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Grand Committee

Wednesday, 27 June 2012.

Arrangement of Business


4.45 pm

The Deputy Chairman of Committees (Baroness McIntosh of Hudnall): My Lords, I begin by reminding the Committee that if there is a Division in the Chamber while the Committee is sitting, we shall adjourn as soon as the Division Bells are heard and resume 10 minutes thereafter.

Civil Aviation Bill

Civil Aviation Bill4th Report from the Delegated Powers Committee


4.46 pm

Relevant documents: 4th Report from the Delegated Powers Committee

Clause 1 : CAA’s general duty

Amendment 1

Moved by Lord Bradshaw

1: Clause 1, page 1, line 10, at end insert “and in the provision of surface transport access”

Lord Bradshaw: In moving Amendment 1, I shall speak also to Amendment 10. These amendments relate to the surface access to the airports, which is of course very important, not just for people who fly but for people who work there and residents. So I am not entering a plea especially for airline passengers but for everybody who uses those modes of access in getting there.

Some figures published this morning show that pollution arising from aeroplanes is reducing quite sharply as bigger and more efficient aeroplanes take over. That brings into focus the need to tackle the higher level of both noise and atmospheric pollution that comes from surface access to airports. I want to stress the point that we must do something about surface access. I know that there are many ideas about it—it is probably becoming more important than the aircraft themselves.

I do not intend to turn this debate into an argument about the third runway in Heathrow, but I want to draw attention to the large amount of spare runway capacity that exists or is planned to exist at Gatwick, Stansted, Birmingham and Luton airports and in other regions of the country. The four airports that I mentioned particularly affect the south-east. If it were exploited, that would reduce the clamour about demand at Heathrow, which is being fed mainly by BA and BAA which have substantial financial interests in it. I am particularly anxious about the damaging and expensive campaign that they are running, which suggests

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that London is not open for business. I think that they are trying to hijack any debate and the forthcoming White Paper to try to concentrate on what they see as the problem—how they can get more planes at Heathrow, which in turn will give them more income.

Regional airports could well take up the challenge as Gatwick has done since it was divested from BAA. Noble Lords will probably be aware that Gatwick now has two direct flights to China, one to South Korea, one to Nigeria and one to Hong Kong. That is only the beginning to building up an international business, and I believe—and I have been to several airports—that Birmingham, with all the committed money being spent there, will offer passengers a wide range of possibilities when they travel. For example, most airport users or people who use the lines, cite the fact that Stansted Express is not a very good, efficient or comfortable way in which to get to London. In fact, if you consider the Lee valley, the whole service needs revision. It needs money spent on the infrastructure, and it is one of the areas that I hope the Government may have something to say about in the high-level output statement for the railways which I believe they are due to publish next month.

The impact of HS2—if it is built—on Birmingham airport would be huge and would bring it within 38 minutes of London, which is equivalent to what Gatwick is now and what Heathrow is for most people. The real point that has been made to me, particularly by people at Gatwick, is that passengers from airports do not mix well with passengers who are commuting on a regular basis. For example, if trains emanating from Brighton arrive at Gatwick full of commuters and a lot of Americans with heavy luggage who have never been here before are on the platform, they cannot be accommodated comfortably on the service that is provided. That is why I was pleased to see the debate yesterday in the House of Commons on this matter. It was raised by Henry Smith, the MP for Crawley, who said that it is very necessary that the whole question of access to airports is brought into focus. It is definitely on the radar of the department. In this debate, reference was made to the fact that the new Southern franchise will be let, and it will be up to the franchisees what they want to do. I think they might need a little guidance. It is not just the train services; it is the trains themselves because many of the trains in use on the railway are pretty unsuitable for people with heavy luggage.

If I am correct, it is only the regulated airports that need any requirement for improvements to be included in the regulations. This is so that they can be included within their regulatory asset base. I do not want any situation to arise in a regulated airport where any airline might legally escape paying its share of any improvements that are made to surface access. I hope the Minister can give me an assurance that once this change is made everything will go into the RAB.

Licensed airports, which are a different lot, can do whatever they consider to be commercially attractive. In many cases, this will mean help with investments by other transport providers to produce mutually beneficial schemes and from local authorities keen to promote regional airports. These airports do not need the regulator

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to intervene, as I see it, so the intervention may come from government or from local authorities which are keen to invest in improvements. Birmingham airport stressed to me that it feels that if the huge spare capacity it has is used, it would bring a lot of development with it. In that case, you have an airport that is willing to accommodate any improvement.

I hope the Minister can give me the assurances that I seek and will endorse the fact that the improvement of surface access is extremely important and is becoming more so as time goes on. I beg to move.

Lord Soley: The noble Lord might be surprised that I am not entirely unsympathetic to what he is trying to achieve but I do not think that he is trying to achieve it in the best way. I will not focus on his comments about Gatwick managing to be a hub or otherwise, although I think that if you told the people around Gatwick that we were to move Heathrow’s operation there, they might be a little less enthusiastic than the airport owners.

I think the noble Lord is right that there is a problem about surface access to airports generally. However, it is not my view that the CAA is the best organisation to do this—the Minister will tell us what he thinks. This flags up the problem which a number of us have referred to over many years: we lack an effective regional government structure in Britain that could provide the surface transport necessary around airports, as well as some of the other regional infrastructure that we need. The noble Lord is right that we end up doing things in a hit-and-miss way, with a bit here and a bit there, and then join it up afterwards. Heathrow Express came in but was that really the best idea when we had Crossrail coming? There are a lot of oddities in there. In my judgment, and I will be interested to hear what the Minister says on this, if we asked the CAA to suddenly become the organisation that has to comment on and recommend surface infrastructure we, will need a much larger organisation than the current CAA.

Lord Berkeley: We have heard two interesting speeches. I have a lot of sympathy with the amendment but what concerns me is starting off on the basis that this would add to the regulatory duties in Clause 1. Regulatory duties are terribly important issues for a regulator to take into account. I have had certain experiences with the Office of Rail Regulation over the years. Reminding it of its duties can be a good way of making sure that it remembers and acts on them.

Of course, Clause 1(2) says that the CAA must carry out its functions,

“in a manner which it considers will promote competition in the provision of airport operation services”.

I am not clear on what we are talking about when it comes to competition. This is something that will recur in later amendments. Is it competition between those airports included in the scheme in the south-east, or all airports, or competition for the provision of services within an airport? If it is the latter, this seems a big sledgehammer to crack a nut. When the Minister replies, maybe he can put me right on that.

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There is also the issue that my noble friend Lord Soley raised on surface access and whether the CAA is the best organisation to do this. He might be right or wrong but there is a similar concern with ports and airports: who pays for the infrastructure and who decides? I thought that the general policy of successive Governments was that the private-sector operator of an airport or port invested within the boundary of the facility and then expected the state, local or regional authorities, or someone, to contribute to the cost of access, except when there was a Section 106-type agreement. We certainly got into a knot in the ports sector. Sometimes there was state aid available for some things and sometimes there was not.

We got into a right old knot with Heathrow over the years. BAA contributed to the cost of building the Heathrow Express line and operating the trains. It did not seem to want the Heathrow Express trains to go down the Crossrail tunnel, which most people would have thought would have made a very good piece of public transport planning, so it will not go down it. I was told by some people from BAA yesterday that the reason for that—they confirmed this—was that the most important customers who use the Heathrow Express, particularly in first class, do not like going into tunnels because their BlackBerry does not work. They would rather go from Paddington to Canary Wharf in a taxi, where they can still play with their BlackBerry. Frankly, that is a farcical argument. It was suggested that if there was a first-class carriage in Crossrail and it went straight to Heathrow, people might use it. This attitude will adversely affect the future public transport and surface access into Heathrow. I hope it will change its attitude; it has certainly said that it will look at the situation.

5 pm

However, who decides? Is it the airport? And who pays—because once a body has paid for it, it will, to some extent, have a right to a say in what happens and what gets built. I am confused as to what will happen. If in future the three main London airports, plus Luton, are owned by different companies, which may well happen, who decides what surface access—which we all agree is important—will be built and who will pay for it? I am not sure whether it should be the CAA but, if it is not, who should it be?

The sooner we have a consistent policy across all airports and ports on the extent of government involvement, the private sector, which is spending a great deal of money on these matters, will feel a lot more comforted. I look forward to hearing what the Minister has to say.

Lord Trefgarne: I apologise to the noble Lord, Lord Bradshaw, for not being in my place when he began his remarks. I missed about 90 seconds.

I recognise the importance of surface access to the major airports and I acknowledge that to Stansted, for example, it is not as good as it should be. I hope it can be improved. However, I am reluctant, for the reasons expressed by the noble Lords, Lord Soley and Lord Berkeley, to impose this duty on the Civil Aviation Authority. I hope the noble Lord, Lord Bradshaw, will not press his amendment.

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Lord Clinton-Davis: The lack of clarity on this point has been demonstrated today by my noble friend and by some noble Lords opposite. It is not permissible that this situation should prevail. I hope that the Minister will be able to demonstrate that the issues that have been raised will be tackled by the Government in due course. It is totally unsatisfactory that this position should be allowed to remain.

Lord Jenkin of Roding: My noble friend will know that I have been pressing him to consider, in the context of HS2, the possibility of an extension around north London to reach the possible future hub airport in the Thames Estuary. This issue has been pressed not least by Foster + Partners, whose imaginative scheme is now the front runner for a Thames Estuary airport. Of course, communications and surface access will be important problems there.

While I have sympathy with what my noble friend Lord Bradshaw said about the desirability of improving surface access, that could not conceivably be a function of the CAA. I agree with those who have argued that. It must be a function for the Department of Transport because, after all, it concerns the railways.

Lord Clinton-Davis: And local authorities.

Lord Jenkin of Roding: I think the local authorities would have some difficulty planning together an orbital railway joining up the HS2 to HS1, with a branch to a potential Thames Estuary airport. It is a very imaginative scheme.

Having lived with the concept of a Thames Estuary airport for about 20 years, the first proposal put forward for it envisaged an orbital rail link around the north of London. In which case, therefore, you do not have a situation where people have to come right into London and cross from one station to another in order to get out to their airport. There is a substantial issue here; however, as I said a moment ago, I cannot see that this could be a function of the Civil Aviation Authority. It has issues that go much wider than what falls within their level of responsibility. One would suspect also the competence of the advice that they have—it must be from my honourable friends in the Department for Transport.

Perhaps I could ask one question. I have asked my noble friend if he would meet some of the people who are proposing to put forward the case for the extension of the HS1—HS2 to go around the north of London—and he has undertaken to consider whether that would be appropriate. I hope I do not misrepresent him. I wonder whether he is yet able to give me an answer: can he meet those who have done a great deal of work on this subject and would be able to offer very valuable advice that may well not be available within the Department for Transport itself?

It cannot be right for Ministers to keep at arm’s length, as it were, outside expert evidence that could greatly improve the quality of their decision-making. It arises only peripherally from this amendment, but we are talking about surface access, and therefore it is highly relevant.

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While I am in some sympathy with my noble friend’s amendment, I am not able to support it for the reasons that I and others have mentioned, that it cannot possibly be the responsibility of the CAA to have to make provision for surface access in the way that the amendment suggests.

Lord Berkeley: Before the noble Lord sits down, perhaps I may press him a little further on what he said with respect to the proposed airport in the Thames Estuary—that it could apply anywhere. As the Government want, and as is suggested in this Bill, the airports are effectively in competition with each other. If they then want to expand, they will have to apply for planning permission in some way or another, then demonstrate what transport plans they have, and who will pay for them. That will then go back to the Government, who will decide which development happens where according to whether they are prepared to pay for the transport links. Is that the way the noble Lord thinks it should happen?

Lord Jenkin of Roding: Certainly, the question of paying for it would have to be considered in some detail. The great advantage of the Foster + Partners proposal as put forward is that they recognise that this would be financed not by the taxpayer but by investment which they would attract perhaps from around the world. There should be a great deal of investment interest in a project of this kind. The noble Lord, Lord Berkeley, is absolutely right, of course, that when this goes to the IPC or its successor, this is precisely the sort of thing that would need to be demonstrated, along with all the other things that the planning system requires. If, however, the Department for Transport is unable to meet the proponents of such a scheme, it will start with not one but two hands behind its back. That is why I have pressed my noble friend to say that in the context of the HS2 consultation he will meet the people concerned, and I very much hope that his officials will feel that it is appropriate for him to do so.

Lord Davies of Oldham: My Lords, the Minister’s worst nightmare must have been fulfilled from this opening debate—namely, because the Committee has, quite appropriately, addressed itself to what the amendment says about surface transport, and of course that then gives a wide range of exciting prospects on how we could improve surface transport. I will put my three penn’orth in if I may. Manchester Airport is very eager that the metro should be part of its facilities. It is some distance away at present. The airport is certainly prepared to face a proportion of the costs. We have heard the anxieties and proposals for the necessary improvement to surface transport to our airports expressed in very cogent terms. The danger is that that will open up a very wide-ranging discussion, as we have heard.

The Minister may have the obvious consolation, which the noble Lord, Lord Jenkin, and I identified, that most of these issues cannot possibly be covered by an extension to the remit of the CAA. We are largely talking about transport projects of the greatest significance, linking our major centres of population to our airports through improvements, which are certainly necessary to all the London airports. Apart from

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Birmingham, which already boasts excellent rail communication and has great expectations for HS2, all airports recognise that the ease with which people can arrive at them is absolutely critical to the experience and choice of travelling by air. However, as the noble Lord, Lord Jenkin, indicated, I doubt that this substantial range of transport issues is meant to be laid at the door of the CAA. I imagine that the Minister, while commenting constructively, as I hope he will, in response to Members of the Committee on ideas for improving connections, will say that this is not a matter with which we can directly charge the CAA.

Earl Attlee: My Lords, as we have heard today, surface transport access is a very important concern for our major airports—not just regulated ones but non-regulated airports, too. I am grateful to my noble friend Lord Bradshaw for enabling us to debate this topic today.

My noble friend is certainly correct to say that without good transport access, it will not be possible for our airports to maintain their strong position compared to their European counterparts, and that we must ensure that people using our airports have access to a range of options for getting to and from them. That is why the Government have put a heavy emphasis on the importance of high-quality public transport to our airports. It is one of the reasons why Thameslink will deliver considerable improvements to access at Gatwick. It is why HS2 and Crossrail will, in the future, deliver important improvements at Heathrow, and it is why the upgrade of London Underground will further enhance access to Heathrow.

My noble friend Lord Bradshaw touched on the problems of the Gatwick Express. When I visited Gatwick Airport, the management certainly made that point to me very strongly.

Your Lordships will also be aware that the Government are seeking to invest in improving access to non-regulated airports through regional growth funding, including, for example, by upgrading junction 10A of the M1 near Luton and through realigning and tunnelling a section of the A45 to facilitate the extension of Birmingham Airport’s runway. The Government recognise the vital contributions that regional airports make to local economies and that regional connectivity is important, as explained by my noble friend Lord Bradshaw.

The amendments seek to expand the scope of CAA’s primary duty for its airport economic regulation functions to meet this point. Specifically, the primary duty is expanded by putting the provision of surface access links on an equal footing with airport operation services. Given the importance of surface access, I sympathise with the thinking behind this amendment. It is important that regulated airports can invest in surface transport access in so far as their unregulated counterparts would be able to do so.

5.15 pm

Noble Lords will have noticed that the primary duty in the Bill contains elements of what is to found in the first of the CAA’s four duties in the current

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legislation that governs airport economic regulation, the Airports Act 1986, specifically Section 39(2)(a). However, the duty in the Airports Act 1986 is not limited to furthering the interests of the users of air transport services in terms of the range, availability and so forth of airport operation services, as is our primary duty in this Bill. There is a very good reason for this. Under the Airports Act, the CAA has limited functions—for example, it must set five-year price controls. Under the Bill, the CAA has broad powers to make licence conditions. It would not be appropriate for the CAA to have such wide duties with these licence-making powers, since the CAA would have extraordinarily wide discretion to impose licence conditions. In principle, anything furthering passengers’ interests could be allowable, even on matters wholly unrelated to airport economic regulation.

I turn back to the impact of the new primary duty on surface access. My right honourable friend the Minister of State for Transport reassured the House of Commons Public Bill Committee that the Bill does allow the CAA to permit investment in surface access by regulated airports. I will reiterate this point for the benefit of my noble friend Lord Bradshaw and the Committee. If a surface access investment furthers the interests of passengers and cargo owners in the provision of airport operation services, the Bill does not prevent this investment from being included in the airport’s regulatory settlement.

However, I also agree with the noble Lord, Lord Soley, and others, that it is not the CAA’s role to plan surface access enhancements—for example, to require an HS2 spur. The noble Lord, Lord Berkeley, made some interesting comments about surface access. Clearly, the wider network issues are a matter for the HLOS, referred to by my noble friend Lord Bradshaw. My noble friend Lord Jenkin asked about the Thames Estuary Airport and a high-speed rail link. Because we are just about to issue a consultation, I am advised that I am constrained as to who I can see. However, I undertake to verify this point with the Permanent Secretary at the Department for Transport.

Lord Jenkin of Roding: I seek an explanation for this point, which my noble friend has also made to me in private. If the department is engaged in a consultation, why on earth should a Minister who is answerable for the department not meet some of the people who would have valuable advice to offer on a proposal, which they wish to put forward? How can it possibly be right for a department to conduct a consultation and shut itself off from outside expert evidence? I do not understand my noble friend’s explanation.

Earl Attlee: My noble friend makes very good points, and they are the ones put to the Permanent Secretary at the department. However, I have to accept the advice that I am given.

Lord Berkeley: How can the department consult with outside bodies if it does not meet any outside bodies?

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Earl Attlee: My Lords, Ministers spend all their time consulting with outside bodies. However, at some point they are advised that it is inappropriate to meet them. I have agreed with my noble friend that I will take this up with the Permanent Secretary.

The noble Lord, Lord Davies, mentioned Manchester. The noble Lord will recognise that Manchester is not a regulated airport. If it decided to contribute to a surface access scheme, it could recover the costs from its customers if the market would bear it. However, that is of course a commercial matter for the airport.

Clause 19(6) provides that “a price control condition” may be made,

“by reference to the amount charged for particular goods or services”,


“to the overall amount charged for a range of goods or services”.

Clause 19 does not specify the mechanics of setting the price control and leaves the CAA with flexibility to take whatever approach seems most appropriate within the framework provided by Clauses 1 and 18(1). Specifically, this flexibility, combined with the provision in Clause 21(1)(f) which states that licensed activities may relate,

“to activities carried on outside the airport area”,

will not prohibit the CAA from taking into account costs from outside the airport area, such as from rail links, where appropriate when setting a price control.

However, given the importance of this issue, the Government will reflect on the debate and specifically will consider further whether any extension to the primary duty to make special provision in respect of rail and road links to the airport is necessary or desirable. I hope that I have provided my noble friend with the reassurance he seeks, particularly that the Government will consider the amendment further and if appropriate bring forward an amendment on Report.

Lord Bradshaw: I just add the fact that the airport is often the primary reason why the surface links are needed but many people benefit from them. I am not suggesting that the airport should pay the whole cost but a proportion. If its regulatory asset base is linked to that, the airport needs to make sure that it can collect money from the airlines using the airport. I am most anxious that the cost of the facilities should be a charge on the airlines as well as any another beneficiaries. I am not saying that the airlines should pay the whole but a proportion of the cost of the new facilities. With that, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Amendment 2

Moved by Lord Rosser

2: Clause 1, page 1, line 13, at end insert “but only where this will not conflict with its ability to carry out its functions in a manner set out in subsection (1)”

Lord Rosser: This amendment and Amendment 13 relate to the Civil Aviation Authority’s general duty and the Secretary of State’s general duty, as set out in

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Clauses 1 and 2 of the Bill. I will direct my comments to the Civil Aviation Authority’s general duty though the argument is the same in respect of the Secretary of State’s general duty.

Under Clause 1(1), the CAA must carry out its functions under Chapter 1 of the Bill,

“in a manner which it considers will further the interests of users of air transport services regarding the range, availability, continuity, cost and quality of airport operation services”.

Subsection (2) goes on to say that:

“The CAA must do so, where appropriate, by carrying out the functions in a manner which it considers will promote competition in the provision of airport operation services”.

This amendment adds to the end of that,

“but only where this will not conflict with its ability to carry out its functions in a manner set out in subsection (1)”.

In the absence of any definition of what “where appropriate” in subsection (2) is intended to mean or how it is to be interpreted in the context of the Bill, there appears to be an assumption in subsection (2) that promoting competition in the provision of airport operation services will further the interests of users of air transport services. Promoting competition does not necessarily further the interests of users of air transport services regarding range, availability, continuity, cost and quality because it can lead to a reduction in range, availability, continuity, cost and quality in a bid to either reduce costs or sustain profit margins, or achieve both objectives.

The amendment seeks to ensure that the requirement to promote competition,

“by carrying out the functions in a manner which it considers will promote competition in the provision of airport operation services”,

does not apply where the Civil Aviation Authority considers that to do so would conflict with its primary responsibility of furthering,

“the interests of users of air transport services”.

It would surely be unacceptable for the CAA to have to carry out its functions in a manner that it considers would promote competition when to do so would conflict with what is presumably its key responsibility to further the interests of air transport services, as set out in subsection (1), rather than the interests of the providers of airport operation services. That would defeat what appears to be a declared objective in the Bill for the Civil Aviation Authority as set out in subsection (1).

I hope the Minister will accept the amendment. However, if he does not intend to do so, I hope that he will indicate the current wording in the Bill which will prevent the CAA having to carry out its functions in a manner which it considers will promote competition in the provision of airport operation services if it felt that to do so would conflict with its duty to carry out its function in a manner which it considers will further the interests of users of air transport services. The answer may be that the Government simply believe that promoting competition cannot not be in the interests of users of air transport services, which would be a remarkable view. Alternatively, it may be that the Minister will say that the words “where appropriate” in subsection (2) give the Civil Aviation Authority the power to decide that it will not promote competition in the provision of airport operation services because

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to do so would conflict with its duty under subsection (1) to carry out its functions in a manner which it considers will further the interests of air transport services. If that is the case, the Minister should give a detailed explanation of what the words “where appropriate” mean in the context of the provisions of subsections (1) and (2) and how they should be interpreted and applied by the Civil Aviation Authority. I beg to move.

Lord Soley: I have sympathy with my noble friend. However, I do not have any answers to the problem. It is very difficult. A clause such as Clause 1 imposes certain duties on an organisation—in this case the CAA—which is a normal format in Bills that become law. However, what troubles me about such clauses—and it is not only in this one, although it happens here too—is that there is a lack of clarity, as my noble friend has pinpointed.

Subsection (3)(b) has the catch-all phrase that,

“the need to secure that all reasonable demands for airport operation services are met”.

There is one of these provisions in almost all the Bills of this type that I know. It is put in in case we have forgotten something that the CAA may want or ought to do. It covers just about everything from whether the coffee machine works to whether you have good services in other more fundamental ways.

I wonder at times whether we are being clear with the operator. Presumably the CAA is happy with the clause—I assume that it is; I have not heard anything to the contrary—but I wonder about the clarity of its operation if this becomes law, as it almost certainly will. Does the CAA have enough clarity to know what its duties are if someone challenges it? A catch-all phrase such as that in subsection (3)(b)—that the CAA has to meet the reasonable demands for airport operation services—means that it can say in certain circumstances that it does not think that a particular demand is reasonable. It could rely on the phrase if it received a legal challenge from someone or some organisation.

It is a general point but sometimes we are casual with our legislation and put in catch-all clauses and subsections. We are saying to the operator that it can do what it likes within certain limits. It may be challenged in law, although that is unlikely, and this clause is there in case it is needed. It is a catch-all clause and my noble friend is right to raise this matter as a lack-of-clarity issue.

5.30 pm

Lord Jenkin of Roding: I am puzzled by the amendment. It is absolutely at the heart of an economic regulator’s job in the general context of government policy, as it has been under successive Governments, that you can give an organisation, perfectly properly, a duty to promote competition. Indeed, in the past, competition between the various airports has been a major feature of our airport structure. We will come later to the relationship between the CAA, the Competition Commission and the other bodies that are required by statute to promote competition. However,

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it does not seem in the least inappropriate that the Bill should state at the very beginning that the general duties of the CAA should include one to promote competition.

The noble Lord, Lord Rosser, asked what the meaning of the words “where appropriate” was. I give an example from the debate on the previous group of amendments. Does competition mean competition only between airports or competition between terminals in the same airport? I would have had no difficulty whatever in arguing that it should not conceivably be competition between the terminals of the same airport, which are under the same management and which one would expect to be run in such a way as to provide the best complementary service for the entire airport for the benefit of users and freight operators. Therefore, it would be quite easy to say that of course competition between terminals would not be appropriate, while competition between airports certainly should be. As I say, we will come later to how that might be applied and enforced.

However, subsection (2) as originally drafted is perfectly reasonable. When I read the amendment that noble Lords had tabled to the subsection, it aroused in me the very unworthy thought that perhaps they do not think that competition is good for users. Competition must be absolutely at the heart of the benefit to users, for the purposes of both the quality of service and keeping costs down. That is what it is about. If the noble Lord wishes to press his amendment when we get to Report stage, I have to say that I would be firmly opposed to it.

Earl Attlee: If the amendments sought to include a requirement that the CAA must promote competition only where it is consistent with the interests of passengers and owners of cargo, I would thoroughly agree with their intent. However, the presence of the words “where appropriate” in the primary duty in Clause 1(2) already achieves the intent of the noble Lord, Lord Rosser. Any further changes are therefore unnecessary. The noble Lord asked me for a definition of “where appropriate” but neither the CAA nor the appeal bodies would have any difficulty in working out what it means.

Broadly speaking, the primary duty provides for the CAA to carry out its airport economic regulation functions in a way that will further the interests of passengers and owners of cargo. The primary duty also states that the CAA must do so, where appropriate, by promoting competition in the provision of airport operation services. This means that it will not be appropriate to promote competition if it is not in the interests of passengers and owners of cargo. Clearly, the CAA will have to balance the issues listed in subsection (1)—for instance, cost and quality. There is a balance to be struck and it is the duty of the CAA to strike it on behalf of passengers and owners of cargo. As the noble Lord, Lord Rosser, recognised, these duties would also apply to the Secretary of State. Therefore, the intent of the amendment is already implicit in the primary duty and any further changes would be superfluous. I hope that this provides your Lordships with the reassurance required and that the noble Lord, Lord Rosser, will withdraw his amendment.

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Lord Rosser: I thank the Minister for his response and my noble friend Lord Soley and the noble Lord, Lord Jenkin of Roding, for their contributions to the debate. I think that the noble Lord, Lord Jenkin, rather misunderstood the wording of the amendment or what I said. I did not seek to remove from subsection (2) the words that related acting in a way that promoted competition. The purpose of my amendment was to make sure that there could not be a conflict between subsections (1) and (2) by making sure that if there was a conflict, subsection (1) would prevail. That was designed so that activities would be carried out in a way that would be beneficial to the users of air transport services.

In his response, the Minister has taken one of the lines that I had suggested he might take in the contribution I made—namely, that he has argued that the words “where appropriate” in subsection (2) already achieve the objective that I sought to achieve with my amendment. In other words, that if it is considered that there is a conflict between subsections (1) and (2), then—as I understand it from what the Minister has said—the Civil Aviation Authority, using the words “where appropriate”, would be able to argue that subsection (1) took priority, because that is the primary responsibility. If I have understood the Minister correctly—and what he said as to how this should be interpreted is now on the record—then I beg leave to withdraw my amendment.

Amendment 2 withdrawn.

Amendment 3

Moved by Lord Rotherwick

3: Clause 1, page 2, line 7, at end insert—

“( ) the need to secure that the reasonable needs and interests of general and business aviation are promoted and safeguarded,”

Lord Rotherwick: My Lords, I beg to move Amendment 3. I shall speak also to Amendments 9 and 11—the latter of which seeks to introduce a new clause after Clause 1. First, I would like to apologise to the Minister for not being able to speak at the Second Reading; and, secondly, I declare my interest as a private pilot and an aircraft owner. I also declare an interest as a director of the Light Aviation Association, which serves the interests of sports and recreational powered flying in the UK, and as vice president of the General Aviation Alliance, a body that co-ordinates regulatory interests of various UK aviation associations, thus representing a co-ordinated position for their pilots, aircraft owners and operators. Moreover, to demonstrate that the LAA is not a pressure group, but a body that knows of what it speaks, the LAA is itself a regulatory body, exercising functions delegated to it by the CAA in respect of a huge range of general aviation aircraft.

This Bill does not provide us with a comprehensive new legal framework to replace the whole of the Civil Aviation Act 1982. Some may lament the fact, given that this is the first Bill to address this area of policy in a generation. It is not as though the ground has not been prepared. Considerable effort has been expended in recent years in examinations and analysis of the role and function of the CAA in preparation for a more comprehensive piece of legislation.

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The Bill before your Lordships’ House is, regrettably, limited in its scope. Its principal focus is on the economic regulation of major airports, but it goes little further, placing new duties on the Civil Aviation Authority in respect of airline passengers and owners of air cargo. Unfortunately, these new regulatory duties will, if enacted in their present form, ignore other sectors of UK aviation. Consequently, the Bill may, in fact, sow the seeds of potentially damaging developments that would impact on those other sectors. In particular, they will have potentially serious implications for the growth and sustainability of the general and business aviation industry and community, which contribute so much to the economy of the UK, and which have the potential to contribute so much more to helping us, as a nation, to move out of our present predicaments. If airport regulation is framed for the benefit of the air transport user, as it is in the Bill, the inevitable consequence will be the creeping exclusion of the other sectors of civil aviation and general and business aviation.

This trend is already evident. I travel widely as a private pilot and find that the provisions for general and business aviation in many other countries put ours to shame. I am therefore bringing forward simple and straightforward amendments to protect and promote general and business aviation and to ensure that this important sector continues to use our major airports. This objective can be ensured by giving the CAA a specific duty to consider general and business aviation in its regulation of major airports.

General and business aviation is important. It includes any civilian aircraft operation other than a commercial air transport flight operating to a schedule. It represents a multi-billion pound industry in the UK, from executive business jets through flying training and air ambulances to private aircraft operators and pilots. A 2009 study by PricewaterhouseCoopers on the total value of this sector found that its contribution to the UK economy was £3.7 billion, equivalent to 0.2% of UK economic activity, with around 50,000 people directly employed. The review also identified that of the 27,000 UK-registered aircraft, only 4% were commercial air transport aircraft.

We have a Bill before us—the first in a generation, although I hope it will not be the last—that neglects 96% of UK-registered aircraft and concerns itself with only those few airports that enjoy a dominant market position. It does not address the needs or interests of the general and business aviation community or make any attempt to regulate the activities of the majority of the airports on which this important sector depends.

The Parliament of the European Union recently issued a valuable resolution, 2008/2134, which I commend to the Minister and to the Committee, calling on member states to adopt policies promoting growth and sustainability in general and business aviation. The Government have, as yet, made no significant response to this resolution. However, this Bill is a perfect vehicle. It provides the opportunity, with some slight amendment consistent with its general principles, to make a worthwhile start. This would entail recognising in legislation that general and business aviation has a place at our airports and that its needs and interests should be promoted and sustained by the CAA alongside those of air transport users.

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The amendments I propose to Clause 1 are modest and a reasonable modification of the regulatory functions of the CAA, yet they have the potential to bring about a substantial improvement in the operating environment for general and business aviation, which would reap rewards for business, industry, UK competitiveness and the financial health of the country. It will not be lost on my noble friend the Minister that the amendments merely extend the functions of the CAA in respect of operators of dominant airports. I regret that the narrow scope of the Bill precludes an amendment to include all airports, which would be ideal. Although amendments that I would prefer to have tabled are outside the scope of the Bill, they are within its spirit and philosophy.

I urge my noble friend the Minister to reflect on the work that has gone before and on the resolution of the European Parliament. I urge him also to recognise the opportunity that this Bill offers to put general and business aviation interests on the government agenda and send a long-overdue message to the European Parliament and business community that the UK is open for aviation business in all its diversity. I hope my noble friend the Minister will see the benefits this would bring to the country. If he is unable to accept my amendments, I hope that I will be able to offer my services and those of the LAA to him and his officials so that we can work together on this and secure a Bill for the general and business aviation industry, and for the community, that is fit for the future and holds the promise of a brighter one. I invite the Minister to accept this offer, in his usual accommodating fashion, to facilitate the further discussions that will be of mutual benefit.

5.45 pm

As I said earlier, I wish to speak to Amendment 11—it is not in this group—which seeks to add a new clause after Clause 1. The new clause is unremarkable in its construction—indeed, it closely mirrors Clause 92—and requires the CAA to prepare and publish its policy as regards its general duties under Clause 1; to consult when it seeks to change that policy; and to publish any revised policy. I propose the new clause in the interests of transparency, accountability and good governance by the regulator. It should have been included in the Bill.

If the Minister is moved to accept the principle behind my other amendments to Clause 1, Amendment 11 has the additional benefit of requiring the CAA to state how it will meet its obligations to promote and safeguard the interests of general and business aviation at our major airports.

The amendments may not be technically perfect or as elegantly drafted as they might be—I do not have the Department for Transport and parliamentary counsel to assist me—and I apologise if there are flaws. However, they make a simple and powerful point. General and business aviation is ignored in the Bill and should not be so. To do so is to the detriment of this country, its aviators and its past history. My amendment, without any offence to the principles of the Bill or the fundamental change to the proposed functions of the CAA, would set this right.

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I do not intend to detain the Committee further in developing my argument: I have made my case. I repeat my offer to the Minister and I look forward to his response. I beg to move.

Lord Berkeley: My Lords, I do not know what the scope of general and business aviation covers but what about the increasing number of hot air balloons that go around the country? Some are quite high; some are propelled, some are not; some make noise—I do not think it is as serious a problem as surface noise, to which the noble Lord, Lord Bradshaw, referred earlier—but they should not go anywhere near airports. What regulation is there for them if they get near airports and in the air generally? It is probably a problem for air traffic control.

Lord Hunt of Chesterton: My Lords, I support the amendment as part of my philosophy of more than 20 years of noting that public servants in Britain who work in agencies—I used to run the Met Office in civil aviation—do not have as part of their job description a requirement to help British commerce and industry. The leader of the Conservatives today said that growth in this country will only come about from businessmen and entrepreneurs. He is wrong. It will also come about from civil servants working with industry to create environments in which these things happen.

It is quite extraordinary that in no case is the job description of any civil servant such that he is judged at the end of the year on how he has done in his service and also promoted industry. This is a good example. The role of the CAA is enormously important for industry. Surely part of the role of the Secretary of State will be to define the terms of reference of the director of the CAA in that direction. The amendment takes us in that direction.

Lord Trefgarne: My Lords, I strongly support Amendments 3 and 9, and perhaps Amendment 11 as well. Like my noble friend Lord Rotherwick, I have a connection with what used to be called the Popular Flying Association, of which I was once the president. Indeed, in that capacity, on one famous occasion, I was lucky enough to fly the then Aviation Minister to open the PFA annual rally. Who was the Aviation Minister? He was none other than my noble friend Lord Goschen, and I am glad to say that we were met with tumultuous applause. As I recall, the only problem was some very nasty weather, about which I had to go to see the noble Lord, Lord Hunt, at the Met Office because we felt that we had not really had proper warning. Happily, all the matters were properly resolved eventually.

General aviation is a very important part of the aviation industry and of aviation activity as a whole. It is quite properly regulated by the Civil Aviation Authority, including the hot air balloons to which the noble Lord, Lord Berkeley, referred. Indeed, a few months ago, I had the privilege of flying in one. I must warn your Lordships that it is very exciting and great fun, except the landing. You usually end up in a heap on the grass, but that is for another time. However, general aviation is crucial. Amendments 3 and 9, which were tabled by my noble friend Lord Rotherwick, are important

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and relevant, and I hope the Minister will be sympathetic, at least, to the aspirations of those amendments, or perhaps will even agree to them.

Viscount Goschen: My Lords, I support the thrust of the amendments tabled by my noble friend Lord Rotherwick. I should also make a mildly spurious declaration that I hold a private pilot’s licence and am the operator of an aircraft, although I can assure the Committee, much to its relief, that I have no intention of going near an economic regulated airport, any more than a hot air balloon would.

My noble friend is right to draw attention to the economic importance of the heavier end of general business aviation. A great deal of economic value is tied up with the importance of being able to move business leaders around the country quickly and, indeed, between countries. To do that, access to major airports is required. My noble friend also drew the Committee’s attention to important areas, such as medevac or ambulance flights. One can also think of traffic monitoring flights, the importance of the maintenance sector and so forth. It is true that general aviation, in particular, business aviation, has been squeezed out of the major airports.

My noble friend is not trying to do anything prescriptive. He is not trying to ensure that a certain share of slots or capacity is accounted for by business aviation. That would not be appropriate. All he is trying to do in his carefully worded amendments and in his remarks in support of them is to draw the Government’s attention to the economic importance of this specialist field. It is easily overlooked. It is not a populous field. Most members of the general public are not going to come across general business aviation flights, but that is not to say that they are not extremely important. My noble friend was right to draw the Committee’s attention to its notable scale. I think he said that this sector is worth £3.7 billion to the economy and employs 50,000 people, so it is important that in determining its regulation the CAA should at least take account of the important interests of this field. It is very easy to portray it as cigar-smoking fat cats coming to appear on television game shows including, perhaps, Members of your Lordships’ House, but in fact we are really talking about the ability for business investment to be drawn into the country. Many business leaders travel by executive aircraft to access our centres of commerce around the country as efficiently as possible. I support my noble friend’s amendments, and I look forward to hearing the Minister’s response.

Lord Jenkin of Roding: My Lords, I am astonished that there is no regulation of general aviation of the sort that is covered by my noble friend’s amendment. If that is right, I cannot understand why the CAA should not have some general role. Air taxis are presumably within the definition that he encounters. There was a time when I had to fly from my home in Essex to Liverpool several times a month, and much the easiest way was to take an air taxi from Stansted Airport, which we used frequently. On one occasion, the pilot suggested that I take over the controls, which lasted

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for about 10 seconds because I did not have a clue. I look forward to hearing my noble friend’s response to the amendment.

Turning to the question of the noble Lord, Lord Berkeley, I, too, have had one or two very interesting trips in a hot air balloon. As Secretary of State for the Environment, I had to decide on the planning requirements for tethered balloons, which are often used for advertising. I was confronted by two very strong opposing views. Some people said, “These are perfectly horrible and should be strictly controlled”, while others said that it was a harmless form of advertising. I split the difference and said that no planning permission was needed if the balloon would be there for only 14 days or fewer. Everybody seemed satisfied with that and I have never heard any more about it.

Landing in a hot air balloon is very exciting. The important thing is not to get off too quickly or it will disappear up into the air again, which can be very disconcerting. However, it is a splendid sport and I have never forgotten the occasion when I was staying officially at Leeds Castle. Very early one still morning, there was a rally of hot air balloons. I was invited to it by American Express, which had a very large balloon. We took off and had the most marvellous flight. However, before we left, we carefully and quietly climbed up the side of Leeds Castle, where my wife was leaning out of the window in her nightgown. I was able to bid her farewell, almost touching but not quite. We had a very skilful pilot and I hugely admired how he managed the hot air balloon. Again, it seems that the CAA should have some regulatory role in this.

Earl Attlee: It does.

Lord Jenkin of Roding: I am assured that it does, so that is fine. No doubt my noble friend will explain that.

Lord Davies of Oldham: My Lords, given that the Bill has been through the other place without this debate being advanced there to any degree, we are grateful to the noble Lord, Lord Rotherwick, for his introduction of these amendments. I will be very interested in the Minister’s response. We can all see that the primary responsibility of the CAA in respect of regulated airports means that any aspect of general aviation may be pretty low in its priorities, although some aspects of business aviation have other advantages to the country. However, I must counter some of the rosier views of general aviation with an obvious point. The last time that private flying came to the attention of the general public was in the case of the individual who went up in his private aircraft each night to avoid a day on British soil counting against him and affecting his tax returns. So there is another side to private aviation.

I am very guarded about this but I have some sympathy with the points that the noble Lord, Lord Rotherwick, put forward. He may have over-egged the pudding with all three amendments. I will be most interested in the Minister’s response to Amendment 3.

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It merely asks that these interests are promoted and safeguarded, which seems a fairly minimal requirement.

6 pm

Earl Attlee: My Lords, these amendments propose the inclusion of new secondary duties that take account of the interests of general and business aviation. I accept that the Bill is limited in scope. It seeks primarily to provide for better regulation of our airports and is not designed to be a comprehensive overhaul of our legislation. Having carefully considered these amendments, I cannot accept them, as they are unlikely to yield significant benefits but could unfortunately introduce unnecessary ambiguity into the Bill.

Despite the amendments being carefully drafted, a technical difficulty arises because of the absence of any definition or description of what is meant by “general and business aviation”, so the amendment may introduce undesirable uncertainty. I am sure that all noble Lords in the Committee understand what we mean by it, but not in legislative terms. I will ensure that I am briefed on the EU declaration that my noble friend Lord Rotherwick mentioned.

There are also policy difficulties with the proposed amendment. One policy intention behind the Clause 1 duties is for the CAA to be provided with a set of clear and unambiguous duties, promoting the interests of passengers and owners of cargo in the provision of air operation services. It follows that the number of secondary duties should be as small as is reasonably practicable. The new framework for economic regulation would apply to airports with significant market power—currently, Heathrow, Gatwick and Stansted. General and business aviation interests will be covered when the flight includes passengers. For example, when a corporate flight is carrying business passengers, the primary duty will extend to the passengers as they will comprise users of transport services. It appears that the only cases where the interests of general and business aviation will not be taken into account are when the flight carries neither passengers nor cargo, other than cargo carried by the pilot. A secondary duty to take into account the reasonable interests of general and business aviation is unlikely to make a material difference, having regard to the very small percentage of such flights to regulated airports.

The Bill recognises that conflicts may arise between the interests of different users of air transport services. In such cases, the CAA has very wide discretion to decide whose interests it should further. Against this background, we do not think that it is appropriate to give specific prominence to the interests of general and business aviation or indeed any other specific sector. For all airports, when demand is higher then capacity for finite take-off and landing slots, this is generally reflected in the fees charged. In a competitive market, an airport operator is likely to prefer to receive flights with large numbers of passengers over those with fewer passengers when this enhances its profits. The Bill will not impact the mechanism for setting airport charges at airports not deemed to have substantial market power, which is the vast majority of airports

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and airfields used by the general aviation community. This is a further policy reason not to pay special regard to general and business aviation.

However, the Government absolutely recognise the valuable contribution of the general and business aviation sector. The CAA’s Strategic Review of General Aviation in 2006 estimated its contribution to the UK economy at £1.4 billion per annum, a little less than the PWC report referred to—probably because different tests were applied—but still a very significant sum none the less. As noble Lords have observed, it delivers important services such as search and rescue, mail delivery, life-saving organ transport, law enforcement, aerial survey and environmental protection flights, as well as underpinning the training of future pilots. It also has growing economic importance for the European manufacturing industry. I would like to take this opportunity to pay tribute to my noble friends Lord Rotherwick, Lord Trefgarne and Lord Goschen, who miss no opportunity to promote the needs of general aviation.

The noble Lord, Lord Berkeley, mentioned hot air balloons. I like seeing hot air balloons in the summer in the countryside, but my wife has declined to take a ride in one for the reasons that noble Lords have identified. The noble Lord, Lord Berkeley, will know that aviation safety is covered by other legislation but is policed by the CAA as the safety regulator.

The Government are currently developing a long-term strategy for sustainable aviation in the UK. A formal consultation document is due to be published later this summer, when the general aviation community and other aviation stakeholders will be invited to comment. However, I believe that these amendments would create unnecessary ambiguity and ask my noble friend to withdraw or not to move them at the appropriate point.

Amendment 11 seeks to introduce a new clause after Clause 1 that would place a requirement on the CAA to publish a statement of policy setting out how it plans to carry out its functions as set out in Clause 1. I understand that the intention of this amendment may be to be ensure transparency in the CAA’s exercise of its new duties. The Bill as drafted provides a clear primary duty to end-users that the CAA supports. However, there are several reasons why I do not think this amendment will work in practice. First, the amendment as drafted requires the CAA to prepare and publish the statement of its policy with respect to carrying out its functions under Clause 1. However, the CAA has no functions under Clause 1; rather, Clause 1 sets outs the way in which it must carry out its functions under Chapter 1. The amendment as drafted would appear to have no effect. In view of this, I hope the noble Lord will withdraw his amendment.

Lord Rotherwick: I thank all noble Lords who took part in this debate and I thank the Minister for his response, although it was not very helpful and rather disappointing. He was not able to offer me much comfort for my amendments. Bearing in mind what he said about consulting later on promoting and safeguarding airports, it would certainly be helpful to sit down with him and his Bill team to find out whether we could get additional comfort.

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Earl Attlee: My Lords, I would be delighted to continue to work closely with my noble friend on the issue of general aviation.

Lord Rotherwick: I am very grateful for that because it has taken us a generation to have vehicle for this and we do not want to miss it. Perhaps I could talk to him a bit later. I am interested in our not giving a negative statement to the European business community, saying that the UK is not open for aviation in all its diversity. As saturation takes up the three main airports, and then the next five, there needs to be an aviation infrastructure left for the rest of the aviation community to flow into. I thank the noble Lord for all his help on this and beg leave to withdraw.

Amendment 3 withdrawn.

Amendment 4

Moved by Baroness Worthington

4: Clause 1, page 2, line 10, at end insert—

“( ) the need to ensure that the holder of a licence under this Chapter complies with applicable planning laws,”

Baroness Worthington: My Lords, in moving Amendment 4, I will speak also speak to Amendments 6, 7, 13A and 69, which have been grouped under the title of environmental amendments. I seek to reinstate environmental duties into the Bill. These amendments are not new and were tabled in the Commons. We have received some responses from the Government that have quite frankly been disappointing. The Bill, as noble Lords will know, started out under the previous Government. When we issued our consultation document in 2009 and our decisions document in December of that year, we made very clear that we intended to use such a Bill to introduce an environmental duty on the CAA.

It was, therefore, with great regret that we noticed that the current Bill does not contain such a duty. We understand that the Minister in the Commons Committee has given reasons why she believes that it should not be included, although it is rather odd for the so-called greenest Government ever to renege on or move away from environmental commitments. We would have thought that they would take every opportunity possible to introduce these duties, so it seems a little odd and the reasons given are not convincing.

The first reason given is that a primarily economic regulatory Bill is simply not the place to put environmental regulations. To that, I simply say that there are obvious precedents for creating environmental duties within economic regulatory instruments. Other bodies that have an impact on the environment such as the ORR, Ofgem, Ofgas and Ofwat all have secondary duties to take into account environmental concerns and sustainable development. As an example I will read the duty put on Ofgas, which has a duty to,

“have regard … to the effect on the environment of activities connected with the conveyance of gas through pipes … and to contribute to the achievement of sustainable development”.

It is, obviously, primarily an economic regulator, but it has, nevertheless, an environmental duty, because it is an activity that brings with it environmental issues. I do not see, therefore, that that reason holds, and it would be very good to hear from the Minister

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on whether the Government accept that there is no real difference between the CAA and other economic regulators, and to get an explanation of why it cannot also have an environmental duty.

The other reason given in response to some of these amendments might be that they apply only to the dominant airports. That is why we have included Amendment 69, which will come later, ahead of Clause 100, to give a general duty. We agree that it should not just be a matter for the dominant airports, but should be across the industry.

Yet another reason given for not accepting these amendments is that they are simply not needed. In fact, there are many people who disagree with that. When we were in government, we did not agree; as I have stated, we made it clear that we would put such duties into the Bill. Also, the Department for Transport’s press release of November 2011 did not seem to agree either. That—rather erroneously, as it turns out—stated that such a duty would be included, so it seemed odd that when the draft Bill was published it did not contain these environmental duties. Most recently, in January 2012 the Transport Committee made it clear that it also believed that it should be included. It stated:

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

The crucial point is that we need to take discretionary spending into account here. There will be examples—civil groups such as Airport Watch have provided them—where airports may want to undertake voluntary measures to improve their environmental performance, but will seek to recover those costs. We need to maintain the CAA’s flexibility to allow them to do this. It is a very important point. We do not want to see a race to the bottom through cost-cutting at the expense of environmental measures. It is, therefore, important that these duties are established and, as I said, many people agree with us on this.

I turn now to Amendment 6, which relates not to the broader environmental duty to have regard to the environment, but is more specifically to do with carbon budgets. In this debate about aviation we cannot ignore the fact that this sector has a considerable environmental impact, that climate change is a real problem, and that there is cross-party consensus that we need to tackle it. So it is clearly important that we enlist all those sectors that contribute to our carbon budget to help in reducing it. It is absolutely imperative that we follow the advice of the Committee on Climate Change on including aviation in our carbon budgets. Having done that, we then need an industry and regulatory body that has environmental concerns and the meeting of those carbon budgets at its heart.

6.15 pm

We cannot continue with business as usual. The sector will have to undergo significant change. If we keep putting our head in the sand and pretending that

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there is not an issue we may find all sorts of unintended consequences. We might build far too much excess capacity, which is not needed because environmental pressures and consumer choices take us down a different route. The meeting of our carbon budgets helps us to plan for the future in a world where we know there will be a carbon constraint. We must not simply put our head in the sand and assume that aviation or any other sector can carry on using up our carbon budgets as though it did not matter.

It is important to note that aviation is now included within the EU Emissions Trading Scheme so the airlines are becoming accustomed to carbon budgets and budgeting. We also need the CAA to take that on board and become involved in this process. You may ask what role airports really play in this and say that we should perhaps concern ourselves more with airlines’ emissions. However, airports can and do play an important role not only through their own emissions on the ground but in how they interact with the airlines. I noted yesterday that BAA is reporting a reduction in its income because airlines are adapting more quickly than expected to the graduated charges that favour more efficient airlines. Already, the sector is seeing its business model change because of carbon budgeting and that pressure now on industry to reduce its emissions and improve the efficiency of its fleet. If the CAA is to keep pace with that, it will need powers to enable it to take that longer view and introduce charges that keep pace with industry moving towards more efficient, lower-carbon aircraft and fuels. It is absolutely important that the CAA should be given this responsibility. It is important that we do not treat aviation as a special case. It must be included within the carbon budget, as are other sectors that contribute to that budget.

It is not all doom and gloom. If the aviation industry and airports in particular can adapt themselves to the coming future and see themselves as transport providers or communication enablers, rather than simply saying, “We build airports and let people fly to and from them”, they will see all sorts of other business opportunities emerging. There is the inclusion of different ways of connecting people, such as telepresencing or video conferencing, so that they are not defending an industry that will absolutely have to change in order for us to tackle climate change.

I will leave it there. If we do not give prominence to carbon budgets there is a risk that we will simply carry on regardless and feel the penalty in future. This is all about taking a long-term view and I hope that noble Lords and the Minister will take the amendment seriously. I look forward to his response. I beg to move.

Lord Bradshaw: While not unsympathetic to what the noble Baroness, Lady Worthington, said, I think that the amendment in my name, which is shorter, takes up most of the points that she made and with which I agree. When the Minister replies, I would like him to be certain that the Marshalled List is correct. It says, “Page 2, line 12”. I am not sure that that is right. It would be a very small adjustment but it may not have been carried through correctly to the Marshalled List.

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Lord Clinton-Davis: I am in entire agreement with what my noble friend said. The impression that might be given is that the unions involved in aviation and aviation interests are unmindful of the environmental situation. A great deal of work has been done on environmental progress, as I well know, having served as president of BALPA for 29 years. I recall meetings of BALPA over the years, and this issue predominates in its influence on events. I know that a great deal of work has been done by aircraft manufacturers, who are not unmindful of their ill effects on the environment and take them into account. The next generation of aircraft will improve the effects of aviation on the environment in future—and so it will go on. This ought to be taken into account in the amendments being moved.

It is right that some emphasis should be given to the work being done on the environment and that it should be included in the legislation. What I can say without any possibility of contradiction is that the use of the word “environment” is not simply a byplay on words but the sign of a real concern, which has been expressed by British Airways, in particular, but also by other aviation interests. It would not be sensible for any aviation interest, whether the companies concerned or the trade unions, to suggest that they are not mindful of the ill effects of aviation on the environment. They are, and it figures very largely in what they have to say on this issue.

Lord Soley: I am also sympathetic to these amendments. If I was asked to choose one particular amendment, it would be Amendment 6, because it links up the key organisations, the National Air Traffic Services, the Committee on Climate Change and the department. It is better if we pinpoint what we want the CAA to do and whom it should work with on this, so that we get an overall approach. I support what my noble friends Lady Worthington and Lord Clinton-Davis said; he has great and long experience in this regard.

The reality is that if you had asked the aviation industry 10 or 15 years ago, it would not have taken climate change anywhere near as seriously as it should have done. But it has woken up, and woken up fast. Because the aerospace industry is such an important scientific and technological driver, it has begun to leap ahead. So you now find, as the Minister will know from our several conversations when I have provided him with information on alternative fuels, most notably algae, that it and other drop-in fuels are actually good for the environment. There is real movement there. The new design of aircraft has made them much quieter and more powerful, so you get the A380, which requires a runway that is half the length of that required by the old 747, even though it was much smaller. It is quieter because it is quieter anyway and its fuel efficiency is particularly good. The effect of the emphasis by the aviation industry on improving has been great, and the airport operators have emphasised it too. I think I mentioned at Second Reading that when I spoke at the Airport Operators Association conference in about 2004, very few of them saw trying to reduce emissions from ground operations as a high priority. They now do, and they give it enormous importance. Look at what has been done at Heathrow

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with electric vehicles. They are all making efforts. However, I always put a cautionary note here because when we talk about electric propulsion, whether for trains, cars or any other operations, we have to remember that electricity in this country is predominantly produced from coal, oil and gas with some nuclear, so it is not as clean as we sometimes like to pretend it is.

Nor are we as good on noise. At Second Reading I mentioned the noise of the trains that went through my former constituency at 100 miles an hour, barely 50 or 100 feet from people’s front and back doors. That went on throughout the night 365 days a year. I have lived next to such railway lines, I have lived under the Heathrow flight path for over 30 years and I have lived by major roads in Glasgow, so I have experience of all of them. In many respects, aviation noise is a bit easier if it is reduced from time to time by runways and flights being switched.

Going back to the comment by my noble friend Lady Worthington on the emissions problem, some of the predictions that have been made about aviation in 50 years’ time are wildly wrong because they are based on the assumption that there will be no scientific development. If you take the scientific development that has been achieved now, leaving aside fuels and just looking at efficiency, you will get nowhere near the figures predicated in the horror scenarios. I say this as someone who has been worried about climate change for years—I wrote my first article on it in the early 1980s—but I have also seen how the green movement got things badly wrong on Brent Spar. It ignored the scientific advice on that and on nuclear power, which I saw as essential to get us out of the hole we were in.

I do not want to turn this into a long debate on the environment, but I want to say, as my noble friends Lady Worthington and Lord Clinton-Davis have said, that if we give the CAA a duty to work with NATS, the department and the Committee on Climate Change we are getting quite a good link-up. We all know about the problem of air traffic control centres in Europe— I mentioned this at Second Reading, so I shall not speak about it at great length—but we have 10 times more than North America for a similar amount of airspace. There is a great fight in Europe about who has to close an air traffic control centre. Believe it or not, no country wants to close one, so we end up flying in doglegs across Europe, which increases fuel use. There is some very encouraging work being done on this, but it would be useful to have in the Bill a requirement to work with the organisations, especially that contained in Amendment 6, which is the amendment I prefer on this.

Earl Cathcart: I shall speak to the last three amendments in this group as they follow naturally from what I said at Second Reading. I support Amendments 7 and 13A—Amendment 13A has been substituted for Amendment 12—and will deal with them together as they are identical. It must be right for the CAA to have a duty to have regard to the impact of airports on the environment and local communities.

Chapter 1 sets out new arrangements for the economic regulation of dominant airports in the UK. These new arrangements were largely designed by Professor Cave, who the then Secretary of State appointed in 2009 to

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propose a new regulatory system for the UK’s airports. The Bill almost entirely follows his advice. I say “almost” because Cave recommended that the CAA, in its role as economic regulator, should have a supplementary duty,

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

This is missing from the Bill. As we heard at Second Reading and from the noble Baroness, Lady Worthington, every other comparable UK regulator has some form of statutory environmental duty. Why should there be an exception for the aviation industry, especially in view of the serious impacts that airport operations and air transport services can have on the environment and local communities?

6.30 pm

It seems that the Government came very close to including an environmental duty for the CAA in the Bill. As the noble Baroness, Lady Worthington, mentioned, on the day that the draft Bill was published, last November, the Department for Transport’s press release stated that the Bill would require the CAA,

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

It is no coincidence that this quote exactly mirrors the Cave quote that I gave a moment ago. Oddly, we were later told that it was an error and it was not included, but it was clearly in someone’s mind to include it until very late in the day.

In supporting these amendments, I do not advocate that environmental considerations should take precedence over passengers’ interests, or even that they should rank equally with those interests. The CAA’s primary duty should, quite rightly, be clearly focused on the interests of passengers. As the Department for Transport’s policy paper for the Bill points out in paragraph 2.14:

“The primary duty will be supplemented by a set of further duties which cannot, individually or collectively, override the primary duty. Rather they aim to set out factors that the CAA should consider in giving effect to its primary duty”.

Therefore, this duty to the environment and local communities is and should be supplementary.

It has been argued in the other place that it would distort the market to give the CAA an environmental duty in its role as economic regulator because only three airports are currently subject to economic regulation; namely, Heathrow, Gatwick and Stansted. I am not convinced that this is a terribly strong point. The regulated UK airports are, by definition, those with the most market power. Together, Heathrow, Gatwick and Stansted account for 55% of the UK market and have some major competitive advantages over the smaller UK airports through economies of scale. It is inconceivable that these dominant airports would be put at a competitive disadvantage to smaller airports simply because the CAA had the statutory authority to allow them to recover discretionary environmental expenditure through their airport charges.

The concern is that the CAA’s hands will be tied by the Bill. If the CAA were to allow a regulated airport to recover discretionary environmental expenditure

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through airport charges, an airline could mount a legal challenge. The Bill leaves the CAA defenceless against such a challenge because, as it is presently drafted, the CAA has no statutory duty or authority in relation to an airport’s environmental impacts. This concern was voiced by the Transport Select Committee in the other place. It said:

“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 Heathrow, Gatwick and Stansted are prevented from recovering discretionary expenditure on measures to offset their environmental impacts, doing the absolute minimum may become the norm. This could result in—to use the phrase of the noble Baroness, Lady Worthington—a race to the bottom in environmental standards at our leading airports. That example may well be followed by our non-regulated airports, which is not what we want to achieve.

I turn to Amendment 69, which I also support. In supporting the two earlier amendments, I referred to the advice which the then Secretary of State took from Professor Cave in 2009. Just prior to that, in 2007, the Secretary of State had appointed Sir Joseph Pilling to carry out a strategic review of the CAA. It was not confined to the CAA’s economic regulation role but covered the organisation as a whole. Among his key recommendations, Pilling called for its new statutory framework to make clear that,

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

and for the CAA to be given,

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

He described the absence of a general environmental duty in the CAA’s statutory remit as a “notable gap”. This amendment is designed to remove the notable gap regarding the environment and to make it clear to the CAA that its responsibility is to safeguard the general public interest and not only the interests of the aviation community.

I wish to make just one other point on this. The earlier Amendments 7 and 13A have been criticised because they would give the CAA an environmental duty only in relation to its role as economic regulator. Thus, they would apply only to our three largest airports and so create the risk of distorting the market. This amendment, however, would give the CAA a general environmental duty, applicable to all airports.

Finally, some may feel that the wording of this amendment, particularly the phrase, “where possible and appropriate”, is rather weak, but it does not need to be strong. It is not intended to give the CAA an aggressive environmental role. It is largely to give the CAA a basis for defending its actions in the event of a legal challenge from airlines, which want the minimum possible expenditure on environmental mitigation measures.

I am not sure of the best place in the Bill for this statutory duty, but what I am sure of is that it must be included somewhere. We all owe a duty to the environment. Why should the CAA be an exception? So I hope that

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my noble friend Lord Attlee will keep an open mind on this subject, agree to consider it further and come back on Report with a suitable government amendment.

Baroness McIntosh of Hudnall: I do not think that I will detain the Committee long because I could not possibly put my arguments better than they have just been put by the noble Earl, Lord Cathcart. He has made every single point that I wanted to make, succinctly and elegantly, which is marvellous for the Committee and not so bad for me.

I support these amendments, which were moved very ably by my noble friend Lady Worthington. In particular, I want to support Amendment 69 for the very reasons that the noble Earl, Lord Cathcart, gave. I felt that he put the points in exactly the way in which they needed to be put. This amendment would provide the CAA with a general duty, which would meet the objections that it would somehow be to the disadvantage of the regulated airports if they were subject to a particular kind of scrutiny by the CAA that was not going to be applied to the airports that are not regulated.

I declare an interest in that, very stupidly, I have chosen to live under two flight paths. I live in north Essex, under the flight path into Stansted, and in Dolphin Square, under the flight path into Heathrow. This was not good planning on my part, but it gives me the ability to make one particular point that the Minister knew that I might raise to do with noise.

Environmental issues can be understood very broadly or quite narrowly. What has been interesting about the whole debate this afternoon, from the outset, is that it has all been drawn towards this issue of environmental impacts. The first amendment from the noble Lord, Lord Bradshaw, which talked about surface access, was actually talking about the impact on passengers and local communities of insufficiently well developed infrastructure, which is an environmental impact. Noise is too, and my noble friend Lord Soley is quite right that if you live next to a railway line that goes all night, that is also disturbing. However, living under a flight path where so-called night flights really only stop between midnight and 4 am means that you lose a lot of sleep. There are a great many people who are adversely affected by that. That does not necessarily include me, as I am fortunate enough to be able to cope. However, people who are very ill, very young children or people who suffer from sleep disorders are going to be very adversely affected if noise pollution is not controlled effectively.

Emissions, which my noble friend Lady Worthington talked about with great authority, as one would expect her to do, are less easy for people to understand in their daily lives. You are not aware, on the whole, of the sort of damage that is being done to you as an individual by the aeroplane that is going over your head emitting toxic fumes that you cannot smell but which sure as heck are there. The same is true of the impact of surface transport around and in airports. The whole range of impacts that can be broadly said to be environmental is very wide, and I find it very hard to understand why the Government have so far resisted giving the CAA the general duty that Amendment 69 would give it. It gives rise to a slight suspicion that they may be susceptible to the wrong

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kind of pressure, possibly from the aviation industry—who knows?—rather than giving what most noble Lords in this Committee today appear to accept is proper consideration to the wider social and environmental impact of that industry’s activities.

I do not think, as my noble friend Lord Clinton-Davis appears to believe, that the industry is unmindful of its environmental impact. I do not think that at all. Having lived under the flight path into Stansted for 10 years, I am aware that a huge amount of work has gone on in the development of aircraft, in respect of both noise and emissions and that there is a strong wish on the part of the industry, in its own interests and in those of the wider community, to continue developing, for example, better fuels, which my noble friend Lord Soley mentioned, and engines and airframes that are less likely to produce excessive noise.

I do not believe that in some way this is an opportunity to bash the aviation industry or not to accept that it has done a great deal already. However, there is much more to do. The danger that we stand in if the CAA does not have the kind of strengthened position that this amendment would give it is that the competition between airports that was talked about in earlier amendments will give rise to reluctance on the part of the industry to accelerate that work as quickly as it otherwise might. It will also, as the noble Earl, Lord Cathcart, has already mentioned—

6.45 pm

Lord Clinton-Davis: Beyond the work of the CAA, does my noble friend recognise that without any prompting the aviation industry and the trade unions concerned with aviation are all mindful of the ill effects on the ground? Is it not appropriate that a tribute should be paid to them for the work they have done and will do in future?

Baroness McIntosh of Hudnall: I believe I just did exactly that. As I already said, I am very well aware of the work that the industry has done and will continue to do in both its own interests and those of the wider community. I merely say that the aviation business is very competitive. There are strong pressures—which I do not suggest are venal in any way—on the airlines to compete with each other and on the airports to compete with each other. If the CAA was not properly equipped with the right regulatory powers, those pressures could lead to some of the reduction in environmental impacts that we would like to see not being achieved either as quickly as we would like or at all.

It seems to me that Amendment 69 in particular is quite modest. I did not draft it. I simply observe that it looks fairly straightforward. As the noble Earl, Lord Cathcart, remarked, it is deliberately structured so as not to place an onerous duty on the CAA but to place an obligation on it where appropriate to exercise this particular power. The point that the noble Earl made about the protection that it offers the CAA is very important. Could the Minister explain to the Committee on what grounds—other than in the difference between the regulated and unregulated airports—the Government have resisted and I fear may continue to resist this particular amendment?

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Lord Jenkin of Roding: I will be very interested to hear my noble friend’s response as to why the obligation contained in earlier legislation has not been repeated in the present Bill. I do not want to repeat what others have said. I, too, feel that Amendment 69 is likely to be the more acceptable of those in the group. One consequence if such an obligation were imposed is that it would go a long way to answer the question that I put to my noble friend at Second Reading on what Clause 84 is about. Clause 84 obliges the CAA to give all sorts of information. When I asked my noble friend at Second Reading what that meant, he said the Bill was,

“designed to require the CAA to publish such … information as it considers appropriate to draw passengers and freight owners into the Government’s wider efforts to address the environmental impact of aviation”.—[

Official Report

, 13/6/12; col. 1378.]

If the CAA does not have any sort of duty, I find that a very difficult paragraph to understand. Of course, as my noble friend Lord Cathcart said with eloquence, and as has been moved by the Opposition Front Bench, if the CAA had that duty then that would fall into place. It would be quite right, if it had that duty, that it should publish that information. The information by itself, without a duty, seems a pretty off way of drafting the legislation.

My noble friend the Minister was extremely good at answering several of the points that I raised at Second Reading but he did not quite have time to answer them all and he did not answer my question about what that paragraph in the Explanatory Note meant. I merely mention this as a consequence of the amendments to restore a duty to have regard to the environmental consequences of aviation and of the airlines.

Lord Berkeley: My Lords, as my noble friend Lady Worthington said in her opening remarks, it is useful to reflect on some of the industries which are regulated in this respect and to reflect that these industries have, for their own rights and reasons and in order to comply with the regulator’s duty, made big improvements in the areas of emissions, noise, water, energy and construction. The rail industry has been required to reduce its diesel emissions, as has the road sector. I am not sure that it will be quite as easy to persuade some ship owners to change their fuel but the European Commission is intent on doing so. I am sure that it will happen one day and that it will be either voluntary or forced upon them. As my noble friend Lord Clinton-Davis said, the air industry has made significant improvements.

It would be odd if the Bill did not contain a requirement or duty on the CAA to take into account environmental matters. That does not mean that the air industry is particularly bad at doing so but there is evidence from other industries that, because of these regulatory duties, they probably try a little harder and in a way that they would not do otherwise.

I am inclined to support Amendment 69 but it is very important that we include something here so that there is commonality with some of the other regulators’ duties to consider environmental issues, and to encourage airports and the airline industry to go that little bit further.

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Many noble Lords will recall the debates when the third runway was last on the agenda about the emissions from Heathrow and whether they were over the limit. Were they caused by emissions from the M4 running past on the north side or from the M25? There were many debates—I do not want to go into who was right and who was wrong—and one solution was to put the M4 in a tunnel. I cannot see the point of that because emissions will still take place in a tunnel and will have to come out somewhere. They might come out further away but, to me, that would be cheating. Again, this concerns the idea of the noble Lord, Lord Bradshaw, of including surface access, which I am sure will come up again.

However, matters have improved since then in the quality of emissions from the air and road industries. It is essential that something along the lines of the amendments is included in the Bill.

Earl Attlee: My Lords, the issue of aviation and the environment was raised by several noble Lords during Second Reading. I am pleased to return to the matter again and to give further consideration to this important subject. I have not tabled a government amendment because I am reluctant to pre-empt the Committee’s consideration of this topic. However, I hope that when we have finished the Bill the noble Baroness, Lady Worthington, will not be disappointed.

The noble Baroness almost fell into the trap of being political. She will know that we take environmental issues very seriously indeed and that that is why the coalition Government will not agree to a third runway at Heathrow. It is clearly for environmental reasons, particularly noise. This was referred to by the noble Baroness, Lady McIntosh. Perhaps the noble Baroness, Lady Worthington, will state what her party’s policy is with regard to the third runway at Heathrow. Does she or does she not support it? I can assure your Lordships that I have listened to the points raised today and that I shall carefully read Hansard.

The point was raised about the drafting of the amendment. Yes, Amendment 13A was substituted for Amendment 12 on the Marshalled List.

Many noble Lords asked why other economic regulators have an environmental duty but not the CAA. Other economic regulators apply economic regulation across most or all of their respective industries, but the CAA regulates only the three London airports, as observed by my noble friend Lord Cathcart. Why should Manchester not be subject to environmental regulation while Gatwick is? If the CAA had an environmental duty, no noble Lord has explained to me, by way of example, what it would do with it that is not already done by some other means.

My noble friend Lord Jenkin asked about the publication requirements in Clause 84. We are not quite there yet but I will write to my noble friend and, if necessary, he can table an amendment to Clause 84.

Lord Clinton-Davis: The noble Earl has referred to Clause 84, which is highly desirable apart from one feature. It would be helpful to allude to that now. Why does the CAA have to divulge environmental information only if it considers it appropriate?

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Earl Attlee: My Lords, it is for the CAA to work out whether it is in the public interest to publish the information.

I recognise the value of noble Lords’ contributions, particularly those of the noble Lords, Lord Clinton-Davis and Lord Soley, and my noble friend Lord Cathcart. They made very important points and some of the technical points made by the noble Lords, Lord Clinton-Davis and Lord Soley, were very interesting. I share the concerns about the environmental impacts of airport operations and wider aviation. The coalition takes the environmental impacts of aviation very seriously, as I have explained.

Each of these amendments seeks to add to the Bill supplementary duties that relate to environmental or planning issues. Amendments 4, 5, 6, 7 and 13A seek to add supplementary duties to the CAA and the Secretary of State’s airport economic regulation functions, whereas Amendment 69 seeks to add an overarching duty for all the CAA’s functions, including airport economic regulation. This would create a tension with the CAA’s primary duty in Clause 1(1).

I turn first to the amendments that would provide the possibility of the CAA having an overarching environmental duty. The idea is not a new one. The previous Government consulted on a general environmental objective for the CAA, along with parallel proposals for a general consumer and safety objective. No clear support for a general environmental objective was evident. This flowed from Sir Joseph Pilling’s review of the CAA. The responses to the consultation were mixed and did not show clear support for a general environmental objective. For example, concern was expressed about ensuring a clear boundary between environmental policy, which was seen as the role of the Government, and the role of an expert aviation regulator, where safety was seen as the priority. After all, the Environment Agency is the body responsible for regulating environmental issues.

Lord Soley: I am looking again at Clause 84. The Minister has indicated that he wants to help the Committee on this issue. When he responds on this at a later stage, will he consider whether Clause 84(2) could apply to all airports? It states:

“The CAA may publish guidelines and advice with a view to reducing, controlling or mitigating adverse environmental effects on civil aviation in the United Kingdom”.

In a way, it refers to the whole of the UK and I am not sure why, with a bit of tweaking, Clause 84 could not cover some of the points that we have made.

Earl Attlee: My Lords, a little inspiration comes and says that it does.

Lord Jenkin of Roding: May I follow up the point that the noble Lord, Lord Soley, has just made? My noble friend invited me earlier to table amendments when we get to Clause 84. I do not wish to amend Clause 84, but I need to know the context in which the information requirements and powers that will be given by that clause will operate. If, as has been suggested by other Members of the Committee, there should be a duty on the CAA, perhaps the clause is all

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right. If we are to reach the next stage of the Bill without having a government amendment on the Marshalled List that says what is happening to the general power, it is quite difficult to know what to do.

My interpretation is that while my noble friend has rehearsed some of the questions and objections, he is not shutting his mind to this. The possibility remains, therefore, that there will be a government amendment before Report, in which case we can look at Clause 84 in the light of that government amendment. However, if there is no such government amendment by that time, it is very difficult to see what else you could do to Clause 84. The point I made is that these things hang together.

Earl Attlee: My Lords, I assure the Committee that I have a very well thought-out speech. I believe that the upcoming aviation policy framework, due to be adopted by March 2013, represents a more proportionate and effective way for the Government to address the environmental impacts across the aviation sector as a whole. As I have said, this Government take seriously the environmental impacts of all airports. With regard to the other amendments, several of these have been extensively debated in the other place, and the Government’s position on these remains unchanged.

First, I turn to Amendment 4. As your Lordships will be aware, the previous Government decided to include a similar duty to that contained in Amendment 10. However, in practice the supplementary duty would have no substance, so the Secretary of State decided in July 2010 to omit it. This is because the duty as drafted would appear to require the CAA, in discharging its primary duty, to take account of the licence holder’s obligation to comply with planning obligations. It is not for the CAA, as an economic regulator, to enforce planning law through licence conditions. In so far as a licence condition purported to require the licence holder to breach planning law or otherwise act in breach of planning law, it would appear to be unlawful. Regardless of whether the CAA had this explicit duty or not, the CAA will need to have proper regard to the airport’s obligation to comply with all applicable legal obligations, including planning law.

Amendment 6, in the name of the noble Baroness, Lady Worthington, covers climate change. While important, this is also unnecessary because other policies seek to achieve it. Separately, the Government have committed to producing a sustainable framework for UK aviation that supports economic growth and addresses aviation’s environmental impacts. In addition, there are other policies, such as the European Union Emissions Trading System, which was mentioned by the noble Baroness when she touched on efficiency issues. Furthermore, this amendment would appear to go beyond airport economic regulation and it is unclear how the CAA would go about fulfilling this duty—a point I made earlier.

However, the Government have some sympathy with the thinking behind the remaining amendments—that is, Amendments 5, 7 and 13A. In particular, this debate allows us to acknowledge the importance of allowing appropriate investment at airports to mitigate their environmental impacts and those of activities associated with them. Without a doubt, this Government

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support the idea that airport operators—whether or not they are subject to economic regulation—should be able to invest in appropriate environmental measures. This concern was frequently raised in the House of Commons. However, obligations should not be put on some airports but not others depending on their economic regulatory status.

Our position is that a licensed airport operator should not be unable to recover, through the regulatory settlements, costs arising from undertaking environmental investment where an unregulated competitive airport would choose to incur similar costs for similar purposes and be able to recover those costs. After all, the overall aim of economic regulation is often cited as delivering the outcomes that would otherwise occur in a competitive market. Therefore, it is my belief that environmental investment that is in the passengers’ interests in the provision of airport operation services should be included in an airport’s regulatory settlement. This is a point on which more clarity could be provided in the Bill.

However, I am hesitant to accept these amendments today because I believe that it would be desirable to specify some or all of the environmental effects to which the CAA must have regard. Furthermore, we need to ensure that the drafting does not have the capacity to create distorting effects by putting greater obligations on regulated airports relative to non-regulated airports. With the assurance that I will consider these matters in detail ahead of Report, I hope noble Lords will be willing to withdraw Amendment 4, and not press Amendments 6 and 69. However, I am willing to consider Amendments 5, 7 and 13A—

Lord Berkeley: The Minister gave a very interesting speech and I congratulate him. He mentioned some or all environmental issues, but is that not moving into a rather dangerous area of lists and what goes into a list? Are you going to include bats but not tadpoles, or noise and things like that? I hope that he will take into account that it is very dangerous to produce lists of these things because you might leave things out or add things in that you subsequently do not want.

Earl Attlee: The noble Lord makes a very good point, and I am sure that my officials will not let me go too far. However, I am willing to consider Amendments 5, 7 and 13A in greater detail, with a view to returning to the matter on Report. I would find further meetings with noble Lords extremely valuable.

While I appreciate the spirit in which noble Lords have proposed these amendments today, as I have said, there are a few reasons why I am hesitant to accept them now. Interested parties have made it clear that the CAA should not be the environmental regulator. If such duties were to be imposed, I also believe it would be desirable to specify some or all of the environmental effects to which the CAA must have regard. With the assurance that I will consider this matter in detail ahead of Report, I hope that the noble Baroness and other noble Lords will be able to withdraw and not to press their amendments.

Baroness Worthington: I thank the Minister for his comments. I am encouraged that he anticipates that I will not be disappointed and that he will consider

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further a number of the amendments. I come back to a few of the things that he mentioned. It would seem odd not to introduce such a duty because it would apply to only 55% of the market and not 100%. Clearly, 55% is better than nothing. I know that he will say that it is about competitive distortions, but let us be honest—I think that the noble Earl, Lord Cathcart, made this clear—those three airports have a distinct advantage over the others in terms of scale. They are off the scale in comparison to the other airports. There are many other environmental regulations that have this differentiation between the smaller and larger, dominant operators. There are often lots of de minimis thresholds put into regulations to account for the difference in scale. I really do not see that as a problem, and I urge the Government to go through with the 55% if they are very keen on environmental issues, which they say they are.

I wonder—and this may be something that we can meet about—whether Amendment 69 does not help to address this question by creating a more general duty that would cover all of the CAA’s operations. I can understand the question of how CAA would operationalise it, given that it does not license the other operators, but I am sure that it is not beyond our wit to be able to work through that.

The Minister talked about planning and said that he could not understand what it would be used for. I echo the noble Earl, Lord Cathcart, in saying that we are trying to prevent a legal challenge and to give the CAA cover if it chooses to apply its discretion and include discretionary spending within the regulated asset base. So it would be used as a defensive measure against being forced not to include environmental measures. There are other things that relate specifically to planning. Often planning approvals include Section 106 agreements—additional obligations to which a developer voluntarily agrees. So they might not be caught within a very strict interpretation of the law, because they are very often quite loosely worded. So there are some questions there about planning.

I pay tribute to my noble friends and other noble Lords who have contributed to the debate. It has been a good debate and I am very encouraged. We all recognise, as my noble friends Lord Clinton-Davis, Lord Soley and Lady McIntosh have accepted, that the aviation industry should not be singled out for not embracing the environment. It clearly does move forward on a voluntary basis. That is exactly what we are trying to say here: we want to enable and allow this voluntary move towards a more efficient, cleaner and more environmentally responsible industry. We do not want this Bill to stop that. That is a very important point. We are not saying the sector does not wish to move. I am sure it does, given all the pressures that it is under.

My noble friend Lord Berkeley raised the point, which we have made before, that other sectors are regulated with environmental duties. He specifically mentioned rail as an example. Rail often competes directly with the aviation sector when it comes to short-haul flights and it seems odd that rail should have an environmental duty but aviation not. The noble Lord, Lord Jenkin of Roding, raised some very important points about other elements of the Bill, in

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particular Clause 84 and how that relates to the duties that we hope will be created. My noble friend Lord Clinton-Davis talked about the fact that the aircraft and aviation industry wish to respond. I hope I have captured most of the contributions and I thank the noble Earl for his encouraging words. I look forward to something being brought forward by the Government and beg leave to withdraw my amendment.

Amendment 4 withdrawn.

Amendments 5 to 7 not moved.

Amendment 8

Moved by Lord Rosser

8: Clause 1, page 2, line 19, leave out paragraph (b)

Lord Rosser: My Lords, this is an opportunity to debate a rather more mundane amendment compared with the ones we have just been discussing. This amendment and Amendment 14 in the group delete the references in Clause 1(4)(b) and Clause 2(5)(b) to the principle in the general duties of the Civil Aviation Authority and the Secretary of State respectively that,

“regulatory activities should be targeted only at cases in which action is needed”.

Clause 1(4)(a) and Clause 2(5)(a) both state that,

“regulatory activities should be carried out in a way which is transparent, accountable, proportionate and consistent”.

It is not entirely clear why either Clause 1(4)(b) or Clause 2(5)(b) is needed. Under subsections (4)(a) and (5)(a), regulatory activities should be carried out in a way that is proportionate, but surely it would not be proportionate if those regulatory activities were targeted at cases in which action was not needed. To do so would surely not be proportionate and would therefore be outside the terms of subsections (4)(a) and (5)(a). If the Minister is not inclined to accept my point that the subsection that this amendment deletes is unnecessary, it would be helpful if he could indicate why and also give some examples of regulatory activities that would be proportionate even though they were being targeted at cases where action was not needed. I beg to move.

7.15 pm

Lord Berkeley: My Lords, this is an important pair of amendments because surely the regulator is independent and should therefore be able to make its own decisions about whether it carries out an investigation and, if so, what action it takes following the transparent, accountable, proportionate and consistent rules. If both paragraphs (b) mentioned in these amendments are included, I can see some companies being regulated starting legal challenges to suggest that they do not need to be regulated and that it is going to be very expensive for them and asking why should they answer this question. I understand that the Government have a deregulation agenda and are trying to get rid of unnecessary regulations, quangos and everything else, but this indicates that the company being regulated will be able to put pressure on the regulator in an unsatisfactory way. It is quite clear from paragraph (a) that,

“transparent, accountable, proportionate and consistent”,

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set out how it would do it. Paragraph (b) is rather dangerous. It will be difficult for the CAA not to get involved in it, and I am not sure why it needs to be there. Perhaps the Minister can explain.

Lord Clinton-Davis: On the face of it, paragraph (b) is otiose. I have dealt with several cases in the sub-committee investigating legislation, of which I am a member. It is incumbent upon the Minister to say why this provision is included.

Lord Empey: Does the Minister feel that these two paragraphs could leave the CAA open to judicial review by disgruntled operators? They are adding something unclear with the definition of what is and is not needed. It may be intended to prevent overzealous application of restrictions on operators, but these days, one always has to look at the potential for judicial review, and I suspect that the way this is drafted might leave the CAA open. It might be possible to amend the first paragraph to meet the needs of the Government, but I hope the Minister will address the legal issue.

Earl Attlee: My Lords, I must admit that I am puzzled by these amendments. I take it that they are merely probing amendments, but they are certainly not mundane. They seek to weaken the principles that the CAA and the Secretary of State must have regard to when discharging their economic regulation functions. Specifically, they seek to remove the need to have regard to the principle that regulatory activities should be targeted only at cases in which action is needed. To this extent, the amendment may inadvertently facilitate or encourage excessive regulation, and I am sure that the Committee will agree that that is clearly not desirable. I ask noble Lords to oppose these amendments today because they would remove provisions in the Bill that strengthen the adherence of the CAA and the Secretary of State to good economic regulation practice.

This first amendment seeks to delete one of the principles that the CAA must have regard to in performing its duties under subsections (1) and (2) of Clause 1, which sets out the CAA’s general duty. That principle is that,

“regulatory activities should be targeted only at cases in which action is needed”.

The second amendment makes the same provision for the Secretary of State’s duties.

The principles set out in Clause 1(4) and Clause 2(5) are those that the Better Regulation Task Force defined in 1997 as in keeping with good regulation. They were that good regulation should be transparent, accountable, proportionate, consistent, and targeted.

These principles are not in the Bill by accident. They are a well recognised starting point and one looks to encourage those responsible for economic regulation to apply them appropriately. Having provisions in legislation that reflect these principles is sensible and makes clear what is expected of regulators. It is not only desirable but good practice to have these provisions to encourage the CAA to discharge its Clause 1 functions in a manner that discourages unnecessary regulation.

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It is known that economic regulation is an imperfect intervention. It should be used only where an unregulated market fails to deliver competitive outcomes. However, used appropriately, it can be an effective tool. The provisions in Clauses 1(4) and 2(5) ensure that this is the case in the Civil Aviation Bill. Furthermore, as an experienced regulator, the CAA is not troubled by having regard to the principles set out in Clause 1(4)(b). Indeed, it considers it sound regulatory practice, as do the Government.

Lord Clinton-Davis: It would be convenient for the Committee if the Minister would say that he will have another look at this particular provision because, notwithstanding what he has said, it is not sensible.

Earl Attlee: My Lords, further to the question of the noble Lord, Lord Clinton-Davis, the noble Lord, Lord Rosser, asked me a most ingenious question—which my officials and I will carefully study in Hansard—and if he has exposed a problem I will deal with it. However, I suspect that the advice from my officials is correct. For these reasons, I hope the noble Lord will withdraw the amendment.

Lord Berkeley: Perhaps I may press the Minister a little more on the text in paragraph (b). On what basis does the CAA or the Secretary of State decide that action is needed? Surely they have to investigate before they can come to a conclusion. It seems a circular process.

Earl Attlee: Yes. However, we are talking about the principle of regulation that you do not do things that are unnecessary: you target your effort at a problem. If there is not a problem, you leave it alone.

The noble Lord, Lord Empey, asked whether the subsections could leave the CAA open to JR. These are secondary, subordinate obligations to which the CAA must have regard. Provided the CAA turns its mind to these matters and considers them, it will, prima facie, have complied with the obligation.

Lord Rosser: My Lords, I thank the Minister for his reply and other noble Lords who have taken part in this brief debate.

The Minister said that he will look at Hansard to see what point I was making. To reiterate, the question I am raising is: what is the necessity for the two paragraphs that my amendment seeks to delete? Paragraph (b) states that,

“regulatory activities should be targeted only at cases in which action is needed”.

That comes after paragraph (a), which states that,

“regulatory activities should be carried out in a way which is transparent, accountable, proportionate and consistent”.

I appreciate that the Minister has said that he will look at the question and respond but, to reiterate the question that I asked, how can something be proportionate if it is a regulatory activity targeted at a case in which action is not needed? Surely, by definition, if regulatory action is not needed and you take regulatory action, that cannot be proportionate.

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I am happy to leave it in the context that the Minister will look at the point I have raised and respond to me. I would be grateful for that. I am asking a genuine question. We are all interested in making sure that there is no unnecessary verbiage in legislation, which is the point I am making about the two paragraphs that the amendment proposes should be deleted. However, in the context that the Minister will look at the issue and write to me, I am happy to withdraw the amendment.

Amendment 8 withdrawn.

Amendments 9 to 10 not moved.

Clause 1 agreed.

Amendment 11 not moved.

Clause 2 : Secretary of State's general duty

Amendment 12 had been withdrawn from the Marshalled List.

Amendment 13 not moved.

Amendment 13A, in substitution for Amendment 12, not moved.

Amendment 14 not moved.

Clause 2 agreed.

Clauses 3 and 4 agreed.

Clause 5 : Dominant areas and dominant airports

Debate on whether Clause 5 should stand part of the Bill.

Lord Berkeley: This is by nature a probing question. I apologise to the Committee for not having been here at Second Reading. I am confused and I am sure that the Minister can help my confusion. We are talking here about an economic regulation of possibly three airports around London. Clearly there are issues of competition for businesses within specific airports, and from the way I read it that is clearly in the Bill. I am slightly surprised that there is nothing in it—that I can see—about competition between airports. If Stansted is sold, you will have three different owners of the three major operators, as well as Luton. We are talking about economic regulation and I would have thought that the Bill must include, in addition to the things that are there, regulation of slots and charges and consideration of dominant position. I know that we will come on to that last issue later.

What is the market in which the dominant position is supposed to be considered? The noble Lord, Lord Bradshaw, in his remarks on Amendment 1, listed a number of airports within the London or south-east area. I think that he forgot Southend International, which is now marketing itself as an international

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airport, and Manston and other similar airports. It is a question of how these would be considered. What is within the scope of the CAA on these issues given that we have dominant areas and dominant airports? As I read it, there are the three main airports around London that we have just mentioned, but Luton is pretty big and there are others. It seems odd to put this into the legislation without some explanation. An explanation would help me, but I apologise if this has already been explained at Second Reading.

7.30 pm

Earl Attlee: The noble Lord mentioned slots. These are regulated by the world slot guidelines and, in Europe, by the EU slot regulations. They are implemented by Airport Coordination Limited in the UK. The Government do not and cannot have a role in slot allocation.

Lord Berkeley: If there appears to be a dominant position in slots, does that come under the CAA or the Government? Is there any competition authority, or is it completely outside?

Earl Attlee: My Lords, that is clearly a competition issue. I am not certain about it but I will write to the noble Lord.

Clause 5 defines what comprises a “dominant airport area” and a “dominant airport”. Under subsection (3), “airport area” means an area that consists of or forms part of an airport, including land and buildings. This provision is included to allow for the possibility of there being more than one operator at an individual airport. This could be the case if, for example, an airline acquired or leased a terminal building. As there can be more than one airport area at an airport, it follows that there can be more than one operator of an airport area at an airport.

Subsection (1) states that an airport area is dominant if the CAA has made a determination that the market power test is met in relation to the area and publishes a notice to that effect. Subsection (2) provides that an airport is dominant if all or part of its core area is a dominant area or part of a dominant area. Subsection (4) describes what comprises a core area. Broadly speaking, the core area includes runways and associated facilities, passenger terminals and cargo processing areas. It follows from that that non-core airport areas include car parks with pedestrian access to the terminal building, or the forecourt of a passage in the terminal, including pick-up and drop-off points. Therefore, if the only dominant airport area at airport X comprised the pick-up and drop-off points, airport X would not be a dominant airport because no part of the core area would comprise or be included in a dominant area. We should remember that the core area is the runways, associated facilities, passenger terminals and so on.

In such circumstances, no part of the airport could be subject to regulation. The underlying thinking is to ensure that no part of an airport should be subject to regulation unless some part of the core area is dominant. This construction is required to prevent unnecessary regulation where there is a problem only with peripheral

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areas. This distinction between core and non-core airport areas is necessary to ensure that the CAA regulates ancillary airport operation services only where some or all of the core area of the airport is dominant; it is unable to exercise regulatory control over core areas where only non-core areas are dominant.

Allowing for more than one operator at an airport differs from the approach used in the Airports Act 1986, which refers to an airport operator as,

“the person for the time being having the management of an airport, or, in relation to a particular airport, the management of that airport”.

That Act does not include provision about cases in which there is more than one operator of an airport. I make clear to the Committee that there are no powers in this clause to introduce intra-airport competition. Rather, the clause allows for the possibility that competition may be introduced within our airports—for example, inter-terminal competition. These provisions are included to keep open the option of competition within airports in future.

The Competition Commission has previously expressed interest in this concept and suggested that the,

“legislation … should allow for terminals to be developed or redeveloped and to be operated separately from runway facilities, where appropriate”.

While the Competition Commission has no present intention to impose such intra-airport competition, it is supportive of keeping the option open for the future. We therefore need to ensure that the regulatory framework is capable of operating in the event that inter-terminal competition becomes a feature of the UK airport sector. By including it in the Bill, we avoid the need for a future Government to have to return to Parliament for fresh primary legislation.

Lord Berkeley: I am grateful to the Minister for that very clear, if somewhat complex, explanation. If I have it right, a core area has to include the landing and take-off runways. I cannot see how more than one landing and take-off runway can be owned in one airport. If Heathrow separated the ownership of the north and south runways, then you would have some competition. However, if the core area has to include the landing and take-off, surely it would be impossible to have competition within any of the airports in the south-east. Have I misunderstood this? I would be grateful if the Minister could explain further.

Earl Attlee: I do not know whether or not the noble Lord has misunderstood. I suspect that he will have to read what I have said very carefully in order to understand it.

Clause 5 agreed


Clause 6 : Market power test

Amendment 15

Moved by Earl Attlee

15: Clause 6, page 6, line 1, leave out “Treaty on the Functioning of the European Union” and insert “TFEU”

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Earl Attlee: My Lords, I shall speak also to Amendments 16 and 23. These three amendments are being taken together. Collectively, they will ensure that the CAA must have regard to the extensive guidance and advice published by the EU and UK competition authorities, for example the Office of Fair Trading.

We have been reflecting on comments made in the other place regarding the definition of “substantial market power” in the Bill. In particular, during debates in Committee in the other place, points were made that there could be some uncertainty regarding how the CAA might assess “substantial market power”. Although we believe that the definitions and specific meanings of the terms relating to market power that are used in the Bill are clear, we see merit in providing more clarity that the CAA must have regard to relevant competition guidance when carrying out the market power test.

Clause 6(1) states that market power test is met in relation to the airport area only if the CAA is satisfied that tests A, B and C are all met by the operator of that airport area. These tests are designed to ensure that operators of airport areas are subject to economic regulation only if under test A,

“the … operator has, or is likely to acquire, substantial market power in a market, either alone or taken with … other persons”,

under test B, general,

“competition law does not provide sufficient protection against the risk that the … operator may engage in conduct that amounts to an abuse of substantial market power”,

and under test C,

“the benefits of regulating the … operator … are likely to outweigh”

the costs.

On a previous amendment, I was asked what the market is. A market for airport operation services could be as narrow as the baggage handling services at Heathrow Terminal 5, or as wide as airport operation services at airports in London and the south-east. Other examples of airport operation services include the provision of airport facilities for car parking, facilities for shops and ground handling services.

The term “substantial market power” in test A is the term used in the current criteria that the Secretary of State applies when making designation decisions on whether an airport should be subject to price control. It is well understood and accepted in this context. The previous Government consulted on the wording of this limb and the other limbs of the test for whether an airport should be subject to economic regulation. In light of that consultation, we see no reason to change the wording. In carrying out test A, the CAA expects to follow the guidelines published by UK competition authorities—for example the Office of Fair Trading and the European Commission—for the assessment of market power. This amendment will put that beyond doubt. These are generic guidelines for use in any industry and provide a useful starting point for assessing the degree of competition faced by an airport. I beg to move.

Lord Berkeley: I am grateful to the noble Earl for that explanation. I have a couple of very simple and quick questions. I assume that when he says there is an

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issue about being subject to price control, he is talking about baggage handling, car parking and things like that rather than the price of slots, which I think he said is outside everything. I would be grateful for his confirmation of that.

Lord Davies of Oldham: The Minister will, no doubt, give an answer to that in just a moment. I am grateful to him for these amendments. As he said, there was considerable anxiety in the other place when discussing the concept of the dominant market. I am still trying to get my head round the position in respect of baggage at Heathrow being a dominant market, but will take the Minister’s word for that. I certainly accept the other extreme he put forward: all the airports in the south-east. We appreciate that, with these amendments, the Minister has helped to reassure us over the anxieties that were expressed in the other place. We all appreciate that it is not easy to get to this definition and that considerable efforts have been made. At first, I thought the cross-reference to the European Commission looked

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a bit like overkill, but the Minister is making sure he has belt and braces with regard to this, in response to the challenges that were made in the other place. I am quite sure my colleagues there will join me in thanking him for these amendments and accepting that they go a considerable way to allaying past anxieties and help the Bill.

Earl Attlee: The noble Lord, Lord Berkeley, is right that it is not the price of slots. The price of slots has an economic value, but it is not regulated.

Amendment 15 agreed.

Clause 6, as amended, agreed.

Viscount Younger of Leckie: My Lords, I believe this is a convenient moment to adjourn this Committee until Monday at 3.30 pm.

Committee adjourned at 7.43 pm.