namely, the kind of company into which NATS should be transferred.

Amendment No. 66 amends Clause 41, covering the meaning of a transfer scheme, to ensure that a transfer from the CAA, or a wholly owned subsidiary of the CAA, may be to a not for profit company. Amendment No. 68 introduces a new clause covering provisions for a transfer to be to a not for profit company and defines what is meant by the term, "not for profit company". It provides that such a company shall not issue shares or pay profits or dividends to its members, and that those members shall represent the providers, employees and users of air traffic services. Amendment No. 69 adds a further new clause covering parliamentary approval of a transfer scheme. It states that such a transfer shall require the resolution of both Houses, following the laying before Parliament of a report which, first, should set out the progress being made on Swanwick, Prestwick and other pre-transfer projects and, secondly, should confirm Treasury approval of the transfer.

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Amendments Nos. 70 to 78 are textual amendments to link the trust proposal into Clauses 44 to 48 which deal with the detail of transfer schemes. Amendment No. 86 in Clause 52, Amendments Nos. 87 and 88 in Clause 53 and Amendment No. 90 in Clause 54 all substitute new for existing wording. The effect will be to enable the Secretary of State to make loans to, guarantee the discharge of financial obligations of and make grants to a not for profit company to whom a transfer has been made. Our intentions to oppose the Questions that Clauses 49, 50, 51, 55 and 56 stand part are therefore consequential on our proposed trustee option.

Equally, Amendments Nos. 93 and 94 are consequential on the loss of Clauses 49 and 50. Amendments Nos. 97 and 98 insert new wording into Clause 65 covering interpretation. That, too, would be a consequence of a change to the trust option.

On Second Reading, I said that we accept, albeit with reluctance, the Government's decision to offload NATS into the private sector so as to avoid the public sector borrowing requirement consequences of the required capital investment. Perhaps I should point out, in view of what was said during our discussions on the previous amendment, that no one on these Benches is in any way opposed to the separation of NATS from the CAA. I hope that that proposal can now be laid to rest. I believe that it is now universally accepted that it will be a "good thing".

However, along with many of my colleagues, I should have instinctively preferred to see NATS remain in the public sector. Although it is difficult to press such an argument in the modern world, it is the kind of operation which, conceivably, sits better in the public sector--perhaps one should not be too mealy-mouthed about making that kind of comment. On the other hand, it is not possible to change the mind of a Chancellor of the Exchequer--I believe that he is the driving force behind this proposal--by amending a Bill from the Department of the Environment, Transport and the Regions. Trying to put down amendments in opposition would be nonsensical.

Having said that, and given the support expressed for the trust option by both the select committee and Members in another place, we have decided to propose amendments to support that option in this House. Perhaps I may say that this decision has appeared to be even more justified as we have learnt more about the potential of the trust option since our debates on Second Reading.

An argument can be put forward that the trust option is important because of considerations of safety. I think that we covered that matter thoroughly when considering the first group of amendments. However, I should like to put forward additional arguments which derive from the special characteristics of the trust model. A trust would not have shareholders and would therefore not have to return a profit for their benefit. That could conceivably make a "safety first" culture easier to create and maintain. Interestingly, one of the possible

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bidders for the PPP, Air 2000, envisages keeping what is now NATS core business as a not-for-profit part of a future PPP business. There is support for this approach.

Unfortunately, private businesses and/or shares in them can be bought. Who can say who might successfully take over the privatised NATS? The noble Lord, Lord Brabazon, has tabled amendments seeking to ensure that NATS remains a British company. I do not believe that that is a feasible option either. I shall not comment on the noble Lord's proposal now; I simply make the point. The Government's share in a privatised NATS could fall as low as 25 per cent, and who can say who would be the purchaser of the other 75 per cent? Secondly, the board of the trust will be constructed in such a way as to keep the public interest in balance with other interests, rather than in a permanent voting minority as envisaged in the PPP solution.

Those two characteristics--the not-for-profit aspect and the character of the board--could help the trust to face up to what lies ahead in terms of changes in air traffic technology and the international relationships within which the changes are taking place and will continue to do so. I refer to the way in which air traffic control will increasingly have to change in order to provide more air space and fewer delays as growth in air traffic clogs up the existing flight corridors. These changes are referred to as "free-flight" and "free-routing". It is conceivable that a trust would be more effective in dealing with those difficulties. It might command the required capital at a lower rate. It might be more acceptable to its partners. Free-flight and free-routing, and indeed air traffic control in general, require a co-operative international approach, and all the other international partners are currently government-owned or government-controlled operators; none is yet in the private sector.

In short, the trust model proposed in the amendments would enable the Government to get what they want--that is to say, to pass the cost of financing investment to the private sector--while retaining many of the benefits of NATS remaining in the public sector. I beg to move.

5.45 p.m.

Lord Brett: I rise to express considerable sympathy with the proposals in this group of amendments. I apologised earlier for not being present at Second Reading. I did, however, set out my views on the proposals for privatisation or part-privatisation of NATS in my maiden speech last October, so my views at that stage were known to the Minister. I believe that the vast majority of the staff employed within NATS also have great sympathy with the proposal for a trust.

My noble friend Lord Whitty did a disservice to the trade unions in his reply at Second Reading. He said:

    "The Liberal Democrats want to put it in a trust. The trade unions by and large want to keep it in state ownership. The Conservatives want it totally privatised".--[Official Report, 5/6/00; col. 1026.]

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My noble friend may be doing justice to the position of Liberal Democrats and the Conservatives, but the trade unions had said to the Government as early as February that there were two alternatives acceptable to them: one was the IPOC (Independently Publicly Owned Company) and the second was a trust. The trade unions provided a model--not one to be applied absolutely but one to be examined; namely, the system employed in Canada, where there has been a successful move to a trust. It has been the subject of correspondence and also of debate in another place. It remains a proposal with greater resonance than the Government's proposals with the staff of NATS.

The rationale behind the Government's decisions has moved swiftly, starting from a position of needing to plug a gap in expenditure plans of £500 million, inherited from the previous administration and applied by the present Government. The reasoning moved on to the need to raise the £100 million a year required for investment over the next 10 years, and to do so outside the PSBR. It then mutated into a desire to have a strategic partner to ensure that the UK would be a major player in Europe and the world as countries moved away from state provision of ATC, to fewer ATC centres and with much greater private sector involvement. In the latter stages the idea was of a UK NATS with a strategic partner, bidding successfully for air space and air traffic control systems abroad. The Dutch were mentioned by the Minister; and we are told that other European countries are preparing to move in a similar direction. Some time ago, we heard that foreign ownership within any strategic partner would be limited to a minority shareholding. Accordingly, the British flag would fly abroad and the growth of the PPP would bring treasure to the United Kingdom and to the Treasury itself.

Unfortunately, as we debate the Bill the reality looks rather different. The shortest odds that one will get now is that NATS in a PPP will become a subsidiary of a foreign-dominated consortium. Ironically, it may be a consortium involving the publicly-owned German air traffic control provider, DFS, or indeed perhaps the Irish air traffic control provider, Aircom, or it could be a multinational American provider of ATC equipment. It may even be the same supplier that has supplied Swanwick so unsuccessfully for the past three or four years. It could be a state-dominated company from Europe such as Thompson CSF. We do not know, but we can be sure that that is why the staff are not particularly enamoured of the Government's proposals and why they would prefer to see a trust model. This they believe would meet, without any risk, the Government's objectives as stated in the Queen's Speech. It said simply that their programme would:

    "include measures for National Air Traffic Services to separate safety regulation from operational matters"--

with which we all agree--

    "and deliver major investment in the next generation of technology".

That, it seems, is where we have begun to move away from what would be a perfectly adequate way of dealing with the matter, outside the PSBR, without the

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constraints of the public sector and in a way that could raise the capital less expensively than in other ways--possibly by using bonds.

The Canadian model bears examination. But that model has been traduced. We were told in another place that it is not accountable. That is not true. It is accountable to the Canadian Minister who is responsible for transport. Indeed, the point was made obliquely by the Deputy Prime Minister when he said that the Canadian Minister could issue instructions for safety and such; but that is the whole purpose of having direct accountability.

My worry is that, with a 70 per cent stakeholding of a private sector partner, in four or five years' time--in a PPP with 5 per cent in the hands of staff and 25 per cent, even with a golden share, in the hands of government--there will be less confidence among staff and users than there is at present. It is interesting that the airlines consortium, while approving the move away from the current NATS proposal, favours a not-for-profit organisation. The question is whether, even at this late stage, the Government can reconsider the proposal for a trust model. It is not true that it is without accountability. In Canada, the largest number of directors are appointed by government and follow government dictate. It was said in another place that there is no control over profits. But in the Canadian model there are no profits as the money is re-invested for the future investment and goes towards reducing costs to the traveller and the airlines. The record of the Canadian model since its introduction has been just that: increased investment and reduced cost.

One of the reasons why I very much favour the trust model is that it is hard to find a smaller group of people than those who favour the Government's PPP. There is a small group of people who want Connex SouthWest to have its franchise renewed. However, even the number in that group exceeds the number of those who want to see the PPP that is proposed for the privatisation of air traffic control services.

I believe that even at this late stage it is worth reconsidering the Canadian model to see how it can be applied, with suitable amendment, to the UK situation. It can provide everything that we need without the risks inherent in the Government's proposals. For that reason, I have much sympathy with this group of amendments.

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