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Baroness Gibson of Market Rasen: My Lords, I had not intended to speak in the debate, but when words such as "trust", "profit" and "safety" were used, I felt that I should. Until 30th September, I was a health and safety commissioner. We often looked at reports of cases in which health and safety had been endangered. Time after time, profit was the reason for safety precautions being cut. The admirable idea of a not-for-profit trust should be accepted.

5.15 p.m.

Earl Russell: My Lords, can the Minister cite one case in which the private sector has delivered safety without the benefit of competition?

Lord Elder: My Lords, I fear that there are still some doubts about the ability of the private sector to be involved in any process that has safety at its heart. That fundamental fear is tainting some of the views that have been expressed. I do not accept that the private sector is incompatible with the provision of safety, so I do not approach the issue feeling that there is a need to exclude the private sector from the equation or to constrain its impact.

The Bill faces up to the need to add first-class project management skills to the real operational expertise of NATS. That has consequences.

I have not had the benefit of a trip to Canada--or at least, not to look at air traffic systems. I have three brief points to make about what we have heard. First, the situation in Canada is very stable. There has been a lot of investment and the situation is being managed. We need enormous new investment. I do not believe that it is appropriate to raise such sums without some equity.

Secondly, the Canadians do not have the considerable problem of congestion that exists in European and UK air space.

Lord Hoyle: My Lords, I am sorry to interrupt, but will my noble friend look at the record of NATS?

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Whenever it has asked for a loan from the Treasury, it has always repaid it with interest. It is a profitable company. There is no reason that the Treasury could not put up the money. NATS would repay it. We all know that we are awash with money at the moment.

Lord Elder: My Lords, if we added up all the things that people say that we could spend money on because we are awash with it, we would soon be in the position that we were in under the previous administration, when borrowing was going up sharply and we were far from awash with money. That is not a sensible basis on which to proceed.

Canada is not a congested country and does not have to face up to the difficulties that we have. The proposed structure for the board of a trust is similar to the current structure at the BBC. Over the past 20 or 25 years, that structure has not had sufficient sharpness or dynamism to enable the BBC to deal with sharp competitive intrusion into its market. It is all very well for managing something--in the case of the BBC, managing the decline in its control over world broadcasting--

Lord Brett: My Lords, will my noble friend explain where the competition is in air traffic control? It is a natural monopoly of the air over our country. I do not accept the analogy with the BBC's competition from independent or satellite television.

Lord Elder: My Lords, the issue is how to get a sharp, competitive body that will have to deal with the massive restructuring that there will be in European air space in the next few years. We are not dealing with a stable or unchanging situation. If we were and there were no possibility of restructuring, I would probably support the proposal, but it would not provide a sufficiently sharp or commercially focused unit that would be able to deal with the restructuring that there will undoubtedly be in Europe. In those circumstances, NATS will certainly lose out. For those reasons, I hope that the amendment will not be accepted.

Lord Brabazon of Tara: My Lords, it might be help if I briefly set out the views of the Conservative Party on the amendments. I am most grateful to the noble Baroness, Lady Thomas, for having explained them so ably. As has been said, we also owe a tremendous debt of gratitude to the noble Lord, Lord Brett, for having visited Canada--I gather at his own expense, as he said on the radio this morning--and for bringing back a report which I found so interesting. I look forward to hearing the Minister's reply to some of the points where clearly a difference of opinion exists between what the noble Lord, Lord Brett, found in Canada and what we were advised the last time this issue was debated in your Lordships' House.

I am not sure whether the Canadian trust model is the best one. Therefore, if the noble Baroness, Lady Thomas, decides to divide the House on this issue, I do not feel able either to support or to vote against the

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amendment. I believe that that will be music to the ears of a number of noble Lords opposite, not least because on the previous occasion the noble Lord, Lord Hoyle, among others, said that it would be entirely opportunistic for noble Lords on this side of the House to support an amendment when it was quite well known--

Lord Hoyle: My Lords, I said that it would be a marriage made in Hell.

Lord Brabazon of Tara: My Lords, I have the noble Lord's quotation somewhere but I did not intend to extract it at this point. He may well have said that. However, I agree with him about some of the points that he made in relation to the conflict of interest among the bidders for this process. I shall not give a commentary on the four groups involved, but I consider that the noble Lord put forward some well made points.

I believe that it was the noble Lord, Lord Clinton-Davis, who said that a raft of people is concerned about this issue. He is right about that. I also agree with the noble Lord, Lord Haskel, that profits are not always bad. I submit that not a single person in aviation could say that British Airways is any less safe since it was privatised and since it has looked, sometimes elusively, for the profit motive.

Lord Brett: My Lords, I am grateful to the noble Lord for giving way. I accept the profitability of British Airways. But is it not curious that the profit-making British Airways is a main mover in a not-for-profit consortium? Obviously it does not view profit as part of air traffic control.

Lord Brabazon of Tara: Yes, my Lords, I agree with that. I said that I did not consider it right to comment on individual groups or to list my favourite bidder, but the noble Lord's point is well known. I agree with the noble Earl, Lord Russell, who said that competition was involved. That is an interesting point. I hope that that clarifies the position from this side of the House.

Lord Macdonald of Tradeston: My Lords, new Clause 35 and its associated amendments seek to restrict the strategic partner to a not-for-profit company. The new clause would also require the Secretary of State to satisfy himself that the company includes representatives of employees and users of aviation, air travel, air navigation and related services.

I assume that one purpose of the new clause is to establish that profit will not be put before safety. However, perhaps I may assure noble Lords that whatever type of strategic partner we select, whatever its nationality and whoever it is, profits will never be put before safety. I believe that that was made clear in the first amendment that we discussed today, which was so warmly welcomed.

This PPP will not jeopardise safety; rather, it is designed to enhance the safety regime for air traffic control. Safety regulation will stay firmly in the public sector in a reformed CAA. The robust public sector

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regulatory regime will ensure that whatever the status or ownership arrangements for NATS, the company will remain one of the safest air traffic service providers in the world. In short, I do not accept the profit before safety argument and nor should other noble Lords.

Let there be no doubt that we take safety extremely seriously, as we demonstrated earlier today. The additional amendments that we tabled reflect our fundamental and overriding commitment to safety. In any event, I stress again to your Lordships and to my noble friend Lord Hoyle that there is absolutely nothing in this legislation or, indeed, elsewhere that would prevent a viable not-for-profit company from becoming our strategic partner. If such a company can pass all the eligibility criteria, can otherwise be made compatible with our proposals for the PPP, such as shareholdings, and puts forward a good bid, then a not-for-profit group could be the right partner for the Government.

However, in order for us to take a view on that, and for a not-for-profit group to prove that it offers the best future for NATS, there needs to be a competitive process which allows a rational assessment of all the bids that we receive. A not-for-profit bid needs to stand up and be assessed alongside other bids. Limiting the selection criteria to a not-for-profit group would knock out potential candidates who at the end of the day might be better partners.

The second change which the new clause would bring about would be to require the involvement of representatives of employees and users of aviation in the ownership of the company. It is certainly entirely right to assert that such people have a crucial interest in the future of NATS. That is why we devised the innovative stakeholder council. Although not part of the decision-making structure of the company, it will certainly be an influential body whose views will carry considerable weight. In addition, apart from their participation in the council, the employees of NATS will have a 5 per cent stake in our PPP.

The proposed amendment suggests that some noble Lords believe that a trust model such as NavCanada is appropriate for NATS. I say to the noble Lord, Lord Clinton-Davis, that I do not believe I shall feel the need to go to Canada to examine it carefully. I am grateful to the noble Lord, Lord Brett, for the perseverance that he showed in bringing the Canadian experience to our attention. However, I listened, too, to my noble friend Lord Haskel and note the business experience that he brings to bear when he says that the NavCanada experience may well suit Canadian circumstances but we do not believe that it provides the best solution for air traffic control in the United Kingdom.

A key rationale behind the PPP model is the improvement of NATS project management expertise, along with access to private sector finance, so that NATS can invest successfully in the right technology to meet growing demand safely. We do not believe that NavCanada would meet those needs. In the NavCanada model the airlines clearly have a great

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interest to ensure that the company is operated commercially. However, in the absence of equity participants, the airlines would bear the financial risk as users of the service. If, for example, an investment project overran its budget through mismanagement, the users would pay higher user charges. Under the PPP model, the economic regime and participation of equity holders mean that the airlines will not have to bear the financial risk. For example, if an investment project overran its budget through mismanagement, through the regulatory regime it would be the equity participants, who are best placed to manage the project, and not the airlines who would shoulder that risk.

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