My third point is rather more technical; for that reason, I have given my noble friend notice of it. It concerns the risk to the financing of the considerable airport investment by the BAA. This of course refers specifically to Heathrow, and I will take a few moments to explain. Heathrow is the largest private infrastructure investor in Europe. It invests over £100 million a month in capital projects. It supports thousands of jobs. Heathrow accepts the Government’s intention—this is important—that critical assets should be safeguarded by ring-fencing. Noble Lords may recollect the case of a water authority owned by Enron, but where the assets were ring-fenced in this country so that the bankruptcy of Enron made no difference at all; that is what it is aimed at. Heathrow accepts that that is entirely appropriate, so it is not concerned with that. What it has concerns with are specific aspects of the ring-fence, which the Government’s policy states could be derogated from in practice and would now be subject to appeal, as the noble Lord, Lord Davies, said, perhaps by airlines or by the CAA itself. BAA is having to raise very large sums of money on the markets. Any uncertainty of that kind would immediately imperil its fundraising operations. I questioned its representatives on this when I met them, and they were really very clear. They said, “This is a very important issue indeed for us. We have been promised that there can be derogation but, at the same time, there is no exemption from the appeal process”. To quote the note which they gave me:

“BAA’s position is straightforward: the possibility of appeal by an airline in relation to BAA’s debt arrangements would have an extremely negative market impact. It would be likely to hamper our ability to raise finance, possibly over a long period. This, in turn, would restrict our ability to invest. Since our capital projects are amongst the largest in Europe and create many thousands of jobs, this would be a very unfortunate outcome at a sensitive time for the economy”.

They have been promised derogation. What they must have is an exemption from any right of appeal. That could very properly be incorporated into this Bill. None of this, of course, is contrary to the main thrust of the Bill which, as I said at the beginning, I warmly support.

6.20 pm

Lord Hunt of Chesterton: My Lords, this Bill provides a modernising regulatory framework for civil aviation in the UK. However, because of the UK’s international

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leadership, this impacts across the world. A modern framework is necessary for a world-class aviation industry, including aviation services, and for taking a leading role in ensuring global safety and minimising any adverse environmental impact. I declare an interest as a former chief executive of the Met Office, which still receives funds from the Civil Aviation Authority, and I am grateful to the Met Office for providing me with some up-to-date information. I am also a director of an environmental consulting company that works for aviation in other places. I also provided evidence on behalf of BALPA in the 1970s, so I have worked on both sides of the fence.

This Bill is based on the strategic review of the CAA by Sir Joseph Pilling in 2008 for the previous Government and, as the Minister explained, on other recent studies. Aviation is a great technical achievement of engineering and meteorology, and increasingly environmental science. As a boy in 1953, I flew in a Comet 1 a week before the first one crashed. This is something I learnt about when I was a student at Cambridge, where I looked at extraordinary movies of the Comet 1 fuselage being pummelled by forces until it cracked. As a result, I have a sober view of these matters. Since then, aircraft have become safer and less dangerous than any form of surface transport. At the same time, aircraft have become more technologically advanced, with less fuel per passenger mile, and with better air traffic control. The new planes for the next generation—which were discussed earlier—are now being considered by Airbus. As far as I can see, they will look something like the wing fuselage designs familiar to noble Lords who used to read the Eagle in the 1950s, and familiar to Dan Dare. They should also be quieter.

The development of aircraft and engine design has reflected the increase in demand for smaller environmental impact. Noise has certainly reduced, as anybody living in London knows. In the 1990s, however, a major engine manufacturer asked at the Royal Society why engine design should take into account emissions of gaseous pollutants. That was then and here we are now with huge changes in policy and design. The new Rolls-Royce engines are as good as any in the world; it is a world leader. The Bill needs to strengthen and keep pressure on industry, as my noble friend Lord Davies mentioned in his opening remarks.

The operation of aircraft also depends greatly on accurate weather forecasts. Forecasts help with the safety and economic operation of aeroplanes. The Met Office reckons that the level of error in the estimation of a flight from Los Angeles to London is now 62 seconds, if the issues are solely to do with the meteorology. However, the real problems with aeroplanes are to do with airports, and indeed whether the aeroplanes are in the right place at the right time.

UK airlines have an excellent record of safety, greatly helped by these forecasts, both before take-off and during flight. It is an important responsibility of the CAA to fund the services of the Met Office and to ensure that it and other organisations remain at the highest technical level. For example, new methods of detecting lightning are now available for civilian forecasts. These were formerly secret. Indeed, it was lightning in

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the Atlantic which brought down the Air France Airbus a couple of years ago. These are still very important issues.

Noble Lords might not know that an aircraft flight above 24,000 feet receives data and forecasts from the UK and the US weather services. The World Area Forecast System provides this information for all airlines in all countries. Independent observers note that the UK forecasts are improving faster than any others. Payments to the Met Office of £30 million per year come from Eurocontrol, to which the CAA contributes.

As my noble friend Lord Davies and the noble Earl, Lord Attlee, reminded us, local weather is very important, and this is the responsibility of local weather services. One of the most difficult problems remains forecasting and advising aircraft in situations of extreme local weather, where there are special local factors. The Met Office and European weather services provided very valuable information about the effects of the ash from the Icelandic volcano, which required a new level of collaboration between the Government, the aircraft industry and environmental services. Indeed, there was a special meeting of the European Parliament to discuss this. This is an example of where science and engineering can provide services around the world.

My question to the Minister is whether it is a role of the CAA to encourage this important area of UK business. I have made the point over and over again that most chief executives of most technical agencies in the UK have no explicit responsibility to help UK industry. Would you believe it? That is the position. Other countries do not have that restriction, as I know from my experience. It was not on my job list at all. I sometimes used to ask about that. The UK does not use its agencies to help its very considerable possibilities for export, and I hope that might be considered in the Bill. Clause 84 refers to the environment of airports, and as the noble Lord, Lord Bradshaw, said, this is associated with aircraft pollution, noise and surface transport which provide most of the pollutant gases near Heathrow. If you look at a map of London pollution there is a great blob at Heathrow associated with surface transportation traffic.

This is of course being studied intensively. The UK has developed methods, which improve on the standard methods of the United States, for studying aircraft pollution at take-off and landing, as was announced by a Minister in 2007. There is much more that could be done. In Japan the airports are using electricity from solar collectors on their large airport roofs. There are no large solar collectors on London airport roofs. There are enormous possibilities here. The electricity from these solar collectors in Japan goes straight to the aircraft, so you do not have aircraft running their engines, producing pollution and so on. This is the kind of development that the CAA could be pushing.

The climate impact of aviation is serious and growing, but it is still less than shipping. The CAA should have a strong role in pushing the industry in the right direction, and discussing taxation regimes to ensure that aircraft operations have reduced emissions. One of these is to go more slowly, and the other is to use more technology, especially technology on the ground. The noble Earl, Lord Attlee, noted that the CAA will

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be taking responsibility for the health of passengers, especially regarding air flow. I wonder whether the CAA will also take responsibility in taking an interest in all passengers on aeroplanes. I am informed that the air flow to first class and business passengers is considerably greater than to those in economy class. Some noble Lords travel in economy class and will therefore be very interested in ensuring that there is an equitable distribution of air flow in aeroplanes. It is palpable that it is not equitable at the moment, and it is well known in the industry. Indeed, I am going to Rio tomorrow economy class because it has less environmental impact. Not everybody goes to Rio in economy class, and I do it out of environmental principle.

The overall issue for the CAA, as the noble Lord, Lord Jenkin, said, is not just efficiency, which is important, but also effectiveness and excellence, and in promoting to other countries what we do well. That aspect is missing from the Bill, as the noble Lord, Lord Jenkin, implied.

The question, then, is not just about the publication and dissemination of data but about the responsibility for action and forward planning. The CAA has no chief scientist or chief engineer. The Department for Transport has a chief scientist but that person’s impact on this whole issue is not particularly obvious. The result is that the CAA must rely on information from other agencies such as the Met Office, the Department of Health, Defra, universities, NERC and so on. However, the pioneer role of the CAA should be promoted in the Bill.

6.31 pm

Earl Cathcart: My Lords, I am very glad to lend my support to almost all aspects of this important Bill. However, I have one reservation, which concerns an area that has been touched on already by noble Lords: the Bill does not contain any form of environmental duty for the CAA.

The Bill seems to have started life as a result of a 2006 recommendation from the Transport Committee in the other place, which called for a strategic review of the CAA. The Government of the day agreed to take forward that recommendation and appointed Sir Joseph Pilling to carry out that strategic review, as the noble Lord, Lord Hunt, said. The Pilling report, published in 2007, called for a new statutory framework for the CAA to make it clear that,

“the CAA’s responsibility is to safeguard the general public interest, which is broader than the aviation community”.

He recommended that the CAA should have,

“a general statutory duty in relation to the environment”,

describing this as a “notable gap” in the CAA’s statutory framework.

Unfortunately, the Bill, as presently drafted, still has this notable gap because it does not contain a general environmental duty for the CAA. This creates the risk that the CAA will, in future, focus almost exclusively on the interests of passengers and the aviation community, which on occasion may be at the expense of the general public interest and the environment. It is quite right that the interests of passengers should

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be the CAA’s primary focus but they should not be its only focus. A balance must be struck and the CAA needs a statutory framework that allows it flexibility to strike the right balance. This means a statutory framework that allows it to take account of the impact of airport operations on the environment and local communities.

Shortly after publication of the Pilling report, the Government appointed Professor Martin Cave to chair an expert panel to advise on how best to modernise the way in which the UK’s largest airports were economically regulated by the CAA. Significantly, it was Professor Cave who proposed that the CAA’s primary duty, in its role as economic regulator, should be towards the interests of passengers. Equally significantly, he also proposed a supplementary environmental duty for the CAA to,

“have regard to the effect on the environment and on local communities of activities connected with the provision of airport services”.

I know that my right honourable friend in the other place, the Secretary of State for Transport, has said that she does not consider it necessary for the CAA to have an environmental duty. However, it is significant that the two independent experts who studied this matter in detail both considered it right and necessary to give the CAA a statutory environmental duty. In addition, the Transport Committee in the other place registered its concern, saying:

“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”.

If the only objection to including an environmental duty is that it is not necessary, presumably it would do no harm to include it and thereby give some comfort to those who are concerned about the risks of a single-minded focus on passenger interests at the expense of environmental and local community considerations. I am encouraged that my right honourable friend in the other place, the Secretary of State, has said that she is open to persuasion on this point. I very much hope that, in Committee, a consensual way can be found to place some form of statutory environmental duty on the CAA. If so, we will have a much improved Bill.

6.36 pm

Lord Clinton-Davis: I speak as a former Aviation Minister and European Union Commissioner for Transport and the Environment. Those experiences have some relevance to this debate.

It is absolutely right to emphasise the importance of aviation, as the noble Earl, Lord Attlee, did. The contribution of aviation to our economy is immense. The number of people that it employs—some 250,000 directly and another 200,000 indirectly—is impressive. However, in a recent poll, to which I alluded earlier, some 91% of BALPA members considered that the Government did not sufficiently support the industry. I hope that the noble Earl will comment on that, since what he said in reply to my intervention was wholly inadequate.

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Safety standards need to be stressed whenever possible. Should this point not appear forcefully in the Bill? This issue undoubtedly affects the members of BALPA and will, like others, be raised in the meetings that the Minister foresees taking place in the near future.

New technologies and biofuels, about which the Minister said nothing, need further investment. The Minister’s opening speech was silent on this issue. Perhaps he will expound on it in winding up.

As many Members have said, particularly my noble friend Lord Hunt of Chesterton, safety is a vital component of an effective aviation strategy. Lip service alone will not suffice. It is simply unacceptable for financial pressures on operators to push safety standards downwards and the Government should say so at every available opportunity.

I turn to the question of fatigue. Too often, insufficient attention is paid to this issue. Jim McAuslan, the general secretary of BALPA, has said that its call to the Government remains that they must follow the principled stand taken by the previous Government and underwrite existing UK standards until Europe can come up with something better. I ask the noble Earl whether the Government agree with that proposition. If so, what is being done?

The noble Lord, Lord Aberdare, stressed the importance of environmental duties. I entirely agree with his comments. It is essential—whatever the Government may say about this—

Lord Jenkin of Roding: I hope that the noble Lord will give way. In defence of my noble friend, the last speech was made by the noble Earl, Lord Cathcart; the noble Lord, Lord Aberdare is not here.

Lord Clinton-Davis: I am sorry—I did not know. It is entirely my fault.

No issue affecting aviation can be considered without addressing the issue of Britain’s runways. I know that the noble Lord, Lord Bradshaw, does not entirely agree with that, but he is quite wrong in not stressing the importance of that issue. It is highly significant. It is a case of Hamlet without the prince, and it is entirely ignored in this Bill. The issue of where Britain’s airport is to be located is essential, and I make no apology for referring to it. No legislation affecting aviation should be considered without addressing that issue. Of course, I differ with my own party concerning this issue, but they will all come round eventually. My own party and the Government will see the advantage of making Heathrow a vital part of our economy in ways that it is not at the moment. Of course, the Government excuse their silence by referring to the inquiry which it has set up—and they are right to do that. However, equally, there is no alternative to expanding Heathrow.

Prevarication in action inevitably impedes progress and, moreover, it is immensely costly. In my view there can only be one candidate: an improved Heathrow. Its advantages are manifest. First and foremost, the waiting time for the start of operations would be far less if Heathrow were chosen. Then, further airport and aircraft development, both of which will inevitably occur, will enable Heathrow to derive huge advantages

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from these issues. Most significantly, there is no viable alternative within a reasonable time span. The Government, plainly, are playing for time in the hope that something—anything—will turn up. That is not a policy but the abandonment of foresight. The clear fact is that Heathrow exists. Undoubtedly there are some—even major—disadvantages, but any alternative regime will also have those. There must be, and can be, the possibility of overcoming them. Above all, decisive action and a powerful lead from the Government are needed, and sadly, at the moment, both are lacking.

6.44 pm

Lord Rogan: My Lords, the Bill has been widely welcomed during its progress and I, too, am in broad agreement with its principles. However, despite my fear being thought partisan, I would like to say a few words from a purely Northern Ireland perspective, although my remarks are also applicable, albeit to a lesser degree, to other UK regions.

Northern Ireland has many fine qualities which I am happy to wax lyrical about, but its geography brings with it the price of being the most peripheral region of the kingdom. Consequently, aviation—especially anything which touches upon access to Heathrow—is of particular interest to Ulster’s travellers, even more so now, in the aftermath of BA’s takeover of BMI, which has raised many questions about the long-term future of BMI’s current Heathrow slots, presently operating from George Best Belfast City Airport. It is difficult to underestimate how important those slots at Heathrow are for Northern Ireland, particularly for the business community and the tourist industry, attracting visitors from overseas with connections at the Heathrow hub.

While much of the debate about Heathrow quite rightly centres around its capacity and ability to compete in the modern world with other major continental airports, our issue in Northern Ireland is more fundamental —to ensure that Heathrow is accessible in the first place. There is no other practical way to reach Heathrow without direct flights from Belfast. There is no direct motorway link, direct rail link, or underground. Nor is it practical to connect to Heathrow, complete with baggage, from a lot of London’s other airports.

The more difficult it is for Northern Ireland to access Heathrow, the more difficult it is for business people to build that outward-looking, export-driven economy which Northern Ireland needs in order to continue developing. The arguments and evidence for the economic development benefits associated with air links are well known, but access to Heathrow is a two-edged sword for Northern Ireland. If we lose those links, our ability to plug into the global business community is much diminished, but similarly, it will also prove more difficult for inbound traffic, particularly inward investors, to register the Province as a serious investment location if there are no direct connections into the UK’s national hub airport.

While I appreciate that it may be beyond the remit of the Civil Aviation Bill to guarantee slots at any given airport, there should be some cognisance of regional policy within the general aviation strategy. Failure to do so will be to the detriment of the regions

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in the short and medium term, and will overcentralise economic activity around key airports, especially in the south-east of England, to an extent which may not be sustainable in the long term.

6.48 pm

Lord Davies of Stamford: My Lords, I thoroughly agree with the remarks of the noble Lord, Lord Rogan. When I was Shadow Secretary of State for Northern Ireland, and therefore about twice a month a regular customer of Belfast City Airport, I realised how enormously important for the economic self-confidence of the Province is that link to Heathrow and, through it, to international networks. I also very much agree with my noble friend Lord Clinton-Davis, who spoke of course, on the basis of very considerable personal experience in having held two immensely important positions in civil aviation. I will follow very much the logic of what he said.

Of course, as always, I listened with great attention to the Minister. He started off by saying something that we would all agree with, which is that aviation is “vital to our economy”—I think I noted down his remarks correctly. To my amazement, he did not say anything at all about the fact that the aviation industry is in fact facing a major competitive threat at the present time and is extremely worried about the future. You might hope that a Government of the day would take that on board and do something about it. Far from it, unfortunately. That is a very troubling situation.

Most of us were brought up thinking complacently—perhaps we always were very complacent about this—that Heathrow was the biggest airport in Europe and so we were quite safe as we had the centre of at least the European aviation industry right here in our country. That is no longer true and is becoming less true all the time. Already two of Heathrow’s rivals, Roissy Charles de Gaulle and Frankfurt, have more aircraft movements than Heathrow. By the end of this decade, which is only eight years away, they will almost certainly have more passengers, as will Schiphol, so Heathrow will be number four and going down.

Heathrow is enormously important and I make no apology for focusing on it. I fear that the noble Lord, Lord Bradshaw, was completely wrong to say that it is all right because although there is not enough capacity at Heathrow there is enough capacity at Birmingham, Luton or somewhere else. People who want to come to London want to get there as quickly as possible. That is particularly important in the business world. Frankly, the noble Lord did not focus at all on the enormously important economics of the hub and spoke system—what an economist would call the networking effects, which are so important in the aviation industry. If Heathrow is not allowed to become a hub, somewhere else will and it will not be Luton or Birmingham. It will be Schiphol, Paris or Frankfurt. I illustrate that by means of a brief personal anecdote.

In February I was lucky enough to be part of a parliamentary delegation to Mexico. The IPU was rightly concerned to save taxpayer funds and got the best deal that it could, which involved us flying via Schiphol. We went to Schiphol and changed, which meant that we flew 300 kilometres in the wrong direction

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and 300 kilometres back over the United Kingdom again. That is 600 kilometres more than we needed to fly. We took off twice rather than once. As we all know, most carbon emissions occur on take-off and early altitude gains. I should think that we emitted twice the carbon that we would have done had we been able to fly directly from Heathrow to Mexico City. I witnessed some colleagues taking advantage of Schiphol Airport’s fine duty-free shopping facilities. That, again, is very good news for the economy of Schiphol and of the Netherlands but very bad news for this country. I say to the Government and to the Liberal Party—they should be aware of that and focus on it but they simply are not doing so.

The Bill sets out the obligations of the Secretary of State. I am, of course, totally in favour of the Bill, which was conceived by the previous Labour Government, as has already been pointed out. Clause 2 is headed: “Secretary of State’s general duty”. Clause 2(1) states:

“The Secretary of State must carry out the functions listed in subsection (3) in a manner which the Secretary of State considers will further the interests of users of air transport services regarding the range, availability, continuity, cost and quality of airport operation services”.

The Secretary of State is doing nothing of the kind at present, nor did her predecessor. That is precisely why we have the current problem and why it is cheaper to fly to Mexico City via Schiphol than it is to take off directly from Heathrow—that is, taking off from Heathrow to Schiphol, and then flying from Schiphol to Mexico. Why is that the case? It is because there are not enough slots at Heathrow. Therefore, airlines that want to put on more flights cannot run them from Heathrow. They have to reserve the slots at Heathrow for the high-margin flights going to destinations such as New York, Chicago and Washington DC, where there are lots of first class and club class passengers. The other aircraft with a greater proportion of discounted passengers have to go elsewhere, and so they go to Schiphol, Roissy or Frankfurt. That is the simple logic and the Government must face up to that fact.

The key issue is not just the importance of the aviation business as regards employment. As has been said, it generates nearly half a million jobs in this country. However, it is important for two other reasons as well. First, it is not the only factor or the leading factor but is certainly a factor in location of business decisions. If you decide that you want to locate an international headquarters in a particular city, one of the things that you undoubtedly take into account is the air communications. If you put your office in London and you have to go via Birmingham to get there, that is a very major disincentive to coming to London at all. The aviation business is very important as regards business traffic. It is also important as regards tourism. If you ask the Government whether they care about tourism, they will say, “Of course, we care very much about tourism. It is a very important industry”. However, in practice, they are handicapping tourism over and over again. We have the problem that we are not part of the Schengen visa system so people coming to this country as part of a European tour—the bulk of private tourists from outside the EU coming to the EU come on organised tours—often will not

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take the trouble, time or additional cost involved in purchasing a British visa. That is a big handicap. We now have the longest delays at our border controls of anywhere in Europe as a result of mismanagement by this Government. That is also a handicap. If we now have shortages of airline slots and people are diverted to Birmingham—I again take the example put forward by the noble Lord, Lord Bradshaw—that will also be a considerable deterrent to tourism. Therefore, it is no use the Government saying that they care about tourism if their policies have the effect of weakening British tourism’s competitiveness worldwide. That is exactly the situation.

Lord Trefgarne: Everything the noble Lord is saying is directed towards more operations, more slots and more flights from Heathrow. What was the policy of the Government, of whom he was a distinguished member, between 1997 and 2010?

Lord Davies of Stamford: Our policy was to expand Heathrow and build a third runway. That was the policy which I supported then, which I support now and which I trust my party will support again at the next election. It is the only policy that seems to make any sense. As regards the third runway that we were planning to build—the BAA third runway—I read an interesting proposal the other day which I recommend to the noble Lord, who knows a lot about this subject. It was produced by the Institute of Directors. Noble Lords may be surprised to hear a member of the Labour Party referring to the Institute of Directors but I thought that it came up with an interesting proposal for a third runway to be built within the existing perimeter of the airport to the south, which would be something like 2,600 metres in length and would greatly improve the situation. The scheme has been well documented and the noble Lord may like to look at it. However it is done it is clear that all the airlines and BAA are of one mind on this—the solution is the one that, had we won the previous election, we would have implemented, I am proud to say.

Of course, the whole of this is against the background of the present Government’s neglect of infrastructure generally. We have had the postponement of the high-speed rail project.

Lord Bradshaw: As regards neglect of the infrastructure, under the Labour Government nine miles of railway were electrified. Under this Government, I think that 833 miles will be electrified. I also draw attention to the fact that a lot of money is being spent on Manchester and Birmingham Airports and a great deal of investment is going into Gatwick.

Lord Davies of Stamford: I commend all that but there is no question that this neglect applies to a number of vital major projects. One of them is the third runway for Heathrow and another is the high-speed rail project, which is unaccountably delayed. Perhaps it has been pushed off sine die; I do not know. I do not think that we shall ever see it again under this Government, although I hope that we do, of course.

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Another such issue is nuclear power. I have asked about this in the House. We are 10 years away from the date when all the AGRs have to be decommissioned but the Government have not succeeded in getting one new project launched. It takes a minimum of eight to 10 years to build a new nuclear power station. These are major areas of neglect. I have to say to the party opposite that any Government who govern with two eyes focused simply on the next morning’s headlines or opinion polls and do not think about the long-term interests of the country are betraying the public interest and will be seen in historical retrospect as a historical failure.

I have to say another thing that the Government will not like, which is that a recession is rather a good time to bring forward investment in social overhead capital—in infrastructure—because factor costs are lower during a recession. It is also rather a good idea to create some demand and jobs during a recession because—I know that the Government do not want to hear this—the fact is that austerity alone will not relaunch growth. I would have hoped that all these important infrastructure projects would have been brought forward, which they would have been by an imaginative Government genuinely concerned with the long term.

I hope that my strictures will have some effect. I am sure that the Minister will not say now that he agrees with my criticisms of the Government but I hope that the Government will think very carefully about these matters and come forward with a policy on all of them which is a little bit more worthy of the enormously important role which they have in looking after the interests of the country during their mandate of office.

7 pm

Lord Patten: My Lords, I am quite fearful of the effects of delaying what are, admittedly, politically and environmentally difficult decisions about airport capacity—not just for this year or next, but over the next several hard years for the United Kingdom’s economy and its employment. It may turn out to be seven quite lean years or more for the people and economy of the whole of western Europe. Against such a background, even the signals that we send out to potential investors—well in advance of actually being able to do anything on the ground to improve airport capacity—may well be critical, because they know good news is coming, albeit a bit delayed.

That said as background to my points, and declaring my business interests, I seek assurances that nothing in this Bill as drafted can get in the way of urgently needed airport capacity improvements. There may be some doubt about this. However, in general and overall, I welcome the sensible provisions that the Bill contains, following obviously careful ministerial consideration of the excellent and far-sighted recommendations of that distinguished public servant, Sir Joseph Pilling. It is good, therefore, to see that improvements have already been made to the way that the CAA works, even ahead of this legislation. In particular, there is the critically important separation of powers between chairman and chief executive. Its governance structures certainly needed modernisation and updating to reach reasonable modern standards.

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The CAA should certainly be in a position, for example, to appoint its own senior executive directors and go on to fix their pay, easing the pressure on Ministers, who should not be involved in what are essentially operational matters. However, for a thoroughly modern public corporation, a board as large as proposed in this Bill—16—might turn out to be rather a lot for useful discussion. At the other end of the size spectrum, fixing pay, which is in the Bill, may need slightly wider scrutiny than that of the chairman and just one other non-executive director. That balance probably better demands two independent directors at least, for the avoidance of doubt. I also hope that the CAA, as it rolls forward, will be very leery—I never know how to spell that, but doubtless the Hansard account of my speech will get it right—of the advice of remuneration consultants. They often seem to be as unreliable and inflationary in their recommendations for increases in executive pay as rating agencies once were in their business recommendations.

We must see this Bill not in isolation, but in relation to the two aviation documents that the Government are likely to launch in the not too distant future; I hear rumours of July. First, there is their consultation on a sustainable airport and aviation framework, which is very important. Secondly, they are consulting on options for maintaining airport hubs in the United Kingdom. My noble friend Lord Bradshaw talked about their importance. I hope that I can go on calling him my noble friend, despite what is going on at the other end of the Palace of Westminster as I speak, and that we do not all need counselling as we go forward. What he said was interesting, and it is precisely why I seek assurances that none of the market power competition provisions in this Bill relating to specified dominant areas and dominant airports could be used in as yet unforeseen ways to inhibit the best choice being made as quickly as possible for the vital London airport expansion. These range from a third runway at Heathrow, as just put forward by the noble Lord, Lord Davies of Stamford, to fantasy schemes on estuarine islands and elsewhere.

To my mind, and I would like to test this against the provisions of the Bill, the best current option would be to bring into use the second Gatwick runway, as will be permitted from 2019. The two runways at Gatwick could then be linked to the present two runways at Heathrow by a cut-and-cover tunnel and rapid transport rail system. I know that this is a suspiciously round number, but I am assured that at current costs this could be done for about £5 billion. Shuttling between the two ends of what would be a unified hub, with two runways at Heathrow and two at Gatwick, could be done in 12 minutes or less. The payback for the Exchequer for this scheme, which of course is vital in our constrained economy, could be met by a £10 take-off or landing charge to clear the cost in 20 years or less. Once it was built, this would undoubtedly become known as the Gatrow Express in one direction and the Heathwick Express in the other.

That is my example and I simply ask this: suppose the Government decide that this—or any other scheme—is what they want to do. Does anything in this Bill prevent it being driven through if the scheme turns out to require dominance by one body, as defined in this

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Bill? Therefore, could the anticompetitive measures, which otherwise may be very welcome, be used to inhibit such development in the national economic and environmental interest? If the Bill was enacted in its present form, could it be used to slow down and prevent such development purely on competition grounds?

I say to the Minister that this is not some probing Committee-stage point, but one of general overarching principle. Have those drafting the Bill considered the possibility of future-proofing its provisions against the unlikely; and the difficulties of delays caused by the unlikely happening, as tiresomely it sometimes does? In a different way, I reflect what my noble friend Lord Jenkin of Roding—not presently in his place—said. He pointed out the uncertainty facing BAA in Heathrow in its necessary capital-raising grants, which we all support for infrastructure reasons. However, uncertainty would also be damaging if those who wish to come and develop using private sector money are inhibited from so doing. After all, look at the time it takes to bring about the simplest changes in the air transport system.

Take the world’s biggest airport, Atlanta, in space-rich Georgia. There are no problems there with overflying or inhibitions about developing much cherished green-belt land and the rest. The most recent proposal there was not to delay building a controversial extra runway, and not expansion inhibited by any competition regulations, but simply to build a much needed new international terminal in what is the world’s busiest airport. It has taken 16 years even in that relatively regulation-free, environmentally free and uninhibited atmosphere. We do not have 16 years in the UK. Wherever expansion happens, it will have to be in the London area. We have in aviation terms nothing like 16 years unless we continue to see our competitive advantage bleeding away. The Government need maximum room for manoeuvre. They should not be shackled in any way by their own legislation and I want to make absolutely certain that one potential set of shackles is not hidden in the middle of this Bill.

7.10 pm

Lord Soley: Like other speakers, I welcome the general thrust of this Bill. I am sure that we shall make some improvements in Committee. I would like to see it in the context of a proper aviation policy, which I fear we do not have at the moment. I am rather nervous about some of the papers that might come out from the Government, although the Prime Minister today, in answer to Zac Goldsmith, the MP for Richmond Park, declined to give a commitment that, if re-elected, the Government would not build a third runway. This argument is moving and there are growing numbers of people who recognise that the only realistic possibility is the expansion of Heathrow. It is something that I have been saying for many years, but I will not spend a great deal of time on it now because the House and other people have heard my views on many occasions. I simply reiterate that at a time of economic recession, a third runway is estimated to add some £8 billion to the British economy, and all the investment is totally private sector. The idea of not doing it is crazy. If we

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do not do it soon, we will continue to lose out. A number of Members around this House have made that point.

I want to make an additional point—and this is where it would be good if the noble Lord, Lord Bradshaw, could talk to the noble Lord, Lord Rogan. I do not think that the noble Lord, Lord Bradshaw, understands the concept of a hub airport. That is curious because he seems to love trains, and I presume that he understands the concept of what is in effect a hub railway station. People go to the big railway stations in big cities to interchange to get to other places.

Perhaps I may give the noble Lord, Lord Bradshaw, an obvious example, and I would like him to think it through, because the opponents are getting in the way of the advantages that would accrue to us if we took the necessary decisions. I could give him many examples similar to that of the Japanese businessman who wishes to invest in Europe and has investment meetings here. He wants to fly on to his factory in Liverpool and can do that by going to London, getting a train across to King’s Cross, getting the train to Luton, and then flying to Liverpool. Or he could go to Euston and get the train all the way to Liverpool. Alternatively, he can fly to Amsterdam, have his meeting there, decide his investment policies, and fly straight to Liverpool. That is true of dozens of regional airports around Britain. We are not just doing damage to London; we are doing damage to our regions and it is important to understand that.

I will not proceed further on that, other than to make the more general point that in aviation generally we still have the second largest and second most advanced aerospace industry in the world. Although we will not retain that position much longer, for all the obvious reasons about emerging countries, we can retain the great advantage that we have, particularly in science and technology. We can do that only if we have a good civil aviation policy and a defence policy that goes with it to support the aviation industry. Everyone in the industry understands that, and that is why when I make speeches such as this I get so much support from across the whole industry. That is generally recognised by all, and I ask the noble Lord, Lord Bradshaw, to talk this through with people, understand the concept of the hub and why you cannot have more than one hub airport in one major area. You can have several hub airports in a large country, but not otherwise. That is important.

I wanted to mention investment in Heathrow and so on. Although the noble Lord, Lord Jenkin of Roding, who has had to slip out for a while, has saved me some time, I want to reiterate this issue—which the noble Lord, Lord Patten, also touched on. There is a problem here. My understanding is that it would not require much tweaking of the Bill to give Heathrow the protection that it needs in terms of investment policies in infrastructure. We could look at that in Committee, because it is an important matter which we should flag up.

I want to refer to two other matters mentioned by another speaker. Clearly, we must give the CAA a duty of efficiency, and the National Audit Office is relevant in this context. The idea of the CAA not being answerable

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to the National Audit Office is, frankly, dumb. I believe that we were thinking of doing that some time ago when we were in government and considered introducing a similar Bill. That was the intention.

I want to say a quick word about the issue of airline holiday sales and the Air Travel Organisers Licensing scheme. My understanding from the CAA is that it believes that airline holiday sales should come under the new ATOL arrangements. It was drawn to my attention that the number of people whose holidays are protected by the ATOL scheme has reduced considerably, and today only around 50% of holidaymakers travel with full financial protection from ATOL. Those figures are from the CAA. We should all recognise and support its proposal.

Security issues, dealt with in Clauses 78 to 82, are very important. This is perhaps not the moment to discuss them in detail, although we may do so in Committee. I am slightly worried about the way that we are tackling this area. It is difficult to get right, although it may be that the Government have received advice from the security industry generally, including the security departments of government. However, we need to get this right. I remember the Minister saying at one time that her plan was to make Heathrow better, not bigger. When you look at the queues at Heathrow you realise that, whatever else she has done, she has not achieved that.

Part of the reason is that we have not tackled effectively the whole issue of immigration, passport clearance and so on. The recent sacking of the head of that department has produced a situation where there is almost a work to rule. I am not justifying that, but if you tell the workforce that they must obey the Immigration Rules to the letter, they will do that—and that is what they are doing. That may be good, bad or indifferent, but you cannot easily blame those staff without recognising that the Government, by saying what they said and doing what they did, have made the problem far worse. We have to rely to a considerable degree on the good sense and, above all, the training of these people. If you tell them that they cannot use that good sense and training and give them a set of rules which you tell them to obey to the letter—and if you tell them that they will lose their jobs if they do not follow the rules to the letter—then they will obviously do just that: follow the rules to the letter. That would account for the terrible queues at Heathrow, which have done immense damage. The airport’s position in the international airline stakes is bad enough.

My noble friend and colleague Lord Davies of Stamford said that Heathrow was now number four in terms of aircraft movements. It has slipped to number eight in terms of the destinations it serves. That is by far the most serious slippage for a major airport. To compound that with a lack of effective ground operations in terms of clearing the queues and so on is therefore a major failure.

Lord Davies of Stamford: Just to set the record straight, what I actually said was that Heathrow is currently third in Europe for aircraft movements—behind Roissy and Frankfurt—but that it will be fourth by 2020, behind Roissy, Frankfurt and Schiphol, both in terms of movements and passenger numbers.

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Lord Soley: I accept that. I was simply making the point that in terms of destinations served, Heathrow has been way down for a long time, and it is slipping further.

On the issue of the environment, there are opportunities to get this right in Clause 84. I am interested in subsection (5), which gives the CAA a duty to fund certain research and so on, including on health—an issue which the noble Countess, Lady Mar, might be interested in. As for what the CAA can do, it seems perfectly possible to interpret subsection (5) as meaning that the CAA could do more to raise the profile of environmental research, and not necessarily by spending a great deal. It always struck me that in airports and aircraft generally there is a captive audience for the environmental message.

There is always room for improvement in what airports can do on ground operations. Five or six years ago, when I first spoke at the Airport Operators Association’s annual conference, there was a lack of willingness to acknowledge that airport operators ought to be aiming, as far as possible, to get zero emissions from ground operations. Now, all airports are trying to do that. There is no reason why, in Clause 84, we could not ask the CAA to look at things such as the effectiveness of airlines in introducing drop-in fuels—algae-based and other biological fuels that are now regularly being mixed with jet fuel by many airlines around the world—and modern aircraft design. That is because a lot of the noise problem comes not from engines but from air frames.

Incidentally, I would say to the noble Lord, Lord Bradshaw, to get off his hobby horse of railways and recognise the overall problem. I can tell him that, having lived under the flight path of Heathrow for something like 30 years, I would far rather do that than live next to the high-speed rail line in west London, where the trains run through at 100 miles an hour, less than 100 feet from people’s front and back doors, which goes on throughout the night—24 hours a day, 365 days a year. Although I recognise the noise problem, I would simply say that this is a problem for all transport systems. Rather than picking out aircraft, trains, cars, or whatever, the message is to look at a modern transport system and do it environmentally.

I have a couple of final points. The stacking issue is important, and several people have mentioned it. We will not stop stacking at Heathrow until we dramatically reduce the number of flights—in which case we may as well close the airport—or we expand the airport. The other problem, which is a much bigger problem for Europe, is the number of air traffic control centres in the European area. There were 50 such centres the last time I looked, compared with about 10 for the whole of the North American continent. Until we reduce that number we will not be able to fly in straight lines; we will have to fly in dog-legs across Europe. The Minister will know that. However, I am not sure that we will be able to get agreement on this issue given the number of jobs involved which will be defended by various countries at various times.

I have one final, brief point which the Minister might like to come back on at another time. I am puzzled about the situation whereby some airports owned by

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the Ministry of Defence also handle civilian flights. I am not sure what the CAA will be covering. Northolt is an obvious example. It has been increasing the number of civil flights, usually involving privately owned aircraft. I am not sure whether the Bill will cover the activities in a MoD-owned airport where there is a civilian operation as well. I welcome the Bill and look forward to dealing with some of it in Committee.

7.23 pm

Viscount Simon: My Lords, when this Bill passed through the other place there was a great deal of agreement with relatively few areas of disagreement, which may well be the case here. Airports provide many jobs and are a convenient means of travel, as we have heard, be it for business or pleasure, but they also have some unwelcome impacts on local communities and the local environment. It is always a question of striking the right balance.

This Bill has many attributes but it also has a serious shortcoming in that it does not include any environmental duty for the CAA and, therefore, does not enable the CAA to strike a proper balance between what are sometimes competing interests with competing objectives. I understand that there are two levels for consideration: first, the general statutory framework for the CAA as a whole; and secondly, the specific statutory framework applicable to the CAA in its role as economic regulator for the UK’s largest airports. As those airports are subject to economic regulation, the Bill makes clear that the CAA should give priority to passengers’ interests. Environmental considerations will not even be of secondary importance because they are not mentioned in the Bill, other than some requirements relating to the publication of environmental information. This means that the CAA will not have the statutory authority to allow regulated airports to recover discretionary environmental expenditure through airport charges.

What does that mean in practice? Hatfield Forest, where I live, is adjacent to Stansted Airport and is a site of special scientific interest with a history going back nine centuries. It is managed by the National Trust and has many ancient trees, which are thought to suffer damage from the fumes emanating from aircraft. For many years the airport owner, BAA, has worked with the National Trust, funding research into the effect of air pollution on Hatfield Forest and providing monitoring equipment to check the levels of pollution. Some of this effort has related to a Section 106 obligation, but most has been discretionary expenditure that would be at risk if the CAA’s new remit made no reference to environmental considerations.

It is true that the regulatory remit that has applied to the CAA for the past 25 years, laid down by the Airports Act 1986, does not specifically include an environmental duty. However, this is so widely framed—some would say woolly—that it allowed the CAA flexibility to balance a range of competing objectives. In contrast, this Bill places a clear statutory duty on the CAA to put passengers’ interests first and foremost and the CAA will not have any statutory remit to take account of environmental factors even as a supplementary or secondary consideration. Noble Lords will be aware

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that some of the so-called low-cost airlines have a reputation for seeking to save every available penny. Stansted is dominated by such airlines. Indeed, a certain Irish airline accounts for more than 70% of Stansted’s passengers. That perhaps makes it easier to understand the concern that, if the CAA does not have any form of environmental remit, it risks being challenged in the High Court by an airline if it ever seeks to allow the airport to recover discretionary environmental expenditure. The Bill gives the CAA no means of defending such a challenge.

The argument has been made in the other place that it would distort the market if the CAA were to be given a supplementary environmental duty, because it would apply only to airports subject to regulation—currently Heathrow, Gatwick and Stansted. However, the converse is also true. Non-regulated airports, such as Birmingham or Luton, would not need the CAA’s permission to increase airport charges by a few pence to improve their environmental performance. If the risk of distorting the market is the only objection, that risk could be avoided by giving the CAA a general economic duty applicable to all airports, not just those subject to economic regulation.

The noble Earl, Lord Cathcart, who is not in his place, comes from the same direction, and I will expand slightly on what he said. Every other comparable UK regulator has some form of statutory environmental duty. For example, the Rail Regulator has a duty,

“to have regard to the effect on the environment of activities connected with the provision of railway services … to contribute to the achievement of sustainable development”.

Ofwat has a duty,

“to have regard to any social or environmental guidance issued by the Secretary of State and Welsh Assembly … to the achievement of sustainable development”.

Ofgem has duties,

“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 the effect on the environment or activities connected with the conveyance of gas through pipes … to have regard to any social and environmental guidance issued by the Secretary of State … to contribute to the achievement of sustainable development”.

It cannot be unreasonable to ask that, like the other regulators, the CAA should be given some form of environmental duty. Indeed, the Department for Transport seems to have come very close to including such a duty in the Bill because, on the day the draft Bill was published—23 November last year—the department’s press release proudly stated that it included an obligation on the CAA to have regard to,

“the effect on the environment and on local communities of activities connected with the provision of airport services”.

If only that had been true at the time. I hope, however, that when this Bill proceeds, it will be true. We will then have a better balanced Bill and, therefore, a better Bill.

7.29 pm

Lord Trefgarne: My Lords, I start by declaring an interest. I am chairman of Fairoaks Airport Consultative Committee—a small privately owned aerodrome only about 10 miles from Heathrow in Surrey, but not a candidate, I can assure your Lordships, for the third London airport.

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I start by saying that I, too, accept the broad thrust of the Bill. The great issue before civil aviation and the Government is the provision of sufficient runway capacity in the south-east. At the moment as everybody knows, Heathrow, if not full, is close to it, and there is much speculation and discussion as to where the additional capacity should be provided. I listened with interest to the speech of the noble Lord, Lord Soley, who was, I think, saying that he is in favour of a third runway at Heathrow. He was once the distinguished Member of Parliament for Hammersmith, as I recall. Indeed, I remember it only too well, because for a while I was the junior Aviation Minister while he was the MP for that constituency. I seem to remember him coming to represent the views of his constituency about flights in and out of Heathrow, as they passed over his constituents, in a fairly critical manner. But perhaps the world has changed. In truth, it has changed, and I must be fair to the noble Lord, because the impact of civil aviation on the population underneath is less now than it was 10 or 20 years ago. He is entitled to take that view and therefore perhaps to now accommodate the idea of a third runway at Heathrow, although that is not a popular view among those who live a little nearer to the airport than do his former constituents in Hammersmith.

Lord Soley: I think I remember the meeting the noble Lord is talking about. It would have been in the very early 1980s. Actually, it was about night flights. I have been in favour of a third runway since 1989 or 1990, and I spoke in favour of it in the House of Commons. However, night flights are different, and I would not go back on that. We have to be very careful about night flights.

Lord Trefgarne: I agree with that. Indeed, I recall that one of the very first issues I was asked to deal with as the junior Aviation Minister—I was there for only nine months, I think—was the numbers of night flights permitted from Heathrow. I dare say the noble Lord came with other Members of Parliament from local constituencies to make their representations to me.

If a third runway is not to be provided at Heathrow—and the Government seem to have set their mind in that direction—then where is it to be provided? Of course, I listened with interest to the speech of the noble Lord, Lord Patten, about a sort of mega-airport, as he seemed to be saying, with two runways at Gatwick and two at Heathrow, connected by some wonderful new interconnecting railway. I must confess I have not heard that proposition before, and no doubt the Minister will want to consider it very carefully.

I also listened with interest to the speech of the noble Countess, Lady Mar. She has, of course, made her representations on these matters to your Lordships on several occasions before. They ought to be considered carefully, but it is also fair to say that very few, if any, of the major air-worthiness authorities take a similar view to her. For example, I would have thought that if there were a real issue along the lines that the noble Countess was predicating, presumably the Civil Aviation Authority would have taken some steps to move in that direction. Perhaps it will one day. Perhaps she is a voice crying in the wilderness; perhaps she is a sort of

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John the Baptist, who will in due course convert us all. But she does, at least, deserve the courtesy of a proper consideration of what she has said, so I shall read it with care. Like almost every noble Lord, I have been a passenger many times in my life, but I was also a pilot for some years, so I am no less interested than she is in these matters.

My noble friend Lord Jenkin of Roding referred to some of the important considerations that arise from Part 1, particularly the ring-fencing of the assets of BAA and any other airport operator which finds itself in a similar position, and the question of the right of appeal when those assets are ring-fenced. He makes an important point that will need to be considered carefully when we get to Committee. My noble friend can count on my interest at least, if not support, in these matters when that time comes.

Further provisions of this Bill which are not sufficiently covered are those for general aviation, in which I have played a small part over the years. General aviation is now largely excluded from Heathrow, for obvious reasons, and is almost totally excluded, though not quite so, from Gatwick. It is therefore required to operate from places like Farnborough, and indeed Fairoaks, to which I have already referred. That presents difficulty, particularly for interconnection with other flights, but I do hope that some provision for general aviation can continue to be made, if not at Heathrow then at least at Gatwick and Stansted.

The time marches on. I certainly intend to play a detailed part when we get to the Committee stage of this Bill. I support the broad thrust of what is proposed, but there are a number of detailed matters which will need further consideration.

7.36 pm

Lord Smith of Leigh: My Lords, I declare my interest as a former director of Manchester Airport, and currently a member of the shareholder committee of that airport. I have, perhaps, a different perspective to some Members who have already spoken here.

Manchester Airport serves 200 of the 400 destinations the Minister mentioned, which is, I regret to tell my noble friend, more than Heathrow. However, my different perspective does not stop me from giving general support to this legislation. I think it will enhance civil aviation overall. I am particularly glad that the Minister, in his introduction, mentioned the change in governance to the CAA, as I think that could be equally important to some of the other parts.

Until we managed to get ourselves de-designated, Manchester was also covered by the 1986 acts of designation, and I remember those times as being ones of great expense for the airport, and a lot of time-wasting, though we did manage to provide employment for a great number of very highly paid lawyers. Essentially, the results of the quinquennial reviews, when we had them, were probably less onerous on us than the market conditions forced us to implement. So of course, we were pleased to be de-designated, and I am sure the same will be true for other airports.

I wonder whether we ought to reflect the new role the CAA has, and change its name to Ofair. The CAA, in exercising its role in economic regulation, needs to

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bear in mind two points. First is the relationship between airports and airlines. I think that relationship may best be categorised as that of an elderly married couple, who realise they need to stay together but constantly bicker about who causes the most difficulties. I think we need to recognise that that will go on, under the new regulation scheme.

Secondly, I think we should recognise—as many other noble Lords have mentioned—the importance of aviation in terms of the wealth and employment opportunities it creates in this country. It facilitates trade, as the Minister said, and acts as an international gateway for people coming into the country, and for us getting away. Manchester contributes some £3 billion to the UK economy, and supports around 100,000 jobs. However, the sector is very sensitive to the economic climate, and in yesterday’s Times I saw two reports about this. The first was about how the domestic aviation market has reduced by 20% in five years, and the second was a report that European airlines’ losses are expected to double during the current year—not profits, but losses. The competition that the aviation industry faces is not bound by our national borders, and we need to recognise that the competition that many of our airports face is not just between Gatwick and Heathrow and Manchester, but rather within the European aviation industry.

Unfortunately, I do not think we have a level playing field in this country, because of the air passenger duty. Research that we commissioned in Manchester demonstrates both the damage to UK aviation that that does, and that it particularly damages regional airports. We have evidence that a flight that was planned from Kuala Lumpur into Manchester was diverted into Paris-Orly because they do not have to pay APD there. Also, the price sensitivity of customers at regional airports tends to be higher than in the London region, where there is a high proportion of business traffic. Hopefully, with the greater independence of the CAA, it will actually think about how aviation can develop, and look at the APD as an issue for aviation.

Security is clearly an important part, and I think we all respect that aviation is in the front line of the war against terrorism. It is important, therefore, that the Secretary of State retains the important role of responsibility for this. Airports have co-ordinated with and co-operated with the Government in implementing security matters, and in fact have gone beyond what was required by the Government. Manchester is running a pilot of whole-body screening, which may be an important way forward. To be effective, security needs full co-operation between partners and a proper exchange of information about objectives. I wonder whether some of the problems that we have experienced with border control, mainly at Heathrow but also at other airports, are evidence that we do not always get that co-operation and co-ordination. We can see the consequences. In passing over security to the CAA, we should ensure that we can demonstrate that this will not create more bureaucracy but will improve the situation. When it was responsible, the DfT listened carefully to the expert views of airport staff. Presumably the CAA will continue to do that in future.

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The changes in the Bill will obviously involve increased costs for airports. Briefings I have read put the figure at up to 4p per passenger. That may sound a relatively trivial amount, but currently the charge is less than 1p, so from 1p to 4p is quite a large increase. For an airport, it will be a sizeable amount of money to pay. The Minister may want to consider whether it will be appropriate to bring in those charges all at once. I ask him to think in particular about the impact that the charges might have on some of the smallest airports in the country, which are struggling at the moment and should perhaps be considered as a special case.

The Bill also assumes that regulatory charges on airlines will be met through airports. Perhaps that seems logical to the Government and the CAA, but why should airports become responsible for those charges? I am not sure about the assumption that in the current age they will be able to pass them on to airlines. Why does the Bill not simply give powers to the CAA to charge the levies directly to airlines, rather than going through the middlemen of airports?

Will the Minister explain—if not tonight then some other time—the thinking behind Clause 7, which gives market powers in relation to airport areas. “Areas” is an interesting word. Perhaps most of us would have thought that it meant “terminals”. I am not sure that competition between terminals will produce a more effective or efficient use of resources than the current planning system. Airports have invested in their facilities and want the maximum return.

Finally, I agree with the comments of the Transport Select Committee on publications from airports. The powers are too widely drawn and risk creating bureaucracy and additional costs to the aviation industry, while the benefits are less tangible. Airports should be open and transparent, and most are. After our earlier discussions I checked on the websites of Manchester and Gatwick airports. Both already publish substantial amounts on environmental policies. We should be very careful that we do not simply expect airports to do things that the CAA thinks are helpful but which do not really mean anything.

The CAA briefing on this matter gives an interesting analogy. It quotes a number of things, such as the publication of documents about the fuel efficiency of cars, which have affected consumer behaviour. That is probably the case, because consumers pay the costs of running their cars. However, in this case, if the consumers are passengers, they do not benefit from environmental information, even though it may be important and interesting to some of them. The reason that there is much more interest now in carbon reduction measures in aviation is that reducing carbon is not only seen to be a good thing but is cost effective. Airports spend less on energy and save a lot of money.

This is an interesting and important Bill. It needs to be improved in Committee, but in general I welcome it.

7.45 pm

Lord Empey: My Lords, I will say a few words in the gap. I apologise to the Minister and to the noble Lord, Lord Davies, for my absence at the beginning of the debate. I was in a Select Committee of the House.

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I will take the opportunity to pick up on a point made by the noble Lord, Lord Soley, who pointed out that our aviation sector is still number two in the world and a very important provider of high-quality jobs in the United Kingdom. I take this opportunity to congratulate Bombardier, which secured a massive order yesterday for more than 100 Challenger business aircraft. The fuselages, nacelles and other component parts are made in Belfast. It is excellent news that has done a lot to lift some of the economic gloom that there is around. It proves the point made by the noble Lord, Lord Soley, that this is one of our key sectors in which we are still a world leader and able to bring home orders. The sector deserves significant support.

Like many noble Lords, I support the broad thrust—

The Countess of Mar: I am sorry to interrupt the noble Lord. The rules are very strict. One should be present at the beginning of the debate when the Minister opens, and if one is not able to be there one should not speak. I am sorry to stop the noble Lord at this stage, but perhaps the Front Bench will agree with me.

Baroness Rawlings: My Lords, the noble Countess, Lady Mar, is absolutely right.

7.47 pm

Lord Rosser: My Lords, this has been an interesting debate on a Bill that, as my noble friend Lord Smith of Leigh said, we broadly welcome and support, despite the lack of consolidation to which the noble Lord, Lord Jenkin of Roding, referred with some feeling. A considerable part of the Bill was drafted by the previous Labour Government, including important reforms to the aviation industry’s regulatory regime. The reforms cover the legislative framework for the economic regulation of airports and for the Civil Aviation Authority, and provide a primary duty to further the interests of passengers and freight owners. The Bill provides also for the transfer of certain aviation security functions from the Secretary of State for Transport to the Civil Aviation Authority, and the widening of the Secretary of State’s powers so that holidays sold by airlines or arranged on an “agent for the consumer” basis can be included in the Air Travel Organisers’ Licence scheme in future.

On the other side of the coin, environmental protection measures, which were in the original draft Bill, have now been excluded. A number of noble Lords, including my noble friends Lord Clinton-Davis, Lord Davies of Stamford and Lord Soley, referred to airport capacity and the position of Heathrow. There is no doubt that the Minister will wish to respond to this point, and to my noble friend Lord Davies of Oldham, who raised the question of the continuing lack of a government aviation policy.

On the issue of security regulation and the transfer of certain operational aviation security functions to the Civil Aviation Authority, there must be a suspicion, as my noble friends Lord Davies of Oldham and Lord Clinton-Davis said, in the current climate in which the Government have chosen to operate that it is the Secretary of State’s spending review rather than security considerations that will drive the change. The proposed

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change splits policy and operational matters. The Minister will need to explain how this will improve a security regime that has been in operation successfully since the tragic Lockerbie bombing, and how the proposed significant change in aviation security policy to an outcome-focused, risk-based approach from the current “direct and inspect” policy will operate in practice.

We shall need to know also what parliamentary scrutiny the new regime will receive, not least in order that the Secretary of State’s claim that the security policy changes will not in any way jeopardise what she accepts are the current high levels of security can be tested and checked. There is a risk that staff with considerable expertise in the security field will be lost to the service as a result of the proposed transfer of responsibilities and the uncertainty and upheaval that that will create.

The Government have said that they are keen that as many employees as possible stay in post when their jobs transfer to the Civil Aviation Authority, taking their skills and experience with them. What is the latest position on this issue? Will staff retain their current entitlements on pay, conditions, pensions and redundancy agreements, or should staff be concerned that the ideas of that expert government adviser on human relations, Mr Beecroft, may be implemented and the current arrangements on protecting existing terms and conditions of employment for staff transferring weakened? What assurances can the Minister give on this point?

My noble friend Lord Hunt of Chesterton referred to the importance of addressing environmental considerations. The environmental protection measures that were in the original draft Bill are not in the Bill we are now discussing, as my noble friend Lord Simon and the noble Earl, Lord Cathcart, have also pointed out. Perhaps this reflects the Government’s rapidly declining commitment to such issues. There is no longer a clear duty on the Civil Aviation Authority in terms of economic regulation to have regard to the airport operators’ compliance with environmental and planning considerations and law. Without this, airports may well be reluctant to invest in improving environmental performance. As other economic regulators have to take account of the environment, the Government will have to explain why they have not placed such a duty on the Civil Aviation Authority.

There is a case for ticketing to show the environmental impact of different modes of travel to help passengers make decisions, if they so wish, on which form of transport to use based on the environmental impact of travelling by air, by rail or by coach. Giving passengers better information on different modes of transport and what emissions are generated by journeys would provide the opportunity to make more environmentally friendly choices when travelling.

There should be tougher targets for reducing CO2 emissions as the industry’s contribution to addressing climate change. The Government have declined to reaffirm even the target we agreed with industry and government. The Bill should lay down a duty for the Civil Aviation Authority to work with the Secretary of

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State, the Committee on Climate Change, NATS and air transport service providers to meet the UK’s carbon reduction targets.

The aviation industry also needs to reflect on whether it has given environmental considerations the public prominence they deserve. The image that the industry has in some eyes—fairly or unfairly—is of one that pays little regard to such considerations and the actual and potential adverse impacts they have on the public as the industry campaigns for more airport capacity and increasing numbers of flights. Being seen publicly to give environmental issues and concerns a high priority ought to be regarded as hard commercial sense by the industry, as one reason for the degree of opposition to increasing airport capacity and numbers of flights is no doubt a feeling—once again, justified or unjustified—that addressing the environmental consequences of such developments and the impact on the quality of life of those most affected is not a major concern of the industry and its leadership.

On the passenger experience, we agree with the Transport Select Committee in the other place and its concerns about the lack of any requirement to publish passenger welfare plans. My noble friend Lord Davies of Oldham reminded us that the experience faced by many passengers during the severe winter weather of 2010-11 demonstrated the need for the sector to improve its performance in relation to passenger welfare. The Bill does not appear to be robust in relation to the specific duties on airports in relation to passenger welfare and there needs to be a requirement for airports and the Civil Aviation Authority to give greater help to passengers stranded at airports. Putting this in the Bill, rather than leaving it to the regulator to decide whether to do it, would give a clear indication to the regulator that the Government expect this to be looked at as a key area.

We also agree with the Transport Select Committee in the other place that airport licences should be structured so as to address key areas of passenger satisfaction. The Civil Aviation Authority should also be a source of reliable information to passengers on issues that have a considerable impact on the quality and level of service to passengers at airports. There has been much publicity recently, for example, over queuing times at Heathrow Airport, and arguments and disagreements between the airport and the Immigration Service over how long people are having to queue. The Civil Aviation Authority should be able to play an important role here in collating the evidence and publishing it. What steps are the Minister’s department and the Home Office taking to work together more effectively to deal with the queues at immigration and passport control?

Passengers with disabilities and reduced mobility also need appropriate assistance at airports, especially when passing through security. The Government made a decision to abolish the Disabled Persons Transport Advisory Committee which provided a channel for the advice and experiences of disabled people to be given on improving transport provision. Such advice still needs to be fed-in to airports and policy-makers. The Civil Aviation Authority and the Secretary of State should have a duty to produce perhaps an annual

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report on the service offered to disabled people at airports and by air transport providers and the extent to which such a service meets the relevant guidelines and European legislation already in place.

However, it is not only at airports that at times passengers may not always feel that they are being treated as though they were valued customers. Another area of concern is over ticket prices and surcharges and the extent to which they are as clear and transparent as they might be. A recent survey, published last month in a national newspaper, showed that one well-known budget airline’s high-season rate for a 20 kilogram bag to go into the hold was £70 return, and if you did not book on-line but turned up at the airport with your bag the fee was £130 one way. The survey of budget airlines’ add-on charges showed that it could cost as much as £110 to change the name on a ticket and £120 because your bag weighed three kilograms over the limit. Add-on charges apply to a multitude of things, covering bags, credit card fees, name change fees, flight change fees and fees for taking on special items such as golf clubs.

When the survey tested costs for a one week return flight to Malaga for one person taking a 20 kilogram bag and paying by credit card, it found add-on costs ranging from £34.95 to £82 depending on the low-cost airline operator. One would have thought that this was an area in which the Civil Aviation Authority could play a role in the interests of passengers and in ensuring fairness and transparency.

Under the Bill, the Civil Aviation Authority remains outside the remit of the National Audit Office, despite it being in receipt of public money and being given important new functions. It should be subject to proper scrutiny and it should also have a duty of efficiency, as the noble Lord, Lord Jenkin of Roding, and my noble friend Lord Solely, said, a duty which, likewise, is not provided for in the Bill. As my noble friend Lord Davies of Oldham said, we will want to probe why the Government feel that the arrangements they have proposed will be adequate and appropriate and an improvement on what we are proposing.

We have a number of issues with the Bill that we will wish to pursue in Committee and, in some instances, also on Report depending on the responses we receive to the points we shall be raising. The Bill lays down a primary duty to further the interests of passengers. While we recognise the progress that the Bill represents, we do not consider that as much has been done in the Bill in this regard as could and should have been. However, in overall terms, we support the Bill, much of which was initially drafted by the previous Government. We shall be seeking in our detailed consideration of the Bill to make it even better.

7.58 pm

Earl Attlee: My Lords, we have conducted a full and wide-ranging debate on the merits of the Bill. Many noble Lords have made the case for the continuing importance of our aviation sector. The continuing success of the industry is essential to our economic growth. The reforms in the Bill have been designed to allow competition to flourish and for our aviation

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industry to innovate and thrive. The Government, the Opposition, the regulator and the wider aviation industry all support the Bill.

I shall now endeavour to respond to some of the points made by noble Lords but they will understand if I have to be selective in what I reply to. I am grateful for the thoughtful and generally helpful response from the noble Lords, Lord Davies of Oldham and Lord Rosser. I am very happy to accept that the previous Administration put a lot of work into the Bill. The noble Lord, Lord Davies, complained that the Government did not accept Front Bench amendments in another place. Of course, our roles are now reversed and I am sure that the same accusation could have been levelled at the noble Lord when he was in government.

The noble Lord, Lord Davies, mentioned climate change. He and the noble Lord, Lord Rosser, will recognise that the Bill is about regulation of the aviation industry. However, I look forward to seeing the noble Lord’s amendment on carbon emissions and how they will work within the confines of the Chicago Convention. The noble Lord, Lord Rosser, offered gentle criticism of the aviation industry. He will be aware that the new generation of aircraft is much quieter and much more efficient.

My noble friend Lord Bradshaw and the noble Lord, Lord Soley, talked about the problem of stacking. The Civil Aviation Authority’s future airspace strategy deals with this problem and one or two others. The Director of Airspace Policy at the CAA recently made a presentation to your Lordships on the possibilities of the future airspace strategy. My noble friend Lord Bradshaw talked about the possibilities of other UK airports and, for his pains, he got a response from the noble Lord, Lord Soley, about hub connectivity.

The noble Lord, Lord Davies of Oldham, and many other noble Lords, raised the issue of capacity at Heathrow. They recognise, of course, that the Bill deals with regulation but I am happy to respond. The Government recognise the need to maintain the UK’s excellent connectivity now, and in the longer term. This is why we will issue a call for evidence later this summer alongside our consultation on the draft aviation policy framework to explore the options to achieve this. We remain committed to adopting the aviation policy framework by March 2013.

The coalition Government’s position regarding a third runway, mixed mode, and the planning cap on air traffic movements at Heathrow has not changed. I can assure noble Lords that we will follow a proper process in developing a long-term aviation policy which is in the UK’s best interests.

Lord Clinton-Davis: Is it still the noble Earl’s view that the Government are ruling out a third runway at Heathrow?

Earl Attlee: My Lords, I repeat: I can assure the noble Lords that we will follow a proper process in developing a long-term aviation policy which is in the UK’s best interests.

Lord Clinton-Davis: Time without number it is reiterated that a third runway is to be ruled out and several other government Ministers have said the same. What is the present policy?

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Earl Attlee: The noble Lord’s comments are accurate but the words I have just repeated are very carefully thought out. I must move on.

These measures are consistent with the Government’s commitment to runway alternation at Heathrow and the trial—that is, the operational freedoms—will not increase the number of flights at the airport, which remains capped at current levels. I can assure my noble friend Lord Patten that the Bill does not interfere with the aviation policy framework. The two issues are separate; future developments will not be inhibited.

I welcome the comments on the environment—particularly from the noble Lord, Lord Davies of Oldham, and many other noble Lords. The issue was also debated at some length in another place. I have listened very carefully to the points raised today. I agree that further consideration should be given to the clarity in the Bill regarding the role of the CAA in allowing licence holders to recover the costs of taking reasonable measures to mitigate the adverse environmental effects of airports in carrying out its functions. Therefore, I look forward to further discussions in Committee. It will, however, be important to get the correct balance between conflicting interests. This will be challenging and we must get it right.

Many noble Lords raised the issue of the NAO auditing the CAA. I am still not persuaded that there are convincing reasons to believe that NAO scrutiny would deliver a better result than the current and planned mechanisms by which the CAA’s functions are audited and scrutinised. In his review of the CAA, Sir Joseph Pilling considered this and concurred that he saw no need for the NAO to be involved directly. Ministers in the previous Government subsequently accepted this recommendation. I have yet to see convincing reasons why they were wrong and nothing has happened since to suggest that this advice needs to be reviewed.

I am not convinced that NAO scrutiny would be more effective than the current system which includes the following elements: the Secretary of State appoints the CAA’s auditors; the Secretary of State places the CAA’s accounts before Parliament; the Secretary of State approves the CAA’s borrowing and sets its required rate of return on capital; the Secretary of State appoints the CAA’s chair and non-executive board members; the CAA’s audit committee is made up of non-executive members who are appointed by the Secretary of State; and the CAA consults on its fees and will be required to do so under the changes set out in Clause 100. In addition, over the period 2001 to 2011, the CAA reduced its operating costs in real terms by 20%. I note that some noble Lords suggested additional functions or capability that the CAA should acquire.

Following discussion in another place on 25 April in the Bill Committee, the Minister, my right honourable friend Theresa Villiers, announced a new non-legislative measure to increase the transparency of the CAA’s moves towards greater efficiency. On an annual basis, the Department for Transport issues a report direction and an accounts direction to the CAA specifying the matters that should be addressed in the authority’s annual report and accounts. From 2013 onwards, the Secretary of State will strengthen the scrutiny of

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the CAA by including in the annual directions a requirement to include an efficiency statement in the annual report.

I am grateful for the contribution from my noble friend Lord Trefgarne about general aviation. The primary duty will be capable of capturing general aviation interests where they are aligned with the interests of users of air transport services. Broadly speaking, users of transport services will be passengers and freight owners using air services to and from the UK—including future users. In so far as owners of small aircraft fall within this, they will be covered. It can also be noted that only around 0.1% of flights at regulated airports comprise general aviation.

My noble friend Lord Jenkin of Roding raised concern that an airline right of appeal touching on an airport’s financial arrangements would seriously inhibit the airport’s ability to raise finances. The noble Lord, Lord Soley, and my noble friend Lord Bradshaw raised similar concerns. The Government remain of the opinion that there are good reasons to include financial resilience licence conditions, with appropriate derogations where these cut across existing financing. We also remain of the opinion that the broad rights of appeal in the Bill provide an effective means of improving the accountability of key regulatory decisions and enable the interest of both airport operators and materially affected airlines to be taken into account in the licence process.

We believe that it is correct that the right of appeal extends to financial resilience licence conditions. Any dispute as to whether a derogation would cause a breach of the existing financial arrangements is most likely to arise from questions of law over the true construction of a loan agreement and/or licence condition. These could ultimately be resolved through judicial review and, in the mean time, an airport operator could seek an injunction to preserve the status quo. Markets should therefore be reassured that the risk of existing creditor protection in an airport operator’s funding structure being unintentionally removed, triggering an event of default, is extremely unlikely. Investors are experienced in managing regulatory uncertainty in their normal course of lending to the regulated sector and we would expect them to manage this situation as well. However, I know how strongly BAA feels about the issue and I will be meeting with it shortly.

The noble Lord, Lord Rosser, raised issues about staff in the event of the transfer of security functions from the Department for Transport to the CAA. It is important to ensure that the CAA has the skills and resources to undertake its new security functions. The Government are working to a plan that would aim for the CAA to take on the aviation security regulation function from the spring of 2014. The Government hope that existing staff will want to continue working in the security environment, but if any of them decide to move elsewhere, there will be enough time to manage this.

The noble Lord, Lord Clinton-Davis, raised the issue of aviation safety standards. The UK is a signatory to the Chicago convention and is required by the

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ICAO to have in place a state safety programme to achieve an acceptable level of safety in civil aviation. The Civil Aviation Bill currently before Parliament does not deal with safety issues as there is already sufficient European and international legislation in place which addresses them.

The noble Countess, Lady Mar, raised the issue of organophosphates. This is a separate matter and one of research rather than legislation. I am pleased to be able to tell the House that the last piece of research that your Lordships asked the Department for Transport to commission, under successive Governments, into allegations regarding airplane cabin air quality, has now been completed and published. All the published research studies have now been formally referred to the Committee on Toxicity, the independent adviser to the Government on matters concerning the toxicity of chemicals, for it to consider.

The Countess of Mar: My Lords, I thank the noble Earl for his comments. Does he agree that there is a serious problem in that the Civil Aviation Authority is responsible for people in an aeroplane both when it is on the ground and when it is in flight, but it does not impose health and safety regulations, as would be the case with the Health and Safety Executive? It looks after people on an airport site who are not in aeroplanes, but does not consider the COSHH regulations. Numerous Questions for Written Answer have been tabled on this issue, but no one takes responsibility for the passengers, pilots or aircrew.

Earl Attlee: My Lords, the noble Countess will recognise that these are complex matters. I will write to her on all the points she raised.

The noble Lord, Lord Soley, asked if the Bill will cover military airports and whether they could be exempted under Clause 77. In certain circumstances, military airports can be exempted from economic regulation under Chapter 1 and Clause 77.

My noble friend Lord Bradshaw was concerned about the market power test set out in Clause 6. His specific concern was that unless an airport operator has market power, it should not be regulated. I would like to reassure my noble friend that, under the Bill, where an airport does not and is unlikely to acquire substantial market power, it will not be made subject to economic regulation. It is a specific requirement of the market power test in Clause 6.

The noble Lord, Lord Rogan, talked about the aviation needs of Northern Ireland. The Government and the Civil Aviation Authority have no role in the slot allocation process. EC regulations established a mechanism for the allocation of slots at congested airports. This has been transposed into UK law under the Airports Slot Allocation Regulations 2006, which came into effect on 1 January 2007. Heathrow, Gatwick, Stansted, Manchester and London City airports are all designated by the Secretary of State for Transport as co-ordinated airports with their slot allocations managed by Airport Coordination Limited, an independent company which has powers under the UK regulations to monitor the conformity of air carriers’ operations with the slots allocated to them,

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and to take enforcement action against those airlines that do not operate according to the regulations, in particular by introducing sanctions for slot misuse. The ring-fencing of slots at Heathrow to protect regional services, other than where a public service obligation has been implemented, would be incompatible with EU law. The UK has highlighted the issue of regional connectivity with the European Commission in the context of the current reform of the EU slot regulations and is exploring the scope for including measures to help secure the ongoing provision of air services between UK regions and congested London airports. Beginning this summer, Commission working groups will examine the slot proposals, and I commend the work of the noble Lord, Lord Empey, who has been extremely active and effective in Brussels.

The noble Lords, Lord Davies of Oldham and Lord Davies of Stamford, commented on the UK Border Force. It is not covered by the Civil Aviation Bill and is accountable to Ministers and Parliament as a Home Office agency. Queues at airports are caused by many factors, including the border force receiving incorrect flight manifests and early or late airplane arrivals, resulting in bunching. The Minister for Immigration and Citizenship is reviewing what additional data may be published by the Home Office and shared with port operators. Meanwhile, the UK Border Force has responded to recent problems with queues in a number of ways. It is tackling short-term peaks with a pool of trained staff, and working with airports and airlines to ensure that they provide more accurate passenger manifests and flight schedules so that the force can flexibly deploy staff at the right times and in the right places. It is creating a new central control room for the UK Border Force at Heathrow that will use mobile teams for rapid deployment, and it will implement new rostering and shift patterns. It is also working with Gatwick and Heathrow airports to improve passenger flows using more specific measures such as e-gates and other biometric checks.

The noble Lord, Lord Davies, asked why there is no obligation on the CAA to require airports to develop passenger welfare plans. The indicative licence prepared by the CAA included, at the request of the Department for Transport, an example condition that would strengthen an airport’s resilience where appropriate. The proposals contained in Condition 7 require the licence holder to operate the airport efficiently and to use its “best endeavours” to minimise any detriment to passengers arising from disruption. It would also require the airport to draw up, consult on and gain the CAA’s approval for an annual resilience plan setting out how it will secure compliance with its obligations under the condition. The licence holder would be obliged to comply with the commitments it has made in its resilience plan.

The noble Lord, Lord Hunt of Chesterton, mentioned the issue of the difference in the quality of the air between first and economy class. The air is the same

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throughout an aircraft. First class seats and economy class seats are usually separated by a curtain, which is not an airtight medium.

Lord Hunt of Chesterton: I was talking about the volume of air. We know that there is air, but the question is how much of it is circulating. That is a very clear distinction.

Earl Attlee: My Lords, if I have anything further to add, I will write to the noble Lord.

My noble friend Lord Jenkin of Roding raised the issue of consolidation. We should strive to produce legislation that is comprehensible to those who have to operate it and to those who are affected by it, and the consolidation of statute law can make a valuable contribution to this. Consolidation can take different forms. On the one hand, there can be what we call “formal consolidation”, which reproduces a law on a particular topic without any changes. On the other hand, a Bill may reproduce existing law with amendments. In recent years, fewer formal consolidation measures have been prepared than previously. One reason for this has been the change to the way that Parliament amends legislation. Amendments are now routinely made by textual amendment; that is, by inserting, removing or replacing text in the original statute. The need to consolidate simply to take account of textual changes has therefore largely disappeared. The approach taken in the Civil Aviation Bill is sometimes to make brand new provisions, as in Part 1, and sometimes to textually amend existing legislation, as in Part 2. When drafting the Bill, the changes being made did not appear to call for the rewriting of the law relating to civil aviation or aviation security. The specific textual amendments to other Acts made by the Bill show more clearly the changes that are being made than would a provision which replaced the whole of the legislation being amended, with the changes buried somewhere in the middle.

I have endeavoured to respond to many of the valuable points made by noble Lords, but time does not allow me to respond to all the points that have been made, no matter how good they are. I will read Hansard carefully and write to those noble Lords who have asked me questions that I have not been able to answer. I will also be delighted to have meetings with noble Lords outside the Chamber to look at the detail of these matters. This is only the first opportunity to formally discuss the Civil Aviation Bill in your Lordships’ House, and I look forward to debating it with noble Lords in Committee.

Bill read a second time.

House adjourned at 8.20 pm.