House of Lords
Wednesday, 13 June 2012.
Prayers—read by the Lord Bishop of Chester.
Companies: Executive Remuneration
My Lords, the Government have recently consulted on a new model of shareholder voting on directors’ remuneration. This proposes giving the shareholders of quoted companies binding votes on the policy for the remuneration of directors and on exit payments. We are considering the responses and will announce final proposals shortly. These reforms will require primary legislation, and we aim to introduce measures during the Committee stage of the Enterprise and Regulatory Reform Bill in another place.
My Lords, while I appreciate the Government’s proposals in the enterprise Bill, does my noble friend agree that, even after shareholders are enabled to pass a special resolution on a remuneration report to make it binding rather than advisory, they may still have great difficulties in exercising that power effectively? Should we not have an urgent review of the workings of the remuneration provisions of the Companies Act? Shareholders, especially in big companies, feel increasingly that their interests as owners, and the long-term interests of their companies, are not being given proper priority by top management, which appears to put its own interests first.
Yes, my Lords, there is broad agreement among investors and businesses that the link between top pay and performance has grown weak and that the current pattern of growth in directors’ pay is unsustainable. Binding votes will encourage companies to set out a long-term pay policy that is clearly linked to the company’s strategy. Shareholders have been showing a keen appetite for a challenge on remuneration, and it is important that we give them the tools necessary to keep up this momentum.
My Lords, given that the policy referred to by the noble Lord, Lord Roberts, is viewed with scepticism for the reasons he indicated, is it not time that the leaders of industry and commerce were brought back to planet earth and workers’ representatives put on the boards of British companies and financial institutions, as is the case in successful economies such as Sweden, Germany and Holland?
My Lords, boards need to change and we are taking measures to promote greater diversity, but we do not believe in mandating that employees should be on boards. We encourage employees to get engaged by taking up their existing rights to information and consultation arrangements.
My Lords, encouraging as the Minister’s replies are, does he not agree that this matter is now urgent? No doubt he will be aware that last year, the total remuneration of FTSE chief executives increased by a further 10%, on top of the very substantial increases of recent years. That is quite out of line with the performance of share prices, with the economic performance of the country, and with what happens to everybody else. It really is a very urgent matter because capitalism is being brought into disrepute.
My Lords, I am sympathetic to my noble friend’s view. We have to balance that against the fact that, while it is not the Government’s role to micromanage company pay, we have a role to play in addressing what is, as he says, a clear market failure. The culture has to change, too. We are pleased to see institutional investors taking a tougher stance on pay than they have in the past.
My Lords, following on from the noble Lord, Lord Tugendhat, the report produced by Manifest shows that the average UK chief executive is now paid 240 times the average earnings in this country. This is an outrageous multiple and it simply is not satisfactory for the Government to say that they are considering allowing binding resolutions on an optional basis. The time has come for the Government to get a grip on this issue and to make sure that these excessive acts of greed are stopped.
My Lords, is not one of the difficulties with the Government’s proposals that the people who act for the shareholders are the fund managers and the institutions—as the noble Lord, Lord Myners, is well aware—who are themselves paid huge sums of money, which, unlike with directors of public companies, are not disclosed?
Presumably unless they are quoted, my Lords. Institutional shareholders are showing a great deal more interest in taking action on this than they have previously, and we have every hope that they will take advantage of the tools that we propose to give them.
My Lords, we will require companies to give more information about pay. We are not in favour of mandating companies to adopt a standardised set of ratios because they are not always the best measure to compare across companies. Different types of companies have different ratios because of the nature of their businesses. We also know from the United States that it is not helpful to work out the appropriate pay ratio for a UK-listed company whose business is conducted largely overseas. But I hear what the noble Lord says.
My Lords, in answer to the question posed by the noble Lord, Lord Lea, the Minister said there were no plans to have employee representatives on management boards. Fine—but can the Minister tell the House why the Government object to workers’ representatives being on the boards?
My Lords, can the Minister explain exactly what a worker is? What is important is that directors on boards are seen to—and do—fulfil a duty to all the stakeholders in a business, including creditors, suppliers, employees and, above all, customers. I would welcome the Minister’s illumination on what constitutes a worker.
My Lords, we know that nutritious food has positive effects on behaviour and attainment. The evidence indicates that many academies have responded positively to the standards, and some are going beyond them. The quality of food offered in all schools, including academies, has improved, but further improvement is needed. The latest findings from the School Food Trust show no significant difference between the lunch provided by maintained schools and by academies.
I thank the Minister for that reply. However, at a time of rising childhood obesity, with more than one-third of 11-year-olds now being classified as overweight or obese, with all the associated health problems, is he not shocked by the School Food Trust’s research, which shows that while healthy eating is increasing in maintained schools, nine out of 10 academies are ignoring the nutritional standards introduced by the previous Government and selling crisps, chocolate and cereal bars? Does this not undermine the Government’s faith that academies can be trusted to do the right thing on nutrition? How much worse must the situation get before the Government act? Is not the simplest answer to enforce the nutritional standards in all schools regardless of their status?
My Lords, having looked at all the research and the most recent qualitative survey carried out by the School Food Trust into what is going on in academies, I find it difficult to draw the very clear conclusion that the noble Baroness has come to. The survey concluded that there are maintained schools that are not doing as well as they ought to, there are academies exceeding the standards and there are also academies not doing as well as any of us would like them to do. I agree with her entirely about the importance of decent food in terms of obesity and of concentration in school. The question in my mind is whether the regulatory approach is the necessary way forward. I agree with her that the Government need to reflect on whether there is more that they can do to raise the quality of school food. My right honourable friend the Secretary of State has indicated that that is what he will do.
My Lords, when I walk to the department in the morning I pass a number of schools and, sadly, I see children drinking Red Bull and eating crisps for breakfast. I would call that junk food because it is not very healthy or good. There are things we need to do to improve the quality of food. There are many schools doing that, including academies, and that is something that we should encourage.
I am not sure that I agree with the noble Lord’s premise that eating junk food is necessarily an indicator of poverty. It is an indicator of people not being properly educated in the importance of good food and that is something that we need to look at. It can also be an indicator of a number of other things. I know from visiting academies which are dealing with some of the poorest children that they are inculcating extremely good habits of eating with pupils all sitting down together, learning and, I hope, building habits for a lifetime. The broader issue of child poverty is clearly important and the Government are working to make further progress on that.
My Lords, yesterday I visited one of our schools, which is hoping to become an academy. It has reinstated its kitchen, providing excellent food not only for the school but for those in the locality. I was also involved in a discussion yesterday about the increasing number of young people whose family food is being taken from food banks around our country today. Does the Minister agree that the priority is to ensure that all school food provides adequate nutritional standards in the light of the fact that too many of our most vulnerable people are experiencing a need to get food from food banks in the 21st century?
There were two strands to the right reverend Prelate’s remarks. One was to make the point that in a school which he knows which is hoping to become an academy good work is being done to make sure that the quality of food is good, and I welcome that. On his broader point, standards clearly can play a part in helping to address the concerns that he raises. One of the things that we have discovered is that although standards are in place and the nutritional quality of food has improved, the take-up of that food by children has not increased at the same rate. So better food is available but the children are not always exercising their choice to eat it. One of the challenges for us is to make sure that children understand that eating healthy food is good for them.
My Lords, with almost 18% of children between two and 15 growing clinically obese in the past decade, can the Minister tell the House what discussions have taken place or are planned to take place with colleagues in the Department of Health to discuss this new evidence from the Government’s own advisers on school food and children’s meals about the potential risks to the life expectancy of children and the increasing costs to the NHS, particularly in the light of the Secretary of State’s own view that the majority of secondary schools will become academies by the end of this Parliament?
My Lords, I declare an interest as the vice-chairman of the Institute for Food, Brain and Behaviour which is currently conducting work in a school in Dagenham replicating work that in young offender institutions reduced the offending rate by 40%. Will the Minister agree to invite the scientists from the Oxford Department of Physiology, Anatomy and Genetics who are conducting this work to talk to his officials about what lessons are learnt from this very important trial which has implications for behaviour as well as for nutrition?
Businesses: Tax Liability
My Lords, changes in tax law are normally confirmed at least three months before the tax year in which they come into effect or the publication of the Finance Bill in which they are to be included. The Government normally announce such changes at Budget for enactment through the following year’s Finance Bill. The Government also consult on most changes to tax law, unless they are straightforward changes, revenue protection measures or areas where there is a risk of forestalling.
On 18 May, HMRC issued new guidance concerning the tax rates to be charged to the waste industry with immediate effect. It resulted in a 2,500% tax increase and put jobs and businesses at risk. I raised it in the House on 29 May. The Government then did a U-turn—the official line was that they clarified their position. The problem is that half the industry does not accept the veracity of the clarification of the Government’s guidance. Does the Minister accept that we have a serious problem and will he agree to facilitate a meeting between me, my good friend the Member of Parliament for Mitcham and Morden and the relevant Treasury Minister with a representative of the industry to sort out this shambles of all shambles?
My Lords, before I get what I might call my noble friend Lady Trumpington’s question, “What on earth are we talking about?”, it might be helpful to give a little background. Landfill tax is payable by landfill site operators per tonne of waste put into their sites. It is sometimes called by the press “the skip tax”.
Recently HMRC responded to concerns expressed by some landfill operators that certain companies were not paying the correct rate of tax and in that process were disadvantaging those companies that were paying the correct rate of tax. There is no new tax policy here. The rates of landfill tax have not changed, but HMRC issued guidance in response to that request. Since the issuance of that guidance, there has been some misinterpretation which HMRC has sought to correct. I appreciate that there may still be some residual concerns, and I am very happy to facilitate a meeting. Because it is an operational matter, I suggest that the person who it would be most helpful to meet is the director at HMRC who is directly responsible, and I will help to set that up.
This Question concerns Customs and Excise. Is the Minister aware that a report published by the Institute of Fiscal Studies last year pointed out that, while some unhealthy foods are subject to the standard rate for VAT, there are many other unhealthy foods which are zero-rated? Would he care to suggest to the Chancellor of the Exchequer that no unhealthy foods should be zero-rated? I am sure that the Chancellor could do with the additional revenue.
My Lords, we are still consulting on this matter and hope to report the outcome of the consultation as soon as possible.
My Lords, I am grateful to the Minister for that reply. However, although many of us support the general thrust of the consultation document, especially the point that local services should be shaped to meet the needs of the communities they serve, does the Minister agree that these local services would be more efficient and more effective if they were supported by a strong organisation at the centre that could provide them with advice, help and support? In particular, will Victim Support continue to maintain its services for witnesses and the relatives of victims of homicide?
Part of the purpose of the consultation is to work out where it is best to keep responsibilities centrally—the noble Lord referred to one such responsibility in the case of homicide—and where they could be devolved locally. I assure him that the Government fully appreciate that Victim Support provides a valuable service. We would be surprised if it did not continue to have an important role, as we have proposed moving to a mixed model of national and local commissioning.
My Lords, I recently chaired a commission from the Magistrates’ Association on the future of summary justice. One of the outcomes of this consultation was the view that victims of crime felt that the system of justice was opaque and seldom provided them with information about the process and the outcome. In light of the consultation process which the Minister has undertaken will he undertake to establish a pilot scheme to see how the local commissioning of victim support schemes might operate and whether it would not be a better option than the current system?
I am not sure that I can assure my noble friend that we will move to pilot schemes. The plan, after the consultation, is to see which parts of Victim Support should go to local commissioning and which parts should be retained centrally. My noble friend makes the point that many victims complain that they are not kept well enough informed. The Ministry of Justice information site is trying to give a much better ability to follow through on crimes. However, we feel that the current code is very process-oriented and out of date. In the victims and witnesses consultation we are proposing to review and rewrite the code to clarify what victims should expect. I will certainly take on board what my noble friend says about the opinions of the Magistrates’ Association, which I value very highly.
My Lords, does the Minister agree that this point is particularly true of children and young people who appear in court as witnesses when they are the victim of crime? Will he look into whether progress is being made on the work done previously? Although that work moved the position forward a long way it seems to have stalled, and children are still being revictimised in court.
I will most certainly follow it up. It is very important that children who are caught up in court processes, whether as the accused or as the witness of a crime, are dealt with in a non-damaging way. I am certain that the thrust of policy development seeks to do just that.
Can the Minister assure me that, whatever follows at the end of the consultation, the needs of victims of stalking will be properly taken into account? I met three victims of stalking earlier this week and it was absolutely clear that their needs as victims were never taken into account. I hope that this situation can be improved.
Again, I certainly take that on board. We are beginning to appreciate more fully just how traumatic it is for an individual to be stalked. I am hopeful that we will be able to treat this as the serious crime that it is, not only in dealing with the perpetrators but in how we support the victims.
May I invite the Minister to consider a very significant omission in the otherwise excellent consultation document? Is he aware that under Section 130 of the Powers of Criminal Courts (Sentencing) Act 2000 a court is obliged in appropriate cases to grant compensation to the victim of the crime, and that if it does not take that view, it is obliged to certify why that is not being done? Is he satisfied that the fullest use is made of this most significant statutory provision?
As often with questions from the noble Lord, I am not sure that I am aware of the provision to which he referred. If I understood him correctly, he is saying that courts should sometimes use their discretion not to grant compensation. I think that there have been press reports of compensation paid to people who have been involved in criminal activity—
I am sorry; perhaps I may explain. I was referring to a situation in which a court feels that a fine is appropriate, all other things being equal, but that the defendant can hardly afford to pay a fine and compensation. The court might decide that, in the circumstances, the public interest is better served by using a compensation order.
Yes. A large number of organisations are involved in victim support, and Victim Support—as the title says—is one of the leading ones. At the moment it is in effect a monopoly provider of services, receiving some £38 million of public funds. In this consultation exercise we are looking at whether it would be better to commission some of those victim support activities locally, and then we can decide where the dividing line between local and central delivery should be. It is a perfectly legitimate exercise. We have, as I say, completed the consultation, and our response and specific proposals are imminent. I hope that that will inform further debate in this House and elsewhere.
Quality will come partly from local accountability and the fact that support will be devolved to the new police commissioners, who will have responsibility for victims. That is a very healthy development. I do not want the new police and crime commissioners to see their role as second-guessing chief constables. They should have a wider role in their responsibility for police and crime. If victims are high on their list of priorities, the democratic process will ensure service and accountability.
European Union (Approval of Treaty Amendment Decision) Bill [HL]
Clause 1: Approval of EU decision relating to stability mechanism
1: Clause 1, page 1, line 10, leave out subsection (3) and insert—
“(3) That decision is subject to the referendum condition, within the meaning of section 3 of the European Union Act 2011, being satisfied.”
My Lords, as Members of this House will know, the Queen’s Speech was made here on 9 May and the Second Reading of the Bill came rather quickly after it on 23 May. Therefore, a number of Members who have taken a notable interest in the European Union over several years were unable to change engagements that had already been made to be here and participate at Second Reading. I was certainly one of them. However, I read the proceedings on the Bill and there was one speech with which I concur absolutely—that of my noble friend Lord Radice. Everything that he said was what I would have said, although he put it rather more eloquently, lucidly and intellectually than I could have.
Several issues that need to be explored arose from consideration of the Bill at Second Reading. Therefore, I tabled two or three amendments, thinking that they would appear on a long Marshalled List. Imagine my surprise when I found that they were the only amendments to the Bill that had been tabled. I wondered what had happened to the usual suspects, notably the UKIP Members, who are never usually at a loss to table reams of amendments and suggestions, and to participate at great length. This could not be more in the mainstream of some of their thinking. However, not only have they not tabled amendments; they are not even here to participate in the debate. I must say that I find that rather strange.
This first amendment proposes that there should be a referendum on the treaty in the United Kingdom. Let me make it absolutely clear that this is a probing amendment—I do not actually agree with it. I put it in to enable a debate to take place, and to contrast the areas in which there will or will not be a referendum because of the provisions of the European Union Act 2011 on this issue. Under Section 4 of that Act there are 13 instances—and we discussed this during the proceedings on that Bill—where referenda would be necessary. The whole of the electorate would be asked to go out to the ballot boxes to cast a ballot on—let us take Section 4(1)(m)—
“any amendment of any of the provisions specified in subsection (3) that removes or amends the provision enabling a member of the Council, in relation to a draft legislative act, to ensure the suspension of the ordinary legislative procedure”.
If that was to happen, we would have a referendum on it. Can you imagine people flocking to the polling stations to take part in that? Yet we have something in this Bill which is a major and very substantive change—as was said in important speeches by former Chancellors at Second Reading—and there is no provision for a referendum. I am not saying that there should be; I am against referenda on all these things. I want to contrast the fact that we would have referenda on all these minor matters but not on this. It seems strange.
I then looked specifically at the basis on which the Government are arguing that there should not be a referendum. The Minister said at Second Reading that the Foreign Secretary had indicated that,
“in his opinion a referendum is not required to give parliamentary approval. … it does not transfer further competence or power to the European Union from the United Kingdom. The statement was open to judicial review, but in the intervening eight months no one has sought to challenge it in the courts”.—[Official Report, 23/5/12; col. 802.]
I went back to the Act again to find out why he had given this opinion. Section 2(3) says:
“The exemption condition is that the Act providing for the approval of the treaty states that the treaty does not fall within section 4”.
We therefore look at Section 4, “Cases where treaty or Article 48(6) decision attracts a referendum”, which includes the 13 that I mentioned earlier. Then, that section says:
“A treaty … does not fall within this section merely because it involves one or more of the following”,
and the second of the following three is,
“the making of any provision that applies only to member States other than the United Kingdom”.
That would seem to me to be open to argument. The inclusion of “merely” implies that there should be something else—that there should be another factor involved in the decision on whether or not there should be a referendum.
I am, therefore, at a loss to understand why this is the case. I hope that the Minister will try further to explain this to the House, as he did briefly at Second Reading, and to convince us that although a referendum would be necessary in all these 13 tiny little areas it would not be necessary in this particular one. I beg to move.
My Lords, I wish to speak briefly on this issue. My noble friend Lord Foulkes—he may not be my noble friend when I have finished speaking, but there we are—said that he agreed with every word that our noble friend Lord Radice said on Second Reading. I wish to put on record that I did not agree with a single word that my noble friend Lord Radice said in that debate, as he well knows, as the notion that the European Union is some sort of holy grail does not accord with me at all. The speech that most appealed to me in that Second Reading debate was that of the noble Lord, Lord Lamont of Lerwick. Although I do not endorse every single word that he said, nevertheless he very much captured the latent suspicion—however, that may be too strong a word—of the British people towards the European Union.
Naturally, as a loyal party man, I will not support the call for a referendum, which is the basis of this amendment, as that is not Labour Party policy. However, your Lordships’ House would do well to take note of the deep feelings of many people in the United Kingdom against further encroachment into their lives by the European Union. I know that the relevant “holy grail” stipulates that we should all be so-called good Europeans and sign up to everything that comes from Brussels, or wherever else in Europe that the European Union happens to be meeting. However, I take the opposite point of view. I am no history graduate in this regard but, as far as I recall, the 1975 referendum—I was involved in that referendum campaign—sold the European Union to the British people as an economic union and an economic set of circumstances which would help us to retain, or in some cases regain, our place in the industrialised world. However, the giant bureaucracy in Brussels and Strasbourg has encroached on our lives bit by bit. In my opinion that is the main reason why many people in the United Kingdom feel strongly that there should be a referendum.
As I say, unlike my noble friend Lord Foulkes, I do not support the call for a referendum but I would like to take a few more minutes to explain why many people feel that there should be one on anything to do with the European Union. I know that noble Lords dotted all over your Lordships’ House take the exact opposite view and will make faces at me as they walk out of the Chamber because I am saying these things.
Strathclyde council has a better record of administration than the European Union. I assure my noble friend that it is one of the best administrative councils in the history of Europe as well as being one of the biggest. I declare an interest as a former member of that council although I was not involved in its financial affairs.
In short, there is a certain amount of arrogance—I do not mean this in a hostile way—on the part of pro-European Union people as regards further encroachment on the British way of life and the concept that the intellectual giants are the people who have thought out everything to do with the European Union and its encroachments. That is not the case and those people do not represent the views of the British people. The view of the British people is best represented by those who say, “This far and no further”. Although I do not support the call for a referendum, it is useful for this House to hear a dissident voice on this side of the Chamber. We certainly should be very careful as regards further encroachment.
My Lords, I must confess that when I saw these amendments in the name of the noble Lord, Lord Foulkes, I thought that we had a convert. However, my hopes were dashed by his speech this afternoon. It appears that he tabled these amendments as it enabled him to make the speech—it is a very nice way of doing it—that he could not make when we debated this matter on Second Reading. He has a point. The implications of this Bill are much further ranging than has been related to the House. I shall quote from the Times on 11 May this year, which will support the case—or non-case—that the noble Lord made:
“There are two issues with this EU treaty change that could cause big problems: first, it allows the eurozone to integrate further with consequences for UK interests; second, the quid pro quo guarantee that the UK won’t be forced to contribute to euro bailouts in future may not be legally binding”.
So there is some support in that article for the view that perhaps this Bill is much more important and far-ranging than some of us had believed. I and other people considered whether this Bill could be amended and I came to the conclusion that it was best left to the House of Commons. However, we have an amendment here which I believe should be supported. The Bill is very important indeed, particularly in the light of what is happening at present. The problems of the eurozone and the European Union itself are leading to demands for further integration. Even today, the President of the European Commission, Mr Barroso, is outlining plans to the European Parliament for a European banking union, which would affect not only the eurozone but the whole of the European Union.
Angela Merkel, for example, believes that the answer to the problem is not less but more Europe, politically, financially and economically. This Bill facilitates what these people are thinking. The Bill is much more important than we previously believed and the House should be grateful to the noble Lord, Lord Foulkes. I should really describe him as my noble friend, because we have been around a long time and embarked on many debates. Usually, we have been on the same side. Paradoxically, according to the wording of the amendment we are still on the same side, but perhaps if he puts it to a vote we shall be in opposite Lobbies. We shall see. In the mean time, if he puts it to the vote, I shall support him.
My Lords, I had better explain briefly the opposition Front Bench position on this amendment and some of the speeches we have heard. It was a great pity that my noble friend Lord Foulkes could not make Second Reading, because he would have made a strong pro-European speech in that debate. He was right that my noble friend Lord Radice made an excellent speech as well. However, from our perspective I do not think that we can support the thrust of his amendment. I see the logic of his position. In the European Union Act, which we debated over many hours last year, we got ourselves in a situation where, if it was decided to establish a European office of paperclips, we would have to have a referendum on it, because it would involve a transfer of sovereignty to Brussels.
For our part, we believe that referenda should take place only on issues of major constitutional significance, as the Lords Constitution Committee recommended, and that we should be consistent with that principle. As far as the Labour position in the Commons is concerned—and I say this with some trepidation because my dear noble friend Lord McAvoy has a great record as a party loyalist and defender of party discipline in the other place—the shadow Foreign Secretary, Douglas Alexander, in the Commons debate last autumn on the question of a referendum, said:
“I urge opposition to the motion because I do not believe that Britain’s national interest would be served by spending the coming months and years debating the case for Britain leaving the world’s largest single market”.—[Official Report, Commons, 24/10/11; col. 60.]
The leader of the Labour Party made it clear only last week or the week before that Labour’s position had not changed from that view in the mean time.
That is where we stand. The EU Act is a contradictory piece of legislation. The measure is not defined under the terms of that Act as a transfer of powers to Brussels, and we therefore do not have a referendum—but there is no point in reiterating our debates on that Act. Our view is that this is an emergency situation in Europe; the stability mechanism is a necessary part of tackling the problems of the eurozone, which is very much in the British national interest. Therefore, this legislation should go through in the speediest possible time.
My Lords, we all admire the lone role that the noble Lord, Lord Foulkes, has cast for himself in bringing forward these amendments, and his boldness in bringing forward an amendment with which he does not, in fact, agree. This is bravery on a high scale in this debating Chamber.
The amendment, as he pointed out, seeks to insert into the Bill a requirement for a favourable vote in a national referendum before the UK could approve the European Council decision amending Article 136 of the Treaty on the Functioning of the European Union. The European Council decision amends Article 136 of the TFEU. It was adopted in accordance with the simplified revision procedure in Article 48(6) of the Treaty on European Union. The decision added a paragraph to Article 136 which confirms that EU members whose currency is the euro may establish a financial stability mechanism. The provisions of Article 136 and the proposed new paragraph apply only—I repeat, only—to member states whose currency is the euro. They do not, therefore, apply to the United Kingdom.
The Bill is required under Section 3 of the 2011 Act, to which the noble Lord, Lord Liddle, referred, to give parliamentary approval to the decision. The other two requirements of that Act were, as noble Lords will recall, a statement by the Minister giving his opinion as to whether a referendum is required—I will come to the remarks of the noble Lord, Lord Foulkes, on that in a moment—and compliance with the so-called referendum condition, exemption condition or significance condition which we debated when we considered that Bill some time ago.
The 2011 Act makes it clear that decisions adopted under Article 48(6) of the TEU are not subject to a referendum under that Act if its provisions do not apply to the United Kingdom. The 2011 Act, to which the noble Lord, Lord Foulkes, rightly drew attention, provides:
“A treaty or Article 48(6) decision does not fall within this section merely”—
I come to that word—
“because it involves ... the making of any provision that applies only to member States other than the United Kingdom”.
The “merely” is intended to indicate that other conditions are also taken into account—for example, the exemption condition or the significance condition. It is not only the fact that it does not apply to the United Kingdom and is outside the application of the United Kingdom; it involves other conditions as well. The decision amending Article 136 therefore clearly falls within the exemption set out in Section 4(4)(b) of the 2011 Act.
The noble Lord, Lord Liddle, raised again the doubts of his own party and colleagues about that Act, which was vigorously debated. I do not think that it would be in order to debate the Act again, although I am always happy to reopen these great issues. I happen to think that it was an immensely important Act which has been a considerable reinforcement to the concerns of the British people that there will be no further transfer of competence to the European Union without a referendum. It is an important safeguard, and my right honourable and noble friends have drawn attention to its importance.
The Government have been clear that a referendum is not required under the 2011 Act right from the very beginning. On 13 October 2011, the Foreign Secretary laid a Statement before Parliament in accordance with Section 5 of the Act, in which he confirmed that in his opinion a referendum was not required under the Act. The Statement was open to judicial review but, as my right honourable friend pointed out, in the intervening eight months, no one has sought to challenge it in the courts. The noble Lord, Lord Stoddart, whose position is consistent and which he has put with admirable consistency over the years, said that in his view there was some practical implication of transfer of competence— although he did not put it in quite those words. But no judicial review to make that point has been launched. The noble Lord referred to the aspect, to which I will refer again in a moment, that in exchange for this going forward, the British liability to be exposed under the European financial stability mechanism is released, and the mechanism falls and is no longer in use. The noble Lord, Lord Stoddart, was concerned that that was just a political decision and not enshrined in law. He is perfectly correct, but it is a decision by all 27 members, and it is a firm commitment. To unravel the whole of that would be to throw the entire arrangement of the EFSM into complete chaos. It would be a total reversal of a firm commitment made in good faith by 27 members. We believe that it is a substantial and supported condition.
I am most obliged to the Minister. Can he deal with the point that I made concerning the article in the Times? I have given it to Hansard so I cannot quote from it again. The Times queried whether the European Court of Justice could interpret our passing of this Bill as an agreement to future financing within the European stability mechanism. The point being made by the Times was that perhaps the European Court could interpret what we are doing as being consistent with having to make future contributions.
The European Court proceeds in ways which some of us do not always understand, but it is required to interpret the law. There is no issue with the European financial stability mechanism in the way that the noble Lord, Lord Stoddart, said. When this Bill is passed—I can boldly say when—and the amendment of Article 136 is ratified by all 27 member states, that will be the law, and the Court will interpret it. I do not see how the noble Lord could argue that this political decision, which is immensely valuable to the United Kingdom, could be somehow embroiled in the legal interpretations of the Court. I do not see how it comes into the interpretations of the law as embodied in the treaties.
When we debated the provisions of the EU Bill, as it then was, in this House last year, many Members were concerned that we might be bringing referenda into disrepute by requiring them for small changes to EU treaties and by being explicit about when a referendum was and was not required. Indeed, the noble Lord, Lord Liddle, made a proposition that something to do with paper clips, I think it was, could cause a referendum.
I spent a lot of time at this Dispatch Box explaining why we felt the provisions for referenda were not trivial. I explained that one of the reasons the European Union Bill was so long was so that it could be crystal clear about when a referendum was not required, and why issues which appeared small in the schedules to some of your Lordships were in fact the core of red-line considerations involving transfers of competence which we believed were not desirable and would certainly require a referendum.
The way in which the European Union Act 2011 applies to the treaty change we are considering today is clear. The provisions of this decision, amending Article 136 of the TFEU, do not apply to the United Kingdom, so the decision simply does not attract a referendum. What is more, there is no transfer of competence or power from the UK to the EU involved. The noble Lord, Lord Stoddart may feel that that is questionable; if that was his determined view and he thought he could mobilise the evidence for it, there would have been an opportunity for a judicial review, but no such review was brought forward.
The amendment to Article 136 simply recognises the ability of eurozone member states to establish a permanent stability mechanism—the European stability mechanism—by means of an intergovernmental agreement. The ESM is established by an agreement. This is not the ESM treaty. This is a treaty merely noting the amendment to the existing treaties, to Article 136.
I have listened very carefully, and I enjoyed the speech of the noble Lord, Lord McAvoy, for which I am grateful. I hear the views of the noble Lord, Lord Liddle—who is a considerable expert on these things—that his party does not stand against this Bill, but believes it will make a contribution. We can have a debate on what sort of contribution it makes to a rapidly changing scene where there are many issues that cannot be resolved at this stage, but holding a referendum on this decision would contradict the clear provisions of the European Union Act 2011. It would introduce confusion about the circumstances in which a referendum would be required in the UK, and that is, to my mind, the reason, above all, why it should be—and, I hope, will be—resisted by your Lordships’ House.
My Lords, while I agree with the Minister that I enjoyed the speech of my noble friend, Lord McAvoy, I can honestly say that it did not contain any words with which I agreed. I was very pleased that my noble friend from the Front Bench gave what might almost be described as a muffled, mild rebuke to my noble friend Lord McAvoy about the importance of loyalty. I think that my noble friend is only too aware of that, because he has managed to follow the party line on many occasions when he did not agree with it, and has been an inspiration to all of us.
I am sorry to disappoint my noble friend—because he is my friend—Lord Stoddart. We are not on the same Benches now, but we were for many years and we agreed on almost everything except Europe. I agreed with everything that my noble friend on the Front Bench said, including his remarks quoting our shadow Foreign Secretary and our party leader on the question of a wider referendum. It would be unnecessary and wasteful. It is not covered in the amendment and not something that I dealt with, but I will say that I agreed with my noble friend completely.
If I had not already intended not to press my amendment, the speeches of the Minister and my noble friend Lord Liddle would have convinced me. Therefore, I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
Debate on whether Clause 1 should stand part of the Bill.
My Lords, I will not detain the House on this for more than a couple of minutes. As I found out, trying to devise amendments for the Bill is not easy. It is very tightly drawn and cleverly done by the usual draftspersons. At Second Reading, the noble Lord, Lord Howell of Guildford, said in relation to the ESM:
“The intention is that it will replace both the EFSM and EFSF”.—[Official Report, 23/5/12; col. 802.]
I wanted to devise an amendment that would make that clear. It would have said that by agreeing to the ESM we would have replaced the EFSM and the EFSF. However, I was told that that was not competent within the terms of reference of the Bill. I wonder whether the Minister—this is the only point I shall raise on the clause stand part debate—will give an assurance that it is the understanding of Her Majesty’s Government that those two mechanisms will be replaced. There is a tendency in my beloved European Union to keep things going when they are not necessary—actually, there is such a tendency in successive Governments. I hope that we will have a clear assurance on that.
My Lords, briefly, I will give a clear assurance that it is our intention to replace the EFSM and the European Financial Stability Facility. That has been the aim all along. The Bill does not do either of those things but merely amends Article 136. However, those intentions were stated absolutely clearly and supported by all members of the European Community. That is what is proposed.
Clause 1 agreed.
Clause 2 : Extent, commencement and short title
2: Clause 2, page 1, line 14, at beginning insert “Subject to subsection (2A),”
My Lords, it was a wise and appropriate suggestion by the Government to group Amendments 2, 3 and 4 together. Amendment 2 would insert,
“Subject to subsection (2A)”.
New subsection (2A) is proposed in Amendment 4. Amendment 3 changes the date to 1 January 2013—again, in order to enable a debate to take place on that.
The amendment is based on the assumption that the Act can come into effect only if the member states of the eurozone are those that existed when the treaty was agreed. Obviously, as we heard at Second Reading, this raises the question of Greece. If Greece was to have withdrawn or in some other way removed itself, or have been removed, from the eurozone, the treaty would not take effect—or, at least, the Bill would not take effect—and our agreement to the treaty would not take effect.
I wish to say a few words about the wider issue that was raised at Second Reading. I am glad that the noble Lord, Lord Sassoon, is in his place because I find annoying the constant referrals to the markets and how they must be satisfied. It is as if the markets were inanimate objects or deities that need to be worshipped—and I am pleased that the right reverend Prelate is in his place. It is as if they are superhuman, but they are not; they are controlled by human beings. It is important not to give so much credence to the markets. We keep hearing statements such as fishermen have to understand and accept all the conditions of the sea because we cannot control the sea—even the right reverend Prelate will agree to that—and we cannot control the wind, but there can be some human influence on and control of the markets through government, intergovernmental organisations and intergovernmental agreements.
I have raised previously, and I raise again, the question of credit rating agencies. The noble Lord, Lord Sassoon, is well aware of my concern on this issue. However, I wish first to make a confession. I confessed in a previous debate on Scotland that I had become an accidental Member of the Scottish Parliament because of the strange electoral system. I now confess that I have become an accidental currency speculator. A few years ago I transferred some sterling to a bank account in France at a rate of €1.50 to the pound. The exchange rate is now €1.20 to the pound. Therefore, if I was to transfer the money back to sterling I would make a very substantial profit. I am therefore potentially —not actually—a currency speculator. I could make money by doing nothing. It would take no effort on my part to transfer the money over and, because of the movement in the exchange rate, I would make money.
That would be after a few years and it is a relatively small amount of money, but the real currency speculators could do it in an instant and it could involve millions and sometimes billions—or trillions, as my noble friend Lord Radice, is saying—of pounds. By speculating that the currency rate is going to change, they can make almost overnight thousands or even millions of pounds. Sometimes they can make money without owning or possessing the currency they transfer. They gamble that when the money comes back having increased in value, they will be able to repay the money they speculated with and hang on to the profit. Of course, if they lose, who bails them out? They do not bail themselves out; they come to the Government.
That is one example but there are many others. The whole system is dependent upon these people—they have so much power over it—and I believe that individual Governments and intergovernmental bodies such as the European Union should have much more control over them. I want to mention briefly an example which I gave previously—that of the credit rating agencies. In my view, the credit rating agencies played a central part in the euro crisis. If one thinks about it, the Greek Government—and other Governments such as that of Ireland—have to pay more for the money that they borrow because of the speculation taking place. Who is making money out of it? Someone is making money out of it. The extra money and extra interest that they are paying does not go into thin air—it goes to the speculators. I think that it was a Conservative Minister who once described them as spivs and speculators.
Let us take Moody’s as one example, although there are also Standard & Poor’s and Fitch. Moody’s, an American-based private company, recently made a statement about the United Kingdom and it can take it upon itself to rate not just other companies but sovereign countries too. As a result, the sovereign countries have to pay more for their borrowing. Therefore, the credit rating agencies helped to bring on the crisis. Look at who owns Moody’s and at who might benefit as a result of that speculation— it is Berkshire Hathaway, Capital World Investors, ValueAct Capital, Vanguard Group. The companies which own these credit rating agencies benefit by the decisions and the announcements made to downgrade the country concerned. It is, really, outrageous that this should happen.
My Lords, I see some puzzled faces around the Chamber and I think that others agree with me that this is rather wide of the amendment under discussion. Perhaps I may remind the noble Lord that we are at the Committee stage when we should address directly the amendments concerned.
I have noticed that the noble Lord, Lord Wallace of Saltaire, has been up on his feet regularly in recent days and weeks keeping colleagues in order, so I know that he is not picking on me in any way. I accept that I had moved just a little wide of the amendment.
I was trying to say that if Greece were no longer a member of the eurozone, having been forced out because of all these speculators, the question would arise whether the treaty should go ahead as originally planned. That is the amendment and that is a valid point. People are concerned that countries such as Greece, Ireland and now Spain, which are in difficulties and suffering, might have to leave the eurozone because of the speculation taking place. If those countries were no longer members of the eurozone, why should a treaty which was drawn up at a time when they were members continue on that basis? I beg to move.
I wonder whether the noble Lord, Lord Foulkes, would reconsider his suggestion that Greece might be forced to leave the eurozone purely because of the action of the speculators. Is the real reason why Greece is in trouble not because it has been spending money it does not have, it has been borrowing money that it cannot pay back, and it is basically bust?
My Lords, I was interested to hear the noble Lord, Lord Foulkes, recount how he was accidentally drawn into the adventure of currency speculation. I hope that that is all in order, and I am sure that it is. However, having heard my noble friend Lord Sassoon say earlier, rightly and correctly, that he was not prepared to be drawn by the noble Lord into a discussion of Rangers’ tax affairs, I have equally to recognise that I am not prepared to be drawn into a discussion about the noble Lord’s own tax affairs either.
The purpose of these amendments is, first and obviously, to delay the entry into force of this Act until January of next year. Secondly, they would stop the Act coming into force at all if the membership of the euro area were to change between now and 1 January 2013. This Bill gives parliamentary approval to a European Council decision amending Article 136, as I am afraid I repeated ad nauseam in my earlier comments. This, in Her Majesty’s Government’s view, is firmly in the UK’s best interests. Once the European stability mechanism is established, the UK will not be exposed to any future programmes of financial assistance for the eurozone through the EU budget, specifically through the European financial stability mechanism. The mechanism will contribute to helping our neighbours in the eurozone in the continuing search for financial stability in the currency area. Delaying the coming into force of this Bill until 1 January is therefore not in our interests. It would create uncertainty about the UK’s intentions in relation to ratification of the decision.
In turn, as a knock-on effect, a delay would destabilise the European stability mechanism, which may or may not come into use in the times ahead depending on what occurs. It is not for me to speculate on any of the points that have been raised about whether there will be exits from the eurozone or whether there will be banking unions, insurance unions, fiscal pacts and so on. This move on the part of the House and this Parliament is intended to be a contribution to a very complex jigsaw of requirements. If the Bill were not to come into force at all, that would be even more damaging to what is without doubt a very difficult and challenging situation with many complex and component parts to it, which is what the eurozone states are presently confronting. I am sure that noble Lords will appreciate that it would not be appropriate for me to speculate further on that aspect of what is going to happen. However, what is certain is that, regardless of whether there is a change in member states whose currency is the euro, having a permanent stability mechanism, which is the decision of the eurozone states, is essential for those that remain.
If the Bill were not to be enacted and come into force, the UK would not be able to ratify the treaty change —the Article 136 amendment—and that amendment would not be able to enter into force. This instrument is the change that will provide eurozone members with the legal certainty they want in relation to the ESM, and it is very much in our interests that that at least should be in place.
We want the euro to sort out its problems, of course, as a strong and stable euro area is in the UK’s national interests because of our close economic links. I think that everyone realises that now. Setting up a permanent stability mechanism is part of the solution to the current crisis and this Bill confirms the ability of eurozone members to do that. Failing to approve or delaying the approval of the treaty amendment decision would further contribute to instability across the eurozone, of which there is plenty around already, and have a negative impact on the UK economy. As my right honourable friends the Prime Minister, the Foreign and Commonwealth Secretary and the Chancellor have all repeatedly made clear, a stable eurozone is directly in the UK’s interests. It is a major market for our trade, and some would argue that its stability is key to unlocking the prospects for recovery and expansion in all the European and, indeed, global economies, and certainly including this one. Accepting these amendments would risk undermining that prospect of stability and growth further.
In addition, in exchange for agreeing to the Article 136 treaty change, there is the secured agreement that the EFSF and the EFSM will be replaced, about which I gave assurances to your Lordships’ House only a few minutes ago; and Article 122(2) of the TFEU, the basis for rules establishing the EFSM, will no longer be needed for the purpose of safeguarding the financial stability of the euro area as a whole. Failure to approve the Article 136 treaty change decision would put that agreement at risk straightaway, and the Prime Minister would not fulfil a commitment that he made at the March 2011 European Council—a commitment that was made after both Houses voted in favour of a Motion to approve the draft decision.
I sympathise with the noble Lord’s desire to have greater certainty about the future of the eurozone before supporting the Bill—we would all like to see greater certainty in what is undoubtedly a very chilling situation which is having an impact on nations and economies not merely in the European region but far outside it as well, as world leaders have observed in trenchant terms. It is precisely to try to meet some of that uncertainty, as far as we can from outside the eurozone, that this Bill is necessary.
This treaty change is firmly in the UK’s national interests. These amendments risk undermining them and the steps towards financial stability that the eurozone so very badly needs to take, and that is why they should be resisted.
My Lords, I just want to make two points in reply; first, to the noble Lord, Lord Brabazon, after his interesting—almost astonishing—intervention about Greece. I do not think I said that the increased interest rates were the only reason that Greece is in difficulties. Although one can of course argue that the Greeks have been living beyond their means, for the past few years pressure has been put on them to get their budget into balance and they have been doing that. However, if at the same time the money that they have to borrow costs them more and more because of higher interest rates, it will make it more and more difficult for them to balance the books and meet their obligations. If the noble Lord, Lord Brabazon, had a mortgage on his house and was just managing to survive paying the mortgage at a certain interest rate, he would find it much more difficult if the building society unilaterally doubled or trebled the rate. So I hope that he will accept that, although it is not the only factor, it is an exacerbating factor that makes it more difficult for Greece to balance its books effectively.
I agree very much with what the Minister said about the importance of the stability of the eurozone. That is very, very important, not just from the point of view of the eurozone itself but for us in the United Kingdom. People who foolishly wish the break-up or fragmentation of the eurozone, or the falling-out of any one country, are doing this country—and our economy—a disservice. That is very clear in what President Obama and others have said as well. The continuation and the stability of the eurozone are very important indeed, as the Minister said. Because he argued that my amendments might create some problems in relation to that, and because he argued so powerfully in favour of giving as much stability to the eurozone as possible, I am happy to withdraw my amendment.
Amendment 2 withdrawn.
Amendments 3 and 4 not moved.
Clause 2 agreed.
Bill reported without amendment.
My Lords, with the leave of the House, I will repeat a Statement made in another place today.
“With permission, Mr Speaker, I wish to inform the House that the Government of the Falkland Islands announced yesterday their intention to hold a referendum on the political status of the islands. The decision, which was taken by the Falkland Islanders themselves through their elected representatives, has the full support of the British Government. The referendum will be organised by the Falkland Island Government and will take place in the first half of 2013. Independent, international observers will be invited to observe the process.
In the past, the Falkland Islanders have made it clear that they wish to remain a self-governing British overseas territory and to continue living in the same peaceful and neighbourly manner which has characterised their long history on the islands, which stretches back some nine generations. They have no interest in becoming a province of Argentina. But, regrettably, not everyone is willing to accept this reality. The Argentine Defence Minister recently accused the UK military of holding the islanders as hostages. The Argentine ambassador to the UK has claimed that the islanders would be quite happy living under Argentine rule on the basis that some of them have been on holidays to Argentina. The islanders regularly rebut these baseless allegations and have embarked on an extensive campaign of public diplomacy around Latin America and more widely to make their views known. The Foreign and Commonwealth Office has offered extensive support to them in doing so. Despite this, the Argentine Government continue either to misrepresent their views or to disregard them as irrelevant.
Elsewhere in the region, the islanders are often surprised by the lack of understanding about their wishes and outlook on life. Because of this, the islanders have decided to hold a referendum to eliminate any possible doubt in the eyes of the world as to what future they want. This will provide a legal, fair and decisive means for the people of the Falkland Islands to express their views. The Minister of State responsible for the Falklands, my honourable friend the Member for Taunton, is on the islands at this time and has discussed the matter in detail with the islanders’ elected representatives. They are excited about the prospect of showing the region, and indeed the whole world, what future they want for the islands.
As the House will be aware, tomorrow marks the 30th anniversary of the liberation of the Falkland Islands by British forces. Events will be held both on the islands themselves and here in the UK to commemorate the extraordinary series of events which unfolded 30 years ago. We will remember all those who paid the ultimate price in defence of basic freedoms. For the Falkland Islanders, tomorrow will bring mixed emotions: thankfulness to those who fought and won, sorrow for those whose lives were lost, and anger that an attempt should ever have been made to invade their home and deny their basic rights. It is fitting that around the anniversary of their freedoms and rights being restored the islanders should announce their intention to give these freedoms further expression through a referendum. In a region that advocates democracy and human rights, it is entirely appropriate that the islanders can express this fundamental right. The principle of self-determination is a key part of the United Nations charter, as we and the islanders have repeatedly made clear and will continue to make clear.
While the current Argentine Government insist that they will seek to recover the islands only via peaceful means, their behaviour towards the islanders remains aggressive in many other ways. They have placed a ban on charter flights through Argentine airspace to the islands. They have banned Falkland Islands-flagged vessels from their ports and prevented cruise ships which have visited the Falklands from docking in Argentina. They have introduced domestic legislation to penalise companies that wish to do business with the Falkland Islands. They have sent threatening letters to those engaged in the wholly legitimate business of hydrocarbons exploration around the islands, and recently they have attempted to politicise the Olympic Games by screening a deeply offensive television advert showing images of an Argentine athlete training on a war memorial on the islands.
These actions, directed by the Argentine Government towards an innocent population of 3,000 people, are not those of a responsible power on the world stage. While the Argentine Government offer threats and misleading rhetoric, the islanders have responded with dignity and determination. For our part, the British Government will continue to offer unequivocal support to the islanders by maintaining a defensive military posture on the islands, by supporting their growing economy and by protecting their rights and wishes today as we did 30 years ago.
The forthcoming referendum will provide further evidence, were any needed, that the islanders alone will decide their future. It will offer a simple but powerful expression of democracy. I hope that Argentina, and indeed all in the international community, will take note of the islanders’ views. Further details will be announced by the Falkland Islands Government in due course, and I will keep the House informed of developments”.
My Lords, that concludes the Statement.
My Lords, I thank Minister for repeating the Statement made in the other place earlier today. The first duty of the Opposition on the 30th anniversary, tomorrow, of the liberation of the Falklands is to pay tribute to the British forces who served there and particularly to the 255 British service personnel who lost their lives. For our part, we express deep gratitude for their service.
The principle for which they then fought was the right of self-determination, which is enshrined in the United Nations charter. It is why today we back the right of the Falkland islanders to reaffirm that principle, that right of self-determination, and why a proposal for a referendum appears to the Opposition to be a reasonable response on their part to the very regrettable misrepresentations and provocations from the Argentine Government. For our part, we want good relations with Argentina and good relations between Argentina and the Falkland Islands. That is the best basis for a happy, secure and prosperous future all round.
A decade or so ago, it seemed as though much democratic progress was being made in Argentina. In my capacity as chair of the think tank Policy Network, I remember a progressive governance conference where we welcomed the late President Kirchner alongside President Lula and President Lagos. The hope was that Argentina was joining a democratic and progressive family. We are very concerned about the stepping up of Argentina’s rhetoric on the Falklands issue and about whether it is part of a wider campaign by an Administration who are facing very difficult domestic problems. It is a pattern that we have seen before in Argentina, a country that has great resources and fine people but, too often, dysfunctional politics and policies.
The Falkland Islanders are not alone in having difficulties with the Argentine Government. Spain has been incensed by Argentina’s forcible nationalisation of the Spanish stake in its oil company. We welcome the robust response not only from the Spanish Government but by our noble friend Lady Ashton, in her capacity as EU foreign policy representative, against what Argentina has done in this case. This is the kind of international support that we need to mobilise on the question of the Falklands. Can the Minister indicate what discussions have taken place with Spain and our other EU partners as to how we can get a more sensible attitude from the Argentinian authorities? Has the Foreign Office had discussions with my noble friend Lady Ashton, not just about the Spanish episode but also about the current Falklands situation?
More widely, what efforts are the Government making to establish good relations in Latin America? It is now a key British interest, given that this is one of the areas of spectacular economic growth in the world and an area where Britain has a lot of historic links. How are we planning to leverage up our relationships with other South American countries in order to isolate Argentina in the stance that it is taking on the Falklands?
The final point is our concern as to whether the Government are sending the wrong signals to the Argentinians. Many of us remember the Franks report and what happened 30-odd years ago, and how the then Prime Minister, the late Lord Callaghan, insisted on keeping a patrol vessel down in the south Atlantic despite the economic difficulties that Britain was suffering. However, the Conservative Government under the noble Baroness, Lady Thatcher, then withdrew that vessel. That was taken as a signal by the Argentinians that we were no longer that bothered. Are we sending a similar signal today, when we have decided that our aircraft carriers should no longer carry aircraft? That seems to me to be a relevant point to ask Her Majesty’s Government.
We want better relations to be established with Argentina, and between Argentina and the Falkland Islands, without conflict. In order to achieve that, the British Government have to have a strategy. I hope that the Minister can give us a glimpse of what it is.
I am very grateful to the noble Lord for the robust support which he, on behalf of his party, has given to this move, and the way in which he roundly and rightly emphasised the need to speak out against the very regrettable misrepresentations by the Argentinian Government of the situation. As the noble Lord said, his party wants good relations with Argentina. Of course, so do we all. It is a country of great potential with which, were it not for this situation, we would be able to work effectively to great benefit of the people of Argentina. That is apparently not the wish of the Argentinian Government, who have persisted with the aggressive attitude that was mentioned by my right honourable friend in his Statement.
As to the international scene, we of course work with all our EU partners, but there is no wish in Her Majesty’s Government to involve other countries in a bilateral relationship on a bilateral issue, which is fully confirmed under international law in accordance with the rights of self-determination which nations across the globe fully recognise. We have made major strides in the past year or so in developing excellent relations with Latin American countries. Latin America is emerging, as are all the great developing nations of this earth, as a major and significant player in world affairs, as a vital new market for our goods and as a source of the generation of wealth and political influence. Both my right honourable friend the Foreign and Commonwealth Secretary, and my honourable friend the Minister of State, Jeremy Browne, have been tireless in their work in that region in establishing—or re-establishing, because this is part of history—very good links with these great and important nations. Work is going on at various international conferences. Some very firm lines have been taken about the need for self-determination. This has been a very robust response, even when Argentinian diplomats have tried to involve other countries in their cause in various ways. That is the situation at present.
The noble Lord talks about a strategy for the future. The strategy rests on the rock of our commitment to the islanders’ wishes and their determination to be a self-governing territory of the United Kingdom. That is what they wish to remain to be, and the referendum will no doubt establish beyond doubt that there is no change in these wishes, and that they are determined to assert their preferences. That is all I have to say on the matter, beyond, again, to thank the noble Lord for his robust support.
My Lords, would the Minister agree that one of the more disturbing developments has been the way in which the Argentine Government have persuaded many other countries in the region, even great friends of ours such as Uruguay and Chile, to deny entry to British naval vessels? Can he reassure us that our embassies in those countries are working hard to refute the unsubstantiated messages put forward by the present government in Argentina? Also, can he agree that as in the case of the Gibraltar referendum a few years ago, a clear message from the people of the Falkland Islands would be most helpful? Will he also be kind enough to convey to the people of the Falkland Islands the fact that we are all fully behind them, especially at this time?
Yes, I will certainly do that, and convey that in clear and simple terms. As to the efforts of Argentine diplomacy to persuade others to support their posture and their claims, I can assure my noble friend that our embassies, our diplomatic machinery and my ministerial colleagues are fully engaged in countering some of the misrepresentations that are being aired around the place. We have had a good response from responsible friends that they are not going to be automatically pushed by Argentina or by claims that go flatly against the basic principle of self-determination for the peoples of the Falkland Islands. This is the 21st century, in which overriding the self-determination of peoples is not the custom or the desirable pattern, or indeed in accordance with full international responsibility. We have made that very clear and will continue to do so.
My Lords, 30 years ago—almost to the day—I sat in some sorrow writing letters to the mothers, wives, siblings and children, of the 22 boys who were killed when my ship was sunk. This task was made a little easier, first because I was very proud of them, and secondly because I felt we had been involved in a just war. I am appalled by the behaviour of the President of Argentina in making outrageous statements about the Falkland islanders purely to distract attention from what is going on in her own country. She seems to forget that the only reason she is there democratically is because we won that war. However, the Minister will be glad to hear that my question does not relate precisely to aircraft carriers and warships but rather as to whether he would join me in agreeing that we owe a huge amount to our merchant marine, 73 of whose vessels were involved in the Falklands War? Does he believe that we have sufficient British merchant mariners today to ensure that if there is trouble globally, we are able to provide the merchant ships, which are so crucial for global operations? They are after all the “fourth service”, as they were referred to by Winston Churchill.
The House will be very grateful to the noble Lord, who speaks to us from the heart of history. He was there and experienced the agonies and challenges of that time, 30 years ago. The country is grateful to him for that as well. As to his question about whether we have the resources to meet global problems, one has to be realistic. If all sorts of crises were to develop on all sorts of fronts—for instance, all the pinch points in the world traffic of oil, gas and energy—no one country could deliver a full Merchant Marine to cover that. Do we have the resources to defend the Falkland Islands against the dreadful, absurd and almost ridiculous prospect of a threat from Argentina again? Yes, we do, but I hope that Argentina will not be stupid enough to do that. We certainly intend to maintain those resources; there can be no doubt at all about that.
However, who knows what great world threats may develop in these troubled times? If they do, we obviously have to act closely with our allies. One could not expect one country alone—perhaps not even the mighty United States—to be able to mobilise adequate resources for all the troubles in the world. There are plenty, not least the piracy on the eastern side of Africa—and, increasingly, on the western side—which now take some of our resources. There are many other problems as well.
The noble Lord has already received what he rightly described as robust support from my noble friend on behalf of the Opposition for the Government’s support for this referendum, and for his justified words in describing the recent behaviour of the Argentinian Government. I think he will get equally robust support universally, throughout the House this afternoon. I hope that he is able to tell the Argentinian ambassador about that personally.
However, I am afraid that the Government cannot escape a wide measure of responsibility for the very bad change in the situation over the past year, particularly in the behaviour of the Argentinians. It was the worst possible signal to send to Argentina when we got rid of our carrier strike capability. We sent a signal that if the Falkland Islands were ever invaded again in the future, next time we would not be able to retake them. That was thoroughly deplorable. In this very unfortunate situation, will the Government consider the possibility of regularly deploying a “Trafalgar”-class or, prospectively, an “Astute”-class submarine in the south Atlantic? It should surface from time to time to leave no doubt in anybody’s mind that it is there.
I cannot comment on the movements of our submarines or on related intelligence matters. I applaud what the noble Lord said at the beginning but completely refute his later sentences. There are forces in the Falklands. We are perfectly well placed to rebut and repel any renewed invasion. Decisions about the strategic defence review, the future of our carriers and so on have no effect whatever on that sustained ability to defend the islanders against another invasion.
My Lords, I express our gratitude to the families of the service personnel who made the ultimate sacrifice. On behalf of others in the House, I say how grateful we are to hear from the noble Lord, Lord West, when he speaks with such passion about the events of 30 years ago.
My question is about the conduct of the referendum. The Falkland Islands Government have obviously been very bold in making this move to demonstrate their confidence in their ability to determine their own future. I note that the Statement says that international observers will be invited to observe the process. I wonder whether my noble friend might suggest to the Falkland Islands Government that it is important to have observers from Latin American countries to demonstrate the rigour of the process. That would be most helpful in countering Argentina’s public relations, which are of course inaccurate.
If I may say so to my noble friend, that is a very interesting thought, which I will certainly pass on to my colleagues. It will be important to establish beyond doubt that whatever emerges from the referendum is absolutely and properly established, and that the whole process is properly conducted. Of course it is undeniably on a very small scale, and therefore the monitoring and checking should be absolutely 100% proof that this is a sensible and precise expression of the wishes of the islanders.
I welcome the Statement by the Minister, and declare an interest in so far as I am the chairman of the South Atlantic Council, a body established after the war to try to improve the triangular relations between the islanders, Argentina and the United Kingdom. The degree of success that we have enjoyed has been variable, but it must be made clear that sabre-rattling by the United Kingdom at this time is irrelevant, because democracy followed the war in Argentina and that, in turn, resulted in the demilitarisation of its economy and the country. The defence cuts of which we are talking this afternoon in the United Kingdom are as nothing compared to what has taken place in Argentina. It is therefore totally unrealistic to talk in terms of a military threat from Argentina. The Malvinas mania going on in Buenos Aires and across the country is concerned primarily with disguising the economic chaos engulfing that country.
We should take Gibraltar as a pointer. When a clear expression of democratic opinion was made, Spain began to think again about how it dealt with the problem of Gibraltar. In the kind of triumphalist rhetoric in which we sometimes indulge regarding the Falklands, it would be unfortunate if we failed to think about what should happen after the referendum. Now, for the first time in several years, there is an ambassador to the Court of St James’s from Argentina. Let us take advantage of that, and start a dialogue rather than just the haranguing which has been carrying on for the last few years. Let us use the opportunity of what I am fairly confident will be a clear expression of the opinion of the people of the islands that they wish to retain the status quo. There are many things—fishing, hydrocarbons, tourism, shipping, flights to the islands—which should be the subject of clear and straightforward negotiation. This could provide us with an opportunity to start afresh after many lost years—largely lost, I have to say, due to Argentine intransigence.
The noble Lord is extremely well informed on this and has followed it very closely. Of course, leaving aside sovereignty and the wishes of the islanders to remain a self-governing territory of the United Kingdom—very clearly expressed, and I am sure they will be again—a whole range of things have been offered to Argentina. There is much talk, of course, about the hydrocarbons explorations around the island. Thirty years ago, when I was involved in some administration of this country on energy matters, one of the files on my desk was concerned with exploration of the hydrocarbons around the Falklands—and that was right at the start of this, in 1980. All along, and increasingly and very specifically in the 1990s, offers were made to the Argentinean people to co-operate very closely and to share the benefits of anything that emerged. That was just one example; the noble Lord gave many others. There is a whole range of areas where there could be extreme benefit to the people of Argentina, but they must not include—and in fact must exclude—the consideration of the sovereignty and the self-determination of the people of the Falkland Islands.
Is my noble friend aware that the Argentine Government have been arguing against the referendum on the basis that those taking part will be settlers, or the children of settlers, on the Falkland Islands? Will it be possible for him to bring to the attention of the Argentine ambassador the fact that she is a settler and the child of settlers, that there is no voter for the President of the Argentine who is not himself or herself a settler, and that if we are talking about settlers we are all in it together?
My noble friend makes a very acute historical point that many of the inhabitants of almost every country on earth are settlers; one thinks, not least, of the United States. I believe that the ancestors of many here were also settlers. Indeed, I often hear divisions between the arriviste Norman settlers who came in in 1066 and those who were here already, so my noble friend makes a very good point. However, I do not intend to pursue it with the Argentine ambassador. I have had the opportunity to meet her and I believe that the view that we should express in this country is not one of tit for tat but a dignified intention that the sovereignty of the Falkland Islands people must be preserved, that we wish Argentina well, and that we would like an end to this distracting quarrel and the restoration of the co-operation and links which we once had with the Argentine.
My Lords, it will be within your Lordships’ knowledge that unfortunately down the years we have not always enjoyed the full support of our American friends with respect to matters relating to the Falklands. The situation is slightly different now. If the reports are accurate, the present American Secretary of State is so disturbed at the irrationality of some of the decisions being made by the Argentine President on a whole range of subjects, a lot of which have nothing whatever to do with the Falkland Islands, that there may well be a change in American attitudes to the situation down there. Therefore, I press on the Minister the desirability of inviting our American friends to give their full support to this referendum and say that it demonstrates that democracy works.
We shall certainly seek to follow that advice. The noble Lord is absolutely right: there are big changes in the region. Not least is that, with the revolution in world gas discoveries and developments, Argentina in due course could be a major beneficiary and have huge reserves of shale gas. This ought to be of benefit to the Argentinian people. That is the path they should follow rather than distracting themselves with complaints and aggression against the Falkland Islands.
My Lords, the Minister said that the Government were not anxious to involve other Governments in the Falklands problem, which I quite understand, but is that altogether wise? The European Union has a treaty obligation to defend trade from EU countries, wherever it occurs. As I understand it, it has taken a very dim view of the Argentine nationalisation of Repsol. I believe that the Foreign Affairs Council met about two weeks ago to decide what the European Union was going to do about it. This is relevant for us because, as the noble Lord quite rightly points out, the Falklands may prove to be a very substantial offshore oil province and if there is any intervention the EU as well as ourselves should be there to defend it. Can he tell the House what the Foreign Affairs Council of the European Union decided with regard to Repsol at its meeting about two weeks ago and whether we are going to involve the European Union in defence of the Falklands offshore hydrocarbon exploration?
I think, from memory, that the Foreign Affairs Council deplored the nationalisation of the Repsol-connected subsidiary in the Argentine. I will check on that to be 100% sure and if I am wrong I will contact the noble Lord. However, he is really making a broader, very profound point that there are all sorts of reasons, as have already been raised this afternoon, why responsible democracies, whether in the EU or elsewhere, should be concerned about the actions of various kinds being taken by the Argentine Government. The nationalisation of the Repsol subsidiary obviously greatly affects Spain. Any other measures interfering with free trade and trade with European Union powers affect them very greatly.
As far as the specific matter of the Falkland Islands’ wish to remain a self-governing territory under the United Kingdom is concerned, that is a bilateral issue. However, it is perfectly sensible that we should work with other EU countries on policy and general matters towards Argentina and towards hydrocarbon development off the coast of Latin America or anywhere else. It is certainly something that would become involved in our discussions. On the specific point of the last FAC meeting, I will check and confirm what I have said.
My Lords, some years ago I had the pleasure of visiting the islands with the South Atlantic Council, under the aegis of the noble Viscount, Lord Montgomery. On that visit, there were a number of people from industry and the arts with various connections here. In particular, there were two colleagues of mine from the oil side of the Anglo-Dutch company which I served for many years. They made it very clear that political instability in that area was a real disincentive to exploration. Perhaps the Argentines can be reminded of this, with the things they have been doing recently. There is no great incentive for oil companies to go into areas like this which are difficult enough geologically, but are made worse by political instability. They are probably doing themselves a lot of damage.
My noble friend is entirely correct. This applies not merely to drilling for exploration. As those—including my noble friend—who are familiar with it know, then comes development, which is expensive, and after that production, which is also extremely expensive. Vast sums of money have to be invested and big investors will not move if there is a severe threat of political instability. He is quite right that it therefore affects the prosperity not just of the Falkland Islanders but of the whole area. In various ways it damages the interests of the people of Argentina and we should point that out.
Civil Aviation Bill
My Lords, we are an island nation and our access to the rest of the world—and the rest of the world’s access to us—is primarily through air travel. That is why the aviation sector is so important to our economy. In 2010, goods worth £113 billion were moved by air between the UK and non-EU countries. In the same year, UK airports served nearly 400 international destinations. That level of activity is possible because over the past 30 years the aviation industry has changed to meet the needs of the customer. The emergence of low-cost carriers is one example of how the industry has innovated and diversified. There has also been an increase in the number of people travelling by air in this country, from 59 million passengers in 1982 to 211 million in 2010.
While the sector has changed dramatically, the regulatory framework which governs it has not. Much of our aviation regulation originated in the 1980s, and needs to be brought into the 21st century. The Government are committed to bringing vital reform to our aviation regulation. In a moment I will set out this reform in more detail, but let me first make clear the important theme that runs through the Bill: putting the interests of the passenger at the heart of airport regulation. For the first time, the CAA’s primary economic regulation duty will be to users of air transport services—that is, the passengers and owners of cargo.
The Bill introduces reform in four areas: the economic regulation of airports, the legislative framework of the CAA, the Air Travel Organisers’ Licensing scheme, and aviation security. I would like to explain each of these in turn, beginning with the reform to the economic regulation of airports. In the UK, the gas, electricity, water, telecoms and post sectors all have some level of economic regulation. Economic regulation typically operates through an independent regulator capping the prices that companies with substantial market power are able to charge and specifying levels of service quality. Much of the aviation industry in this country is competitive. That is how the Government prefer it to be. Effective competition gives firms the incentives to invest and improve efficiency, choice, and service quality.
However, a small number of airports—currently Heathrow, Gatwick and Stansted—have substantial market power and are not subject to sufficient levels of competition. In order to replicate the effects of a competitive market on these airports, the CAA exercises its powers of economic regulation in the form of price caps and service quality requirements. However, there is compelling evidence that the framework for the economic regulation of airports needs updating. The Competition Commission has concluded that the regime distorts competition between airlines and should be reformed. Advice from an independent panel of experts and responses from three evidence-gathering exercises has further indicated that the current regime is not fit for purpose. I should also add that the previous Government agreed that reform is necessary—a fact that helps explain the considerable degree of cross-party support the Bill has attracted so far.
The most common criticisms of the current regime are that the regulation is disproportionate and difficult to adapt to individual airports, that the CAA is unable to respond effectively to extraordinary events such as volcanic ash or extreme weather, that the regulator is insufficiently accountable for its decisions and its priorities are unclear, and that the regulatory process is burdensome and inefficient. The Bill would remedy these problems.
Where the current legislation gives the CAA four separate and sometimes competing duties, the Bill replaces them with a primary duty to passengers and owners of cargo. Where the CAA is presently constrained by rigid rules that require it to set five-year price caps when regulating dominant airports, the Bill would give the CAA a modern licensing system. Under this new system, licence conditions could be tailored to individual airports to tackle specific challenges at particular times. This licensing system would also enable the CAA to reduce the degree of economic regulation imposed on individual airports if it believed that this would benefit passengers. For example, instead of controlling prices, it could monitor prices while regulating certain aspects of service quality. The new system would also enable the CAA to impose different regulatory time periods. For example, setting longer periods for price controls would provide greater certainty and could stimulate investment.
Currently, it is the responsibility of the Secretary of State to decide which airports should be subject to economic regulation. The Bill proposes that the CAA, as an independent and expert body, should make that decision against clearly defined criteria set out in the legislation. Another criticism of the current regime is the lack of accountability it provides for key regulatory decisions. At present, judicial review is the only way to challenge the CAA’s decisions on the price cap and service quality standards that airports must meet. Under the Bill, the licence conditions imposed will be appealable by the licence holders and materially affected airlines. These appeals will be made to the Competition Commission, thereby removing the need to go straight to judicial review. The decision on whether an airport is dominant will be also be appealable to the Competition Appeal Tribunal. To summarise, the reforms will deliver a new system of regulation that is fairer, more flexible, and more focused than the current regime.
I turn to reforming the legislative framework of the CAA itself. Measures in Part 2 of the Bill will change the way in which the CAA operates, improving transparency and accountability; removing unnecessary government involvement and funding; and cutting red tape. The Government believe that a more transparent system of providing information would be of benefit to the public. At the moment it is very difficult for passengers to compare air services—for example, to establish which airline is most likely to lose luggage, or which airport garners the most complaints from passengers. It is also difficult for consumers to find out environmental information about aviation.
In 2011, PricewaterhouseCoopers looked at the reports of 46 world airlines and found, for example, that only one-third reported on their noise levels. The Bill will create a new duty for the CAA to publish, or arrange for the aviation sector to publish, information to help users compare services. The CAA will also be given a duty to inform the public about the environmental effects of civil aviation in the UK. It is important that these duties are performed proportionately, so the CAA will have to consult on its approach and have regard to the principle that the benefits of taking action should outweigh any adverse effects.
Other measures to modernise the legislative framework of the CAA include giving the CAA new freedoms to appoint its own executive directors. Where at the moment the CAA has recourse only to slow, costly, and often disproportionate criminal sanctions in enforcing regulations, the Bill will enable the Secretary of State to give the CAA powers to enforce offences through civil sanctions. I am pleased to say that Part 2 of the Bill also brings forward a recommendation that was made by this House.
In the course of its licensing duties, the CAA collects medical data on individuals in the air transport industry. In 2007, your Lordships’ Committee on Science and Technology, as part of its inquiry into air travel and health, recommended that anonymised medical data held by the CAA should be made available for ethically approved medical research. Clause 104 meets this recommendation. Of course, we have built in safeguards to help to ensure these data are used appropriately. I urge your Lordships to read the appropriate section carefully.
I will now move on to our proposals to improve the regulation of aviation security. Keeping people safe and secure when they travel is of prime importance. At present, aviation safety is regulated by the CAA, while security regulation is carried out by the DfT. The Bill would move security regulation from the DfT to the expert regulator, the CAA. On both safety and security, the aviation industry would have to deal with only one regulator, not two. The move would have the further advantage of bringing the “user pays” principle to aviation security. The costs of the aviation industry should, as far as possible, be paid for by the people who use it. At the moment, the aviation industry pays for safety regulation, but the public purse pays for security regulation. The position under the Bill would be fairer.
The final measure in the Bill that I will mention, which accounts for just one clause, Clause 94, is the reform to the Air Travel Organisers’ Licensing scheme—ATOL for short. Over the years the ATOL scheme has given peace of mind to millions of holidaymakers who have known that because their holiday is covered by the scheme they will not be left stranded or out of pocket if their travel company becomes insolvent. However, diversification in the holiday market since the scheme was set up—in particular, the changes associated with internet booking—mean that it is no longer clear to some consumers whether their holiday is ATOL-protected or not.
Certain sorts of holiday—for example, those sold by airlines and on an agent for the consumer basis—cannot currently be required to be included in the ATOL scheme because they fall outside the relevant powers in Section 71 of the Civil Aviation Act 1982. So Clause 94 of this Bill would allow us to improve clarity for the consumer, by giving the Secretary of State powers to add more holidays to the ATOL scheme, including holidays sold by airlines and agents for the consumer. This should also mean that businesses selling holidays that include a flight will have a more coherent and consistent regulatory framework in which to operate.
The Civil Aviation Bill has undergone thorough scrutiny—
The Minister is right to stress the importance of aviation to this country. Does it not follow that the pilots are an extremely important part of that? Why did 91% of the members of the BALPA union consider the Government to be not supporting the industry sufficiently? Is that not a serious point that ought to be taken into account?
My Lords, I am sure it is a very serious point. I will be meeting representatives of BALPA shortly, certainly before the Committee stage starts.
The Transport Committee found the Bill to be clearly welcomed by the aviation industry, including airlines, airports and the CAA. It also found that the draft Bill has been,
“subject to detailed review and consultation over a lengthy period”—
and, although it raised some points which have since been picked up in the Commons, it found that the Bill—
“appears to offer a better way to regulate UK airports in the future”.
I look forward to debating the merits of the Bill with your Lordships in this Chamber. I am confident that we will maintain the high level of scrutiny that the Bill deserves and has attracted so far.
I beg to move.
My Lords, I thank the Minister for his clear exposition of the contents of this important Bill. He will know that we, on this side of the House, are familiar and indeed, supportive, of its broad structure. That is not surprising since, as the Minister indicated, the Bill was under preparation by Labour Ministers not so very long ago.
That does not mean that, while accepting the broad principles underpinning the Bill, we do not find much of the detail disappointing. Of course, we will seek to reflect that disappointment in a constructive way in Committee, in our amendments. The Bill, after all, was driven through the Commons with almost no concessions to our Front Bench team’s well argued criticisms and constructive amendments, and not all the Government’s arguments against those amendments were wholly convincing.
My noble friend Lord Clinton-Davis reminds us that the Bill also needs to be put in some context. Of course, I welcome it, as one of the first positive signs from the department of constructive work on the aviation industry, after we have, for two years, seen the Government tread water in circumstances where the industry has been making its demands very clear.
Those demands, as the Minister indicated, are impressive and insistent, because this is an industry that expands and grows, of which we should be proud and solicitous to its needs. Yet, we still await the broader context in which to view this Bill in terms of the Government’s future aviation policy.
Usually when I make these points, the Minister treats me to a “not just yet” response that suggests I should bide my time. Today he did not even do that; I got nothing from him on when aviation policy will be made manifest. Perhaps when he winds up the debate he will have some words of solace for those of us who are still extremely anxious about what the Government may propose.
As the Minister said, the Bill sets out to modernise the regulatory framework for civil aviation. We endorse the broad thrust of the reforms to the economic regulation of airports and to the legislative framework of the Civil Aviation Authority. We support many of these changes, improvements and reforms. The Bill seeks to make the Civil Aviation Authority more effective and, as the Minister emphasised, more accountable. That is to be commended. We also support in broad terms the transfer to the CAA of certain aviation security functions from the Department for Transport. However, we have anxieties in this area. I am sure that they will be shared by noble Lords when we discuss them in detail, and may even be voiced today at Second Reading.
We also approve of the strengthening of the Secretary of State’s powers so that holidays sold by airlines—an increasing feature of the holiday trade—can be included in the ATOL scheme, with its greater consumer protection. Again, we have one or two questions that we will address in detail, but it is a most welcome development. We will seek to ensure that the Minister fulfils his claim that the Bill will put the consumer, the passenger and the user at the centre of arrangements for governing the industry.
However, the problem is that the Bill seeks to implement these changes in ways of which we are strongly critical. In particular, the Government’s backsliding on the policies necessary to moderate climate change is already evident in key areas of the economy, and aviation is no exception. The Bill gave an opportunity to the Government at least to show an earnest intention on these issues, but it is inadequate. We look forward to lively debates in Committee. The Bill weakens the terms of proposed environmental obligations and sends the wrong signals to the industry. There is no longer a clear duty on the Civil Aviation Authority in its crucial role of economic regulation to have regard to compliance in airports’ operations with environmental and planning law.
Airports are major economic activities. We address a lot of our attention to one of the world’s great airports that is by far the most significant one in the UK: London Heathrow. However, other airports are very significant economic enterprises in their areas, and there are consequences from their considerable economic activity. That is why environmental concerns about their operations have been well articulated by the public for many years, particularly in the case of Heathrow, which has the disadvantage of being our largest airport and yet located within the confines of the M25 in an area of very considerable population density. Yet the Bill limits the legislative pressure on the Civil Aviation Authority, and thus the airports, so that investment in improving environmental performance may be reduced. Our amendments in the Commons were rejected by the Government in Committee and on Report. When I say “the Government”, I mean the full coalition Government—the Liberal Democrats participated as fully in this rejection as the Conservatives —and the Minister, therefore, is bound to expect that he will be strongly challenged by us in Committee. We shall table amendments to impose a duty on the CAA to ensure that aviation plays its part in meeting the UK’s carbon reduction targets.
The Minister emphasised that improved passenger welfare is a very important objective in the Bill. We have only to cast our minds back to the suffering of stranded passengers in the winter of 2010-11 to recognise how little consideration was given to passengers at that time. We do not consider that the provisions in the Bill meet the necessary requirements and we shall seek to strengthen the obligations of the airports and the CAA. The House of Commons Select Committee on Transport expressed strong concerns about passenger welfare and we agree that the Bill should guarantee that airport licences will be so structured as to address fully key areas of passenger satisfaction, including baggage handling, which is problematic enough, and the even thornier issue of immigration. Recent Government proposals on strengthening immigration controls have significant implications for busy airports, as we have all found out in the past 12 months. We shall explore the transfer of responsibility for security from the department to the CAA. We are concerned that the proposals are motivated more by reducing departmental expenditure than efficiency in action. The House will be concerned about how effective are those proposals. The airlines, of course, are concerned about the likely costs of this transfer, and we are worried about reduced efficiency when highly qualified and experienced staff are subjected to major change in their employment conditions and the organisation for which they work. The morale of staff is an important issue so far as security is concerned and the Government must recognise that they cannot just flick a switch in this area and expect this particular light to come on readily. They must reassure us that they are approaching this issue with the greatest amount of care and consultation.
The House of Commons Select Committee on Transport also recommended that the CAA should be brought within the remit of the National Audit Office—after all, the Minister has expressed that the objective of the Bill is to make the CAA more accountable—but the Government in Committee and on Report in the Commons were singularly unconvincing in their arguments on the issue of this important financial control over an expanding CAA. We remain utterly unconvinced by their arguments. Of course, we shall have the opportunity of examining this important case in Committee.
The Bill affords us a significant opportunity to cause the Government to think again about the important changes to the role of the Civil Aviation Authority. Of course, we agree entirely that the Civil Aviation Authority was overdue for reform in a rapidly changing industry and that, in this changing environment, it is essential that it is fit for purpose. That is why so much preparatory work was done under the previous Administration. However, the Bill introduced by the Government—the Bill before the House today—has obvious departures from the thinking that was present in its early stages. We shall seek to harness the informed opinion available on all sides of this House to effect necessary changes.
My Lords, this is not a debate about determining new runway capacity. I believe that we can make much better use of the capacity we already have. In preparation for this Bill, I have been to Luton, Gatwick, Stansted, and Birmingham airports. It is obvious that there is plenty of spare capacity which can be bought online. Releasing capacity is very much tied in with having good quality public transport access. This area needs attention and probably ought to be addressed when the Government consider the HLOS target for the railway. However, the improvements to surface capacity—for example, between Stansted and London—would benefit a huge number of people who live in the Lea Valley and at the moment enjoy what I would call a less-than-good train service.
I wish that people would stop talking down—I am talking about what is going in the press, not in this debate—the ability of airports within easy reach of London to maintain good air services throughout the world. If we take Germany as an example, it is not necessary to have one hub airport which offers everything. Members will know that, for example, Gatwick now has two services to China, one to Hong Kong and one to South Korea, and one other which has been started recently. It shows that when there is competition between the airports, they seek out the markets to which Heathrow draws a lot of attention but which can, in fact, be served quite effectively by other places. Gatwick and Birmingham are not far from London, and Luton would be very much more convenient if the arrangements for getting people from the train to the plane were anything other than third world.
We support the general thrust of the Bill and, particularly, devolved power to the CAA and the extension of the ATOL licence to enhance the protection of passengers and holidaymakers. Does the Minister consider that the proposed charges are sufficient to eliminate the insolvency of the Air Travel Trust Fund? That is, the fund out of which people are compensated, which I believe has an accumulated deficit of £40 million. However, we are more concerned that the CAA should have environmental objectives and duties relating to pollution and noise. These objectives should, of course, be funded by airport charges levied on airlines. Again, is the noble Earl minded to engage seriously with the environmental issues of pollution and noise?
I am a little concerned about the words in the Bill concerning a market power test. When Stansted, Gatwick and Heathrow were all part of the British Airways Authority there was not much competition between them, but Gatwick has shown that there can be competition. It has 25% spare capacity and could be an effective competitor for a number of services from Heathrow. Unless there is market power, there is no need for regulation. Regulation is necessary in the absence of fair competition.
I want to draw the Minister’s attention to the scope of rights of appeal, which he touched on in his opening remarks. To protect airport investment in environmental improvements, many airlines will attempt to use the proposed appeal mechanism as a delaying tactic. I leave it to noble Lords to imagine which airlines might wish to avoid any charges at all, but they will have to be made if we are to meet the objectives. Of course, the environmental duty should apply not only to the three designated airports, but to those which handle more than 5 million passengers a year. That would include Manchester, Luton, Birmingham, Edinburgh, Glasgow, Bristol and Liverpool airports.
There is also concern that in proposing to control the environmental problems, the CAA will invent, as it were, a new bureaucracy. Almost all of the airports’ annual reports include reports about pollution and noise, as well as on things like the use of water and salvage. We should not seek to duplicate work, but simply to harmonise best practice between the various airports.
Of course they will because every aircraft manufacturer is striving to produce quieter aircraft, and that we would like to see. It is not just a question of noise from the aircraft, it also concerns maintaining the right take-off trajectory and angle of climb, which can significantly reduce noise. However, I would draw the noble Lord’s attention to the fact that more than 50% of the pollution relates to ground access. It is not the aircraft, but what happens on the ground, and it is that area which I would ask the CAA particularly to review.
Lastly, I refer to the practice of stacking. What progress is being made on the elimination of stacking through better control of the airspace? It is not reasonable for an aircraft flying from Hong Kong to arrive an hour early and then circle around London. If there is a tail wind, the whole flight can be regulated so that the aircraft travels less quickly, which would save fuel and ensure that it arrives at London airport when it is ready to accept it. We should try to use technology and the single-sky policy to control airspace generally and thus ensure that aeroplanes reach their destinations on time. You cannot have trains stacked outside stations; you have timetables to regulate them. I believe that the same is true of aircraft.
My Lords, I feel I have been here before. During the passage of the previous Civil Aviation Bill in 2006, I recall long discussions on Clause 8, relating to health—the noble Lord, Lord Davies of Oldham, may recall our exchanges then. These included my concerns, and those of injured pilots, over the effects of breathing what is known as “bleed air”, which could contain organophosphates, on the health of both airline crew and passengers.
The Civil Aviation Bill before us today includes the requirement under Clause 84, “Environmental information”, that:
“The CAA must publish, or arrange for the publication of, such information and advice as it considers appropriate relating to—
(a) the environmental effects of civil aviation in the United Kingdom,
(b) how human health and safety is, or may be, affected by such effects, and
(c) measures taken, or proposed to be taken, with a view to reducing, controlling or mitigating the adverse environmental effects of civil aviation in the United Kingdom”.
This is to be welcomed, but I would suggest that there is one environment in particular where this duty is avoided: the cabin environment. Despite growing evidence, contaminated cabin air continues to be a very serious threat to the safety and health of air crew and passengers of all ages. This has been known since 1954. Indeed, a year later, an engineer from the company that is now part of Boeing recommended that,
“in light of the risk of exposure to oil fumes in flight, airlines should either operate non-bleed ventilation systems or filter the engine bleed air before supplying it to passengers”.
The Civil Aviation Act 2006 clearly sets out the responsibility of the Secretary of State and the Civil Aviation Authority for,
“organising, carrying out and encouraging measures for safeguarding the health of persons on board aircraft”.
Five years ago, the noble Lord, Lord Tyler, welcomed the House of Lords Science and Technology Committee’s 2007 report on air travel and its call for urgent action on contaminated air, saying that this was a,
“very serious matter of public safety”.
Since that time, some research has been undertaken by the Department for Transport-sponsored Institute of Environment and Health at Cranfield University—more of which later.
I believe that more rigorous action is required and this duty cannot be abdicated in favour of the European Aviation Safety Agency—EASA. In 2007, the House of Commons Transport Committee’s report on the work on the Civil Aviation Authority stated that EASA was,
“not yet ready to do its job and it is vital that the UK transfers no further responsibilities to it. I see no evidence that the position has changed”.
Apart from the new Boeing 787, passenger aircraft use unfiltered, heated air drawn directly from aircraft engines and auxiliary power units for cabin air conditioning. This is termed bleed air, because it is bled from the compressor section of the engine. This system has been used since just after World War II, when engine temperatures and pressures were considerably lower than today. The use of compressed air for ventilation was described in 1946 as “fortuitous”. With rising oil prices, the aviation industry was faced with huge commercial challenges; since the initial introduction of bleed air, both performance and efficiency have become critical. As a result, it is normal for the temperatures to which oils are now exposed within the engine to be far higher. This is a serious toxicity concern because the base stock of the oil is known to thermally degrade when exposed to extreme temperatures. Combine this with the known design fault in engine oil seals and you have the perfect conditions for low-level oil leakage that can expose passengers and crew to toxic fumes through the unfiltered air they are breathing.
As highlighted in the recently published Australian Civil Aviation Safety Authority—CASA—report:
“Exposure to … fumes and vapours can result in acute short-term symptoms”.
The report stated that the organophosphate family of TCP includes TOCP, which is a known substance in engine oils and can cause adverse health effects. In some individuals, long-term disability and forced retirement have resulted from long-term exposure. Pilots and air crew are particularly vulnerable.
It was also proven in the 1950s that other parts of the TCP family in the oil were even more toxic than TOCP, and these were later acknowledged to be in the oil at far greater levels than TOCP. Even more concerning is the recent research undertaken by the University of Washington, which has found that the entire family of TCP chemicals is toxic. I am sure that I do not need to remind your Lordships that organophosphates are neurotoxins—also commonly known as nerve agents. A small ongoing study undertaken at the University of Nebraska has recently published an astonishing finding that 50% of airline passengers tested positive to exposure to TOCP. This was one flight only with a wide spectrum of people on board—it could have been you or me, or a member of our families. There have been many reports of contaminated air incidents for many different airlines. I can provide details if any noble Lord is interested.
A report from the German air accident investigation bureau, the BFU, showed a serious incident late in 2011 in which a Boeing 737 co-pilot was partially incapacitated shortly after take-off and again on descent after smelling a pungent smell. Blood tests undertaken at the University of Nebraska found,
“that the blood sample (was) positive for exposure to TOCP”.
Recent PhD findings by Dr Susan Michaelis, specifically investigating this issue, found that 32% of the UK pilots in the survey population experienced medium to long-term ill health, 44% reported short-term effects and 13% experienced such chronic ill health that they were no longer able to fly. What we have here are threats to flight safety combined with a public health issue that can no longer be ignored.
The United States Air Force’s newest fighter aircraft has been having major problems with the oxygen system, with pilots reporting a range of hypoxic-like physiological symptoms. With a growing number of in-flight incidents, the United States Air Force grounded its F22 fleet for several months from May until September 2011. Several investigations failed to find the root cause of the problem and the US Secretary of State for Defence recently limited the aircraft’s operational capabilities and required NASA to resolve the issue. The F22 on-board oxygen-generating system takes some of its supply from the bleed-air system, and contaminated bleed air is one of the two issues considered to be the potential cause of the problem.
While attention is often focused on certain aircraft types, such as the BAe 146 and the Boeing 757, in fact the bleed-air system suffers from a flawed design affecting all aircraft using bleed air to supply cabin air for breathing. These fume events are alarming, both in their severity and their frequency. However, many sources—including Dr Susan Michaelis, the European Aviation Safety Agency and the Federal Aviation Administration in the US—have shown that these dangerous events are actually being underreported. What we have is a failed reporting system.
A survey for BALPA undertaken in 2001 and later published in a leading occupational health journal showed that less than 4% of the contaminated air events experienced by pilots in aircraft were recorded on the CAA mandatory occurrence report database. Pilots and cabin crew are too often unaware of, or complacent about, the health and safety implications and come from a culture that accepts fume smells as normal. Worse still, too many are too frightened to report such incidents for fear of losing their jobs. They are aware of the commercial pressure on airlines as, once a defect such as contaminated air is reported, it must be investigated before the aircraft can fly again. I am aware that DHL instructed its pilots not to report selected fume events, confirmed by the CAA in the House of Commons, because these are “acceptable”. This is in direct contradiction of European regulation 859/2008, which states that incidents that could endanger aircraft safety should be reported to the regulator and recorded in the aircraft technical log. Furthermore, European Directive 2003/42/EC requires all suspected oil fume or contaminated air events to be reported to the national authority. I know that the Minister is aware of this because he has given me that answer in reply to a Written Question.
Pilots can also be reluctant to report any symptoms experienced for fear of exposing themselves to a medical that could, ultimately, lead to their licence to fly being revoked. This is acknowledged by the Department for Transport, which notes in its FAQs on cabin air quality that a UK study is unlikely to be successful as,
“pilots … would be legally obliged to report any health impairments found ... to the CAA, who licenses them”.
A recent example of two British Airways pilots who were cited by the airline to be filing a higher than average number of contaminated air reports illustrates this point: one had his medical certificate withdrawn after TCP was found in his blood, while the second pilot died in his mid-40s of a brain tumour after repeated exposures which were in many cases reported, but clearly ignored. The British Airways head doctor, however, is quoted in the House of Lords Science and Technology Committee’s 1st Report of Session 2007-08, entitled Air Travel and Health: an Update, as saying that he had,
“no evidence to suggest there is a serious medical problem”.
It is against this background of underreporting and an industry eager to avoid the commercial implications that the research by Cranfield was undertaken. In the House of Lords 2007 report, it was noted that as the original proposal was to sample “around 1,000 flights”, the size of sample offered only a,
“remote chance of capturing an event”,
if the incidence of contaminated air events is as low as the Government claim. In fact, the sample used was just 100 flights, yet the presence of TCP was detected in 23% of flights. Additionally, 38 reported fumes of which the majority were described as oil or oily-type smells. A mandatory occurrence report, or defect report, was not triggered on one single flight despite this being a requirement under the European directive and regulation. Clearly, the Government’s accepted estimate of the frequency of fume events is flawed and, despite government denials, this problem is being seriously underreported. Indeed, despite censuring the Government while in opposition for their dithering on air cabin quality, with secret studies behind closed doors, putting air crews and passengers at risk, when in office, the Secretary of State for Transport, Theresa Villiers, appears to have done an about-face. Ms Villiers’ interpretation of the Cranfield report was that,
“there was no evidence of pollutants occurring in cabin air at levels exceeding available health and safety standards and guidelines”.—[Official Report, 10/5/11; col. WS37.]
I was told in 2005 that there are no safe levels set for exposure to the mixture of substances from heated synthetic oils or for the organophosphate TCP. Peer reviewers for the Cranfield study used descriptors such as “very serious deficiency”, “very varying quality”, and “serious weaknesses in sampling”. Interestingly, earlier research by the same establishment on behalf of the Government concluded that because,
“current risk assessment practices are largely based on evaluating the toxicity of single chemicals at high doses”,
and because humans are exposed to a mixture of chemicals on a daily basis,
“there could be many uncertainties in the hazard assessment”,
particularly related to low-level exposures. It would appear that we are making the science fit the policy, not the policy fit the science.
As long ago as 1997 I used the term “intellectual corruption” in a speech in your Lordships’ House on the subject of organophosphates. I was not in the least surprised to learn that the second and final Department for Transport-sponsored air-monitoring swab-sampling study by the Institute of Occupational Medicine, in Edinburgh, recently found TCP in aircraft at low levels, with estimated airborne concentrations of TOCP found to be very low.
I have a chest problem caused by organophosphates.
The Department for Transport publicly states that,
“it would be proper for DfT to be alerted of any findings out of the ordinary. Should that happen the DfT will consider what action might be appropriate to ensure that people can continue to fly without risk to their health”.
However, I must remind noble Lords that, as with the Cranfield study, no fume events were reported, and yet TCP at higher levels than TCP found elsewhere was detected, indicating that the substance originated from the aircraft. Of great concern is that the levels of the neurotoxic parts of the TCP stated to be in the oil are a direct contradiction of what Mobil advised in 2000. While ExxonMobil, formerly Mobil, the manufacturer of the oil, stated at the Australian Senate inquiry into this issue that the levels of the most toxic part of the TCP were over 600,000 times higher than the TOCP part, this Department for Transport-sponsored study has stated that the difference is only three times higher. One might ask who would know better. Making science fit the policy provides a wonderful excuse for inertia.
TCP has clearly been found in all aircraft surveyed. Controversially, the Institute of Occupational Medicine study states that there are government-set exposure standards available for the neurotoxic parts of TCP, but this is not the case. TCP as a whole and the most toxic parts do not have established exposure standards and, as we know, there are no exposure limits set for the mixture of ingredients in the aircraft environment. How can the researchers compare the enclosed environment of an airline cockpit with a normal office environment?
As well as organophosphates, there is a chemical known to be in the oil as an antioxidant at 1%, N-phenyl-alpha-naphthylamine, which is quite a mouthful, or PAN, which is much easier. It has an acknowledged contaminant as a by-product, beta-naphthylamine, or BNA. This is a prohibited schedule 1 category 1 carcinogen that has long been known to cause human bladder cancer. While oil certification standards used to say that suspected human carcinogens are prohibited in the oil, here we have a known human carcinogen in the oil as a contaminant totally ignored. The levels might be low, but repeatedly exposing people to human carcinogens is not acceptable. The new certification standards have removed this prohibition and simply say that all the regulations must be met. The other phrase that has been removed by the Civil Aviation Authority stated that,
“the lubricating oil shall have no adverse effect on the health of personnel when used for its intended purpose”.
The noble Countess reminded me of the time when I served on the first Select Committee that looked at air travel and health. Many of the concerns that she has voiced again this afternoon were before us in that committee. Our main concern was deep vein thrombosis, which we had a lot of very interesting evidence about. I hope she will forgive me if I do not follow her speech, but I will certainly read it with much interest.
I would like to say how grateful I am, and I am sure other noble Lords are too, for the very careful briefing we had before this debate from my noble friend Lord Attlee and his officials. They gave us a wealth of detailed information and a very good start on how we might debate this Bill.
Like others, I give a very general welcome to the main thrust of the Bill. My noble friend described its main features with great clarity and it is unnecessary for me to repeat that. However, I shall make one preliminary point before I turn to the Bill itself. It concerns the consolidation of legislation. I have been very critical over the years of the failure of successive Governments to embark on the consolidation of legislation, particularly legislation that is by reference to large numbers of prior Acts. Paragraph 28 of the Explanatory Notes makes the point very clearly:
“The Bill makes changes to a number of existing Acts, most notably the Aviation Security Act 1982 … Civil Aviation Act 1982 … Airports Act 1986, Transport Act 2000 … and the Regulatory Enforcement and Sanctions Act 2008”.
All those Acts are being amended by this Bill. My noble friend will remember that at one of his briefings I asked why the opportunity was not taken to consolidate all this into a single piece of legislation and he agreed to look into that.
At the same time, I consulted our very excellent Library researchers, who, in their turn, consulted parliamentary counsel. They supplied me with a very full response with which, of course, I will not weary the House this afternoon—except for one brief paragraph:
“The question of whether consolidation is appropriate tends to be considered at two different stages. The first”—
that is the one with which I am concerned here—
“is when a Bill is being drafted. If the changes proposed to be made by a Bill are sufficiently extensive, rewriting the existing legislation with those changes may be appropriate”.
I was arguing with my noble friend that this was in fact precisely such a case. Parliamentary counsel went on to set out the reasons why, in his view, this Bill was not considered to warrant rewriting into existence a new, single Act. He made a fairly strong case, and I do not propose to pursue that, but I will make two general points.
Where there is complex, detailed, technical legislation, the practitioners who deal with this, and their lawyers, are thoroughly familiar with the legislation and all the terms, and can therefore read the new Bill and its amendments with full understanding straight away. For parliamentarians, however—I suspect that most of us do not begin to share that expertise—it is a very different process. Either we have to spend a great deal of time on researching the thing and getting all the earlier legislation, looking it all up and deciding how the Bill will impact it, or, as I suspect most of us do because we do not have that time, we rely on those who brief us. They are interested parties. They may not give us a fully objective view of what is happening. It therefore seems to me to be right that when a new Bill is being drafted and there might be a case for consolidation, that should be considered.
The second thing is the device known as the Keeling schedule. If you have an existing clause that is being substantially amended by a whole series of amendments, which may run to several pages of the Bill, it is extremely helpful if there can be a Keeling schedule—a schedule at the back of the Bill which illustrates what the Bill will look like with the amendments all incorporated. I hope that Governments will be ready to consider this. I have come fairly new to this legislation, and I confess to my noble friend and to the House that I in no way consider myself an expert in it. It would be a good deal easier if one could have either a consolidated Bill or a Keeling schedule. I hope that the House will forgive me for deviating from the general tenor of the debate to make that point.
In the rest of my remarks I will touch on three issues. There has already been mention of Clause 84, about the environmental effects of civil aviation. I declare an interest: I am a resident of Vauxhall. We are directly under the main westbound flight path into Heathrow and very conscious of not only the noise but the atmospheric pollution. My noble friend Lord Attlee supplied a very helpful note on air quality, pointing out all the existing legislation, both domestic Acts and regulations, and EU directives, in which all these things are firmly regulated. It was a long list; again, I will not weary the House. At the end of his note to me, my noble friend said:
“Clause 84 of the Civil Aviation Bill has been designed to require the CAA to publish such environmental information as it considers appropriate to draw passengers and freight owners into the Government’s wider efforts to address the environmental impact of aviation, and to raise awareness of the environmental effects of civil aviation in the UK and measures taken to mitigate its adverse effects”.
I am afraid that I do not understand what that means. I do not know what its effect is to be. One thing is perfectly clear: it is not intended that the CAA should become yet another environmental regulator. There are plenty of regulators of different sorts there already. I hope that my noble friend may be able to give us some explanation.
My second point concerns the duties imposed in the Bill on the CAA. It is, of course, the main economic regulator. Unlike other regulators, however, there appears to be no explicit requirement that it should act efficiently. There is no efficiency or proportionality objective in this. I have to ask my noble friend, “Why not?”. Every other regulator—all the other regulators—have requirements to act efficiently and proportionately. Why not the CAA? It seems to me that this might be the subject of not only an amendment but, as the noble Lord, Lord Davies, said, audit by the National Audit Office. Why not? The Government’s argument as I have understood it and as it was advanced in the other place is to say, “Well, this is not a government body. It is not like a government department”. But it is a statutory regulator and it is entirely appropriate that its efficiency should be audited by the National Audit Office. I get the impression, which others have had, that over the years the Department for Transport has not put efficiency of the CAA at a very high level. It has had a low priority. The Bill seems to be an opportunity to put it right.
My third point is rather more technical; for that reason, I have given my noble friend notice of it. It concerns the risk to the financing of the considerable airport investment by the BAA. This of course refers specifically to Heathrow, and I will take a few moments to explain. Heathrow is the largest private infrastructure investor in Europe. It invests over £100 million a month in capital projects. It supports thousands of jobs. Heathrow accepts the Government’s intention—this is important—that critical assets should be safeguarded by ring-fencing. Noble Lords may recollect the case of a water authority owned by Enron, but where the assets were ring-fenced in this country so that the bankruptcy of Enron made no difference at all; that is what it is aimed at. Heathrow accepts that that is entirely appropriate, so it is not concerned with that. What it has concerns with are specific aspects of the ring-fence, which the Government’s policy states could be derogated from in practice and would now be subject to appeal, as the noble Lord, Lord Davies, said, perhaps by airlines or by the CAA itself. BAA is having to raise very large sums of money on the markets. Any uncertainty of that kind would immediately imperil its fundraising operations. I questioned its representatives on this when I met them, and they were really very clear. They said, “This is a very important issue indeed for us. We have been promised that there can be derogation but, at the same time, there is no exemption from the appeal process”. To quote the note which they gave me:
“BAA’s position is straightforward: the possibility of appeal by an airline in relation to BAA’s debt arrangements would have an extremely negative market impact. It would be likely to hamper our ability to raise finance, possibly over a long period. This, in turn, would restrict our ability to invest. Since our capital projects are amongst the largest in Europe and create many thousands of jobs, this would be a very unfortunate outcome at a sensitive time for the economy”.
They have been promised derogation. What they must have is an exemption from any right of appeal. That could very properly be incorporated into this Bill. None of this, of course, is contrary to the main thrust of the Bill which, as I said at the beginning, I warmly support.
My Lords, this Bill provides a modernising regulatory framework for civil aviation in the UK. However, because of the UK’s international leadership, this impacts across the world. A modern framework is necessary for a world-class aviation industry, including aviation services, and for taking a leading role in ensuring global safety and minimising any adverse environmental impact. I declare an interest as a former chief executive of the Met Office, which still receives funds from the Civil Aviation Authority, and I am grateful to the Met Office for providing me with some up-to-date information. I am also a director of an environmental consulting company that works for aviation in other places. I also provided evidence on behalf of BALPA in the 1970s, so I have worked on both sides of the fence.
This Bill is based on the strategic review of the CAA by Sir Joseph Pilling in 2008 for the previous Government and, as the Minister explained, on other recent studies. Aviation is a great technical achievement of engineering and meteorology, and increasingly environmental science. As a boy in 1953, I flew in a Comet 1 a week before the first one crashed. This is something I learnt about when I was a student at Cambridge, where I looked at extraordinary movies of the Comet 1 fuselage being pummelled by forces until it cracked. As a result, I have a sober view of these matters. Since then, aircraft have become safer and less dangerous than any form of surface transport. At the same time, aircraft have become more technologically advanced, with less fuel per passenger mile, and with better air traffic control. The new planes for the next generation—which were discussed earlier—are now being considered by Airbus. As far as I can see, they will look something like the wing fuselage designs familiar to noble Lords who used to read the Eagle in the 1950s, and familiar to Dan Dare. They should also be quieter.
The development of aircraft and engine design has reflected the increase in demand for smaller environmental impact. Noise has certainly reduced, as anybody living in London knows. In the 1990s, however, a major engine manufacturer asked at the Royal Society why engine design should take into account emissions of gaseous pollutants. That was then and here we are now with huge changes in policy and design. The new Rolls-Royce engines are as good as any in the world; it is a world leader. The Bill needs to strengthen and keep pressure on industry, as my noble friend Lord Davies mentioned in his opening remarks.
The operation of aircraft also depends greatly on accurate weather forecasts. Forecasts help with the safety and economic operation of aeroplanes. The Met Office reckons that the level of error in the estimation of a flight from Los Angeles to London is now 62 seconds, if the issues are solely to do with the meteorology. However, the real problems with aeroplanes are to do with airports, and indeed whether the aeroplanes are in the right place at the right time.
UK airlines have an excellent record of safety, greatly helped by these forecasts, both before take-off and during flight. It is an important responsibility of the CAA to fund the services of the Met Office and to ensure that it and other organisations remain at the highest technical level. For example, new methods of detecting lightning are now available for civilian forecasts. These were formerly secret. Indeed, it was lightning in the Atlantic which brought down the Air France Airbus a couple of years ago. These are still very important issues.
Noble Lords might not know that an aircraft flight above 24,000 feet receives data and forecasts from the UK and the US weather services. The World Area Forecast System provides this information for all airlines in all countries. Independent observers note that the UK forecasts are improving faster than any others. Payments to the Met Office of £30 million per year come from Eurocontrol, to which the CAA contributes.
As my noble friend Lord Davies and the noble Earl, Lord Attlee, reminded us, local weather is very important, and this is the responsibility of local weather services. One of the most difficult problems remains forecasting and advising aircraft in situations of extreme local weather, where there are special local factors. The Met Office and European weather services provided very valuable information about the effects of the ash from the Icelandic volcano, which required a new level of collaboration between the Government, the aircraft industry and environmental services. Indeed, there was a special meeting of the European Parliament to discuss this. This is an example of where science and engineering can provide services around the world.
My question to the Minister is whether it is a role of the CAA to encourage this important area of UK business. I have made the point over and over again that most chief executives of most technical agencies in the UK have no explicit responsibility to help UK industry. Would you believe it? That is the position. Other countries do not have that restriction, as I know from my experience. It was not on my job list at all. I sometimes used to ask about that. The UK does not use its agencies to help its very considerable possibilities for export, and I hope that might be considered in the Bill. Clause 84 refers to the environment of airports, and as the noble Lord, Lord Bradshaw, said, this is associated with aircraft pollution, noise and surface transport which provide most of the pollutant gases near Heathrow. If you look at a map of London pollution there is a great blob at Heathrow associated with surface transportation traffic.
This is of course being studied intensively. The UK has developed methods, which improve on the standard methods of the United States, for studying aircraft pollution at take-off and landing, as was announced by a Minister in 2007. There is much more that could be done. In Japan the airports are using electricity from solar collectors on their large airport roofs. There are no large solar collectors on London airport roofs. There are enormous possibilities here. The electricity from these solar collectors in Japan goes straight to the aircraft, so you do not have aircraft running their engines, producing pollution and so on. This is the kind of development that the CAA could be pushing.
The climate impact of aviation is serious and growing, but it is still less than shipping. The CAA should have a strong role in pushing the industry in the right direction, and discussing taxation regimes to ensure that aircraft operations have reduced emissions. One of these is to go more slowly, and the other is to use more technology, especially technology on the ground. The noble Earl, Lord Attlee, noted that the CAA will be taking responsibility for the health of passengers, especially regarding air flow. I wonder whether the CAA will also take responsibility in taking an interest in all passengers on aeroplanes. I am informed that the air flow to first class and business passengers is considerably greater than to those in economy class. Some noble Lords travel in economy class and will therefore be very interested in ensuring that there is an equitable distribution of air flow in aeroplanes. It is palpable that it is not equitable at the moment, and it is well known in the industry. Indeed, I am going to Rio tomorrow economy class because it has less environmental impact. Not everybody goes to Rio in economy class, and I do it out of environmental principle.
The overall issue for the CAA, as the noble Lord, Lord Jenkin, said, is not just efficiency, which is important, but also effectiveness and excellence, and in promoting to other countries what we do well. That aspect is missing from the Bill, as the noble Lord, Lord Jenkin, implied.
The question, then, is not just about the publication and dissemination of data but about the responsibility for action and forward planning. The CAA has no chief scientist or chief engineer. The Department for Transport has a chief scientist but that person’s impact on this whole issue is not particularly obvious. The result is that the CAA must rely on information from other agencies such as the Met Office, the Department of Health, Defra, universities, NERC and so on. However, the pioneer role of the CAA should be promoted in the Bill.
My Lords, I am very glad to lend my support to almost all aspects of this important Bill. However, I have one reservation, which concerns an area that has been touched on already by noble Lords: the Bill does not contain any form of environmental duty for the CAA.
The Bill seems to have started life as a result of a 2006 recommendation from the Transport Committee in the other place, which called for a strategic review of the CAA. The Government of the day agreed to take forward that recommendation and appointed Sir Joseph Pilling to carry out that strategic review, as the noble Lord, Lord Hunt, said. The Pilling report, published in 2007, called for a new statutory framework for the CAA to make it clear that,
“the CAA’s responsibility is to safeguard the general public interest, which is broader than the aviation community”.
He recommended that the CAA should have,
“a general statutory duty in relation to the environment”,
describing this as a “notable gap” in the CAA’s statutory framework.
Unfortunately, the Bill, as presently drafted, still has this notable gap because it does not contain a general environmental duty for the CAA. This creates the risk that the CAA will, in future, focus almost exclusively on the interests of passengers and the aviation community, which on occasion may be at the expense of the general public interest and the environment. It is quite right that the interests of passengers should be the CAA’s primary focus but they should not be its only focus. A balance must be struck and the CAA needs a statutory framework that allows it flexibility to strike the right balance. This means a statutory framework that allows it to take account of the impact of airport operations on the environment and local communities.
Shortly after publication of the Pilling report, the Government appointed Professor Martin Cave to chair an expert panel to advise on how best to modernise the way in which the UK’s largest airports were economically regulated by the CAA. Significantly, it was Professor Cave who proposed that the CAA’s primary duty, in its role as economic regulator, should be towards the interests of passengers. Equally significantly, he also proposed a supplementary environmental duty for the CAA to,
“have regard to the effect on the environment and on local communities of activities connected with the provision of airport services”.
I know that my right honourable friend in the other place, the Secretary of State for Transport, has said that she does not consider it necessary for the CAA to have an environmental duty. However, it is significant that the two independent experts who studied this matter in detail both considered it right and necessary to give the CAA a statutory environmental duty. In addition, the Transport Committee in the other place registered its concern, saying:
“Without giving the CAA a supplementary duty on the environment in relation to its economic regulation role, there is some risk that airports may be reluctant to invest in improving environmental performance”.
If the only objection to including an environmental duty is that it is not necessary, presumably it would do no harm to include it and thereby give some comfort to those who are concerned about the risks of a single-minded focus on passenger interests at the expense of environmental and local community considerations. I am encouraged that my right honourable friend in the other place, the Secretary of State, has said that she is open to persuasion on this point. I very much hope that, in Committee, a consensual way can be found to place some form of statutory environmental duty on the CAA. If so, we will have a much improved Bill.
I speak as a former Aviation Minister and European Union Commissioner for Transport and the Environment. Those experiences have some relevance to this debate.
It is absolutely right to emphasise the importance of aviation, as the noble Earl, Lord Attlee, did. The contribution of aviation to our economy is immense. The number of people that it employs—some 250,000 directly and another 200,000 indirectly—is impressive. However, in a recent poll, to which I alluded earlier, some 91% of BALPA members considered that the Government did not sufficiently support the industry. I hope that the noble Earl will comment on that, since what he said in reply to my intervention was wholly inadequate.
Safety standards need to be stressed whenever possible. Should this point not appear forcefully in the Bill? This issue undoubtedly affects the members of BALPA and will, like others, be raised in the meetings that the Minister foresees taking place in the near future.
New technologies and biofuels, about which the Minister said nothing, need further investment. The Minister’s opening speech was silent on this issue. Perhaps he will expound on it in winding up.
As many Members have said, particularly my noble friend Lord Hunt of Chesterton, safety is a vital component of an effective aviation strategy. Lip service alone will not suffice. It is simply unacceptable for financial pressures on operators to push safety standards downwards and the Government should say so at every available opportunity.
I turn to the question of fatigue. Too often, insufficient attention is paid to this issue. Jim McAuslan, the general secretary of BALPA, has said that its call to the Government remains that they must follow the principled stand taken by the previous Government and underwrite existing UK standards until Europe can come up with something better. I ask the noble Earl whether the Government agree with that proposition. If so, what is being done?
The noble Lord, Lord Aberdare, stressed the importance of environmental duties. I entirely agree with his comments. It is essential—whatever the Government may say about this—
I am sorry—I did not know. It is entirely my fault.
No issue affecting aviation can be considered without addressing the issue of Britain’s runways. I know that the noble Lord, Lord Bradshaw, does not entirely agree with that, but he is quite wrong in not stressing the importance of that issue. It is highly significant. It is a case of Hamlet without the prince, and it is entirely ignored in this Bill. The issue of where Britain’s airport is to be located is essential, and I make no apology for referring to it. No legislation affecting aviation should be considered without addressing that issue. Of course, I differ with my own party concerning this issue, but they will all come round eventually. My own party and the Government will see the advantage of making Heathrow a vital part of our economy in ways that it is not at the moment. Of course, the Government excuse their silence by referring to the inquiry which it has set up—and they are right to do that. However, equally, there is no alternative to expanding Heathrow.
Prevarication in action inevitably impedes progress and, moreover, it is immensely costly. In my view there can only be one candidate: an improved Heathrow. Its advantages are manifest. First and foremost, the waiting time for the start of operations would be far less if Heathrow were chosen. Then, further airport and aircraft development, both of which will inevitably occur, will enable Heathrow to derive huge advantages from these issues. Most significantly, there is no viable alternative within a reasonable time span. The Government, plainly, are playing for time in the hope that something—anything—will turn up. That is not a policy but the abandonment of foresight. The clear fact is that Heathrow exists. Undoubtedly there are some—even major—disadvantages, but any alternative regime will also have those. There must be, and can be, the possibility of overcoming them. Above all, decisive action and a powerful lead from the Government are needed, and sadly, at the moment, both are lacking.
My Lords, the Bill has been widely welcomed during its progress and I, too, am in broad agreement with its principles. However, despite my fear being thought partisan, I would like to say a few words from a purely Northern Ireland perspective, although my remarks are also applicable, albeit to a lesser degree, to other UK regions.
Northern Ireland has many fine qualities which I am happy to wax lyrical about, but its geography brings with it the price of being the most peripheral region of the kingdom. Consequently, aviation—especially anything which touches upon access to Heathrow—is of particular interest to Ulster’s travellers, even more so now, in the aftermath of BA’s takeover of BMI, which has raised many questions about the long-term future of BMI’s current Heathrow slots, presently operating from George Best Belfast City Airport. It is difficult to underestimate how important those slots at Heathrow are for Northern Ireland, particularly for the business community and the tourist industry, attracting visitors from overseas with connections at the Heathrow hub.
While much of the debate about Heathrow quite rightly centres around its capacity and ability to compete in the modern world with other major continental airports, our issue in Northern Ireland is more fundamental —to ensure that Heathrow is accessible in the first place. There is no other practical way to reach Heathrow without direct flights from Belfast. There is no direct motorway link, direct rail link, or underground. Nor is it practical to connect to Heathrow, complete with baggage, from a lot of London’s other airports.
The more difficult it is for Northern Ireland to access Heathrow, the more difficult it is for business people to build that outward-looking, export-driven economy which Northern Ireland needs in order to continue developing. The arguments and evidence for the economic development benefits associated with air links are well known, but access to Heathrow is a two-edged sword for Northern Ireland. If we lose those links, our ability to plug into the global business community is much diminished, but similarly, it will also prove more difficult for inbound traffic, particularly inward investors, to register the Province as a serious investment location if there are no direct connections into the UK’s national hub airport.
While I appreciate that it may be beyond the remit of the Civil Aviation Bill to guarantee slots at any given airport, there should be some cognisance of regional policy within the general aviation strategy. Failure to do so will be to the detriment of the regions in the short and medium term, and will overcentralise economic activity around key airports, especially in the south-east of England, to an extent which may not be sustainable in the long term.
My Lords, I thoroughly agree with the remarks of the noble Lord, Lord Rogan. When I was Shadow Secretary of State for Northern Ireland, and therefore about twice a month a regular customer of Belfast City Airport, I realised how enormously important for the economic self-confidence of the Province is that link to Heathrow and, through it, to international networks. I also very much agree with my noble friend Lord Clinton-Davis, who spoke of course, on the basis of very considerable personal experience in having held two immensely important positions in civil aviation. I will follow very much the logic of what he said.
Of course, as always, I listened with great attention to the Minister. He started off by saying something that we would all agree with, which is that aviation is “vital to our economy”—I think I noted down his remarks correctly. To my amazement, he did not say anything at all about the fact that the aviation industry is in fact facing a major competitive threat at the present time and is extremely worried about the future. You might hope that a Government of the day would take that on board and do something about it. Far from it, unfortunately. That is a very troubling situation.
Most of us were brought up thinking complacently—perhaps we always were very complacent about this—that Heathrow was the biggest airport in Europe and so we were quite safe as we had the centre of at least the European aviation industry right here in our country. That is no longer true and is becoming less true all the time. Already two of Heathrow’s rivals, Roissy Charles de Gaulle and Frankfurt, have more aircraft movements than Heathrow. By the end of this decade, which is only eight years away, they will almost certainly have more passengers, as will Schiphol, so Heathrow will be number four and going down.
Heathrow is enormously important and I make no apology for focusing on it. I fear that the noble Lord, Lord Bradshaw, was completely wrong to say that it is all right because although there is not enough capacity at Heathrow there is enough capacity at Birmingham, Luton or somewhere else. People who want to come to London want to get there as quickly as possible. That is particularly important in the business world. Frankly, the noble Lord did not focus at all on the enormously important economics of the hub and spoke system—what an economist would call the networking effects, which are so important in the aviation industry. If Heathrow is not allowed to become a hub, somewhere else will and it will not be Luton or Birmingham. It will be Schiphol, Paris or Frankfurt. I illustrate that by means of a brief personal anecdote.
In February I was lucky enough to be part of a parliamentary delegation to Mexico. The IPU was rightly concerned to save taxpayer funds and got the best deal that it could, which involved us flying via Schiphol. We went to Schiphol and changed, which meant that we flew 300 kilometres in the wrong direction and 300 kilometres back over the United Kingdom again. That is 600 kilometres more than we needed to fly. We took off twice rather than once. As we all know, most carbon emissions occur on take-off and early altitude gains. I should think that we emitted twice the carbon that we would have done had we been able to fly directly from Heathrow to Mexico City. I witnessed some colleagues taking advantage of Schiphol Airport’s fine duty-free shopping facilities. That, again, is very good news for the economy of Schiphol and of the Netherlands but very bad news for this country. I say to the Government and to the Liberal Party—they should be aware of that and focus on it but they simply are not doing so.
The Bill sets out the obligations of the Secretary of State. I am, of course, totally in favour of the Bill, which was conceived by the previous Labour Government, as has already been pointed out. Clause 2 is headed: “Secretary of State’s general duty”. Clause 2(1) states:
“The Secretary of State must carry out the functions listed in subsection (3) in a manner which the Secretary of State considers will further the interests of users of air transport services regarding the range, availability, continuity, cost and quality of airport operation services”.
The Secretary of State is doing nothing of the kind at present, nor did her predecessor. That is precisely why we have the current problem and why it is cheaper to fly to Mexico City via Schiphol than it is to take off directly from Heathrow—that is, taking off from Heathrow to Schiphol, and then flying from Schiphol to Mexico. Why is that the case? It is because there are not enough slots at Heathrow. Therefore, airlines that want to put on more flights cannot run them from Heathrow. They have to reserve the slots at Heathrow for the high-margin flights going to destinations such as New York, Chicago and Washington DC, where there are lots of first class and club class passengers. The other aircraft with a greater proportion of discounted passengers have to go elsewhere, and so they go to Schiphol, Roissy or Frankfurt. That is the simple logic and the Government must face up to that fact.
The key issue is not just the importance of the aviation business as regards employment. As has been said, it generates nearly half a million jobs in this country. However, it is important for two other reasons as well. First, it is not the only factor or the leading factor but is certainly a factor in location of business decisions. If you decide that you want to locate an international headquarters in a particular city, one of the things that you undoubtedly take into account is the air communications. If you put your office in London and you have to go via Birmingham to get there, that is a very major disincentive to coming to London at all. The aviation business is very important as regards business traffic. It is also important as regards tourism. If you ask the Government whether they care about tourism, they will say, “Of course, we care very much about tourism. It is a very important industry”. However, in practice, they are handicapping tourism over and over again. We have the problem that we are not part of the Schengen visa system so people coming to this country as part of a European tour—the bulk of private tourists from outside the EU coming to the EU come on organised tours—often will not take the trouble, time or additional cost involved in purchasing a British visa. That is a big handicap. We now have the longest delays at our border controls of anywhere in Europe as a result of mismanagement by this Government. That is also a handicap. If we now have shortages of airline slots and people are diverted to Birmingham—I again take the example put forward by the noble Lord, Lord Bradshaw—that will also be a considerable deterrent to tourism. Therefore, it is no use the Government saying that they care about tourism if their policies have the effect of weakening British tourism’s competitiveness worldwide. That is exactly the situation.
Our policy was to expand Heathrow and build a third runway. That was the policy which I supported then, which I support now and which I trust my party will support again at the next election. It is the only policy that seems to make any sense. As regards the third runway that we were planning to build—the BAA third runway—I read an interesting proposal the other day which I recommend to the noble Lord, who knows a lot about this subject. It was produced by the Institute of Directors. Noble Lords may be surprised to hear a member of the Labour Party referring to the Institute of Directors but I thought that it came up with an interesting proposal for a third runway to be built within the existing perimeter of the airport to the south, which would be something like 2,600 metres in length and would greatly improve the situation. The scheme has been well documented and the noble Lord may like to look at it. However it is done it is clear that all the airlines and BAA are of one mind on this—the solution is the one that, had we won the previous election, we would have implemented, I am proud to say.
Of course, the whole of this is against the background of the present Government’s neglect of infrastructure generally. We have had the postponement of the high-speed rail project.
As regards neglect of the infrastructure, under the Labour Government nine miles of railway were electrified. Under this Government, I think that 833 miles will be electrified. I also draw attention to the fact that a lot of money is being spent on Manchester and Birmingham Airports and a great deal of investment is going into Gatwick.
I commend all that but there is no question that this neglect applies to a number of vital major projects. One of them is the third runway for Heathrow and another is the high-speed rail project, which is unaccountably delayed. Perhaps it has been pushed off sine die; I do not know. I do not think that we shall ever see it again under this Government, although I hope that we do, of course.
Another such issue is nuclear power. I have asked about this in the House. We are 10 years away from the date when all the AGRs have to be decommissioned but the Government have not succeeded in getting one new project launched. It takes a minimum of eight to 10 years to build a new nuclear power station. These are major areas of neglect. I have to say to the party opposite that any Government who govern with two eyes focused simply on the next morning’s headlines or opinion polls and do not think about the long-term interests of the country are betraying the public interest and will be seen in historical retrospect as a historical failure.
I have to say another thing that the Government will not like, which is that a recession is rather a good time to bring forward investment in social overhead capital—in infrastructure—because factor costs are lower during a recession. It is also rather a good idea to create some demand and jobs during a recession because—I know that the Government do not want to hear this—the fact is that austerity alone will not relaunch growth. I would have hoped that all these important infrastructure projects would have been brought forward, which they would have been by an imaginative Government genuinely concerned with the long term.
I hope that my strictures will have some effect. I am sure that the Minister will not say now that he agrees with my criticisms of the Government but I hope that the Government will think very carefully about these matters and come forward with a policy on all of them which is a little bit more worthy of the enormously important role which they have in looking after the interests of the country during their mandate of office.
My Lords, I am quite fearful of the effects of delaying what are, admittedly, politically and environmentally difficult decisions about airport capacity—not just for this year or next, but over the next several hard years for the United Kingdom’s economy and its employment. It may turn out to be seven quite lean years or more for the people and economy of the whole of western Europe. Against such a background, even the signals that we send out to potential investors—well in advance of actually being able to do anything on the ground to improve airport capacity—may well be critical, because they know good news is coming, albeit a bit delayed.
That said as background to my points, and declaring my business interests, I seek assurances that nothing in this Bill as drafted can get in the way of urgently needed airport capacity improvements. There may be some doubt about this. However, in general and overall, I welcome the sensible provisions that the Bill contains, following obviously careful ministerial consideration of the excellent and far-sighted recommendations of that distinguished public servant, Sir Joseph Pilling. It is good, therefore, to see that improvements have already been made to the way that the CAA works, even ahead of this legislation. In particular, there is the critically important separation of powers between chairman and chief executive. Its governance structures certainly needed modernisation and updating to reach reasonable modern standards.
The CAA should certainly be in a position, for example, to appoint its own senior executive directors and go on to fix their pay, easing the pressure on Ministers, who should not be involved in what are essentially operational matters. However, for a thoroughly modern public corporation, a board as large as proposed in this Bill—16—might turn out to be rather a lot for useful discussion. At the other end of the size spectrum, fixing pay, which is in the Bill, may need slightly wider scrutiny than that of the chairman and just one other non-executive director. That balance probably better demands two independent directors at least, for the avoidance of doubt. I also hope that the CAA, as it rolls forward, will be very leery—I never know how to spell that, but doubtless the Hansard account of my speech will get it right—of the advice of remuneration consultants. They often seem to be as unreliable and inflationary in their recommendations for increases in executive pay as rating agencies once were in their business recommendations.
We must see this Bill not in isolation, but in relation to the two aviation documents that the Government are likely to launch in the not too distant future; I hear rumours of July. First, there is their consultation on a sustainable airport and aviation framework, which is very important. Secondly, they are consulting on options for maintaining airport hubs in the United Kingdom. My noble friend Lord Bradshaw talked about their importance. I hope that I can go on calling him my noble friend, despite what is going on at the other end of the Palace of Westminster as I speak, and that we do not all need counselling as we go forward. What he said was interesting, and it is precisely why I seek assurances that none of the market power competition provisions in this Bill relating to specified dominant areas and dominant airports could be used in as yet unforeseen ways to inhibit the best choice being made as quickly as possible for the vital London airport expansion. These range from a third runway at Heathrow, as just put forward by the noble Lord, Lord Davies of Stamford, to fantasy schemes on estuarine islands and elsewhere.
To my mind, and I would like to test this against the provisions of the Bill, the best current option would be to bring into use the second Gatwick runway, as will be permitted from 2019. The two runways at Gatwick could then be linked to the present two runways at Heathrow by a cut-and-cover tunnel and rapid transport rail system. I know that this is a suspiciously round number, but I am assured that at current costs this could be done for about £5 billion. Shuttling between the two ends of what would be a unified hub, with two runways at Heathrow and two at Gatwick, could be done in 12 minutes or less. The payback for the Exchequer for this scheme, which of course is vital in our constrained economy, could be met by a £10 take-off or landing charge to clear the cost in 20 years or less. Once it was built, this would undoubtedly become known as the Gatrow Express in one direction and the Heathwick Express in the other.
That is my example and I simply ask this: suppose the Government decide that this—or any other scheme—is what they want to do. Does anything in this Bill prevent it being driven through if the scheme turns out to require dominance by one body, as defined in this Bill? Therefore, could the anticompetitive measures, which otherwise may be very welcome, be used to inhibit such development in the national economic and environmental interest? If the Bill was enacted in its present form, could it be used to slow down and prevent such development purely on competition grounds?
I say to the Minister that this is not some probing Committee-stage point, but one of general overarching principle. Have those drafting the Bill considered the possibility of future-proofing its provisions against the unlikely; and the difficulties of delays caused by the unlikely happening, as tiresomely it sometimes does? In a different way, I reflect what my noble friend Lord Jenkin of Roding—not presently in his place—said. He pointed out the uncertainty facing BAA in Heathrow in its necessary capital-raising grants, which we all support for infrastructure reasons. However, uncertainty would also be damaging if those who wish to come and develop using private sector money are inhibited from so doing. After all, look at the time it takes to bring about the simplest changes in the air transport system.
Take the world’s biggest airport, Atlanta, in space-rich Georgia. There are no problems there with overflying or inhibitions about developing much cherished green-belt land and the rest. The most recent proposal there was not to delay building a controversial extra runway, and not expansion inhibited by any competition regulations, but simply to build a much needed new international terminal in what is the world’s busiest airport. It has taken 16 years even in that relatively regulation-free, environmentally free and uninhibited atmosphere. We do not have 16 years in the UK. Wherever expansion happens, it will have to be in the London area. We have in aviation terms nothing like 16 years unless we continue to see our competitive advantage bleeding away. The Government need maximum room for manoeuvre. They should not be shackled in any way by their own legislation and I want to make absolutely certain that one potential set of shackles is not hidden in the middle of this Bill.
Like other speakers, I welcome the general thrust of this Bill. I am sure that we shall make some improvements in Committee. I would like to see it in the context of a proper aviation policy, which I fear we do not have at the moment. I am rather nervous about some of the papers that might come out from the Government, although the Prime Minister today, in answer to Zac Goldsmith, the MP for Richmond Park, declined to give a commitment that, if re-elected, the Government would not build a third runway. This argument is moving and there are growing numbers of people who recognise that the only realistic possibility is the expansion of Heathrow. It is something that I have been saying for many years, but I will not spend a great deal of time on it now because the House and other people have heard my views on many occasions. I simply reiterate that at a time of economic recession, a third runway is estimated to add some £8 billion to the British economy, and all the investment is totally private sector. The idea of not doing it is crazy. If we do not do it soon, we will continue to lose out. A number of Members around this House have made that point.
I want to make an additional point—and this is where it would be good if the noble Lord, Lord Bradshaw, could talk to the noble Lord, Lord Rogan. I do not think that the noble Lord, Lord Bradshaw, understands the concept of a hub airport. That is curious because he seems to love trains, and I presume that he understands the concept of what is in effect a hub railway station. People go to the big railway stations in big cities to interchange to get to other places.
Perhaps I may give the noble Lord, Lord Bradshaw, an obvious example, and I would like him to think it through, because the opponents are getting in the way of the advantages that would accrue to us if we took the necessary decisions. I could give him many examples similar to that of the Japanese businessman who wishes to invest in Europe and has investment meetings here. He wants to fly on to his factory in Liverpool and can do that by going to London, getting a train across to King’s Cross, getting the train to Luton, and then flying to Liverpool. Or he could go to Euston and get the train all the way to Liverpool. Alternatively, he can fly to Amsterdam, have his meeting there, decide his investment policies, and fly straight to Liverpool. That is true of dozens of regional airports around Britain. We are not just doing damage to London; we are doing damage to our regions and it is important to understand that.
I will not proceed further on that, other than to make the more general point that in aviation generally we still have the second largest and second most advanced aerospace industry in the world. Although we will not retain that position much longer, for all the obvious reasons about emerging countries, we can retain the great advantage that we have, particularly in science and technology. We can do that only if we have a good civil aviation policy and a defence policy that goes with it to support the aviation industry. Everyone in the industry understands that, and that is why when I make speeches such as this I get so much support from across the whole industry. That is generally recognised by all, and I ask the noble Lord, Lord Bradshaw, to talk this through with people, understand the concept of the hub and why you cannot have more than one hub airport in one major area. You can have several hub airports in a large country, but not otherwise. That is important.
I wanted to mention investment in Heathrow and so on. Although the noble Lord, Lord Jenkin of Roding, who has had to slip out for a while, has saved me some time, I want to reiterate this issue—which the noble Lord, Lord Patten, also touched on. There is a problem here. My understanding is that it would not require much tweaking of the Bill to give Heathrow the protection that it needs in terms of investment policies in infrastructure. We could look at that in Committee, because it is an important matter which we should flag up.
I want to refer to two other matters mentioned by another speaker. Clearly, we must give the CAA a duty of efficiency, and the National Audit Office is relevant in this context. The idea of the CAA not being answerable to the National Audit Office is, frankly, dumb. I believe that we were thinking of doing that some time ago when we were in government and considered introducing a similar Bill. That was the intention.
I want to say a quick word about the issue of airline holiday sales and the Air Travel Organisers Licensing scheme. My understanding from the CAA is that it believes that airline holiday sales should come under the new ATOL arrangements. It was drawn to my attention that the number of people whose holidays are protected by the ATOL scheme has reduced considerably, and today only around 50% of holidaymakers travel with full financial protection from ATOL. Those figures are from the CAA. We should all recognise and support its proposal.
Security issues, dealt with in Clauses 78 to 82, are very important. This is perhaps not the moment to discuss them in detail, although we may do so in Committee. I am slightly worried about the way that we are tackling this area. It is difficult to get right, although it may be that the Government have received advice from the security industry generally, including the security departments of government. However, we need to get this right. I remember the Minister saying at one time that her plan was to make Heathrow better, not bigger. When you look at the queues at Heathrow you realise that, whatever else she has done, she has not achieved that.
Part of the reason is that we have not tackled effectively the whole issue of immigration, passport clearance and so on. The recent sacking of the head of that department has produced a situation where there is almost a work to rule. I am not justifying that, but if you tell the workforce that they must obey the Immigration Rules to the letter, they will do that—and that is what they are doing. That may be good, bad or indifferent, but you cannot easily blame those staff without recognising that the Government, by saying what they said and doing what they did, have made the problem far worse. We have to rely to a considerable degree on the good sense and, above all, the training of these people. If you tell them that they cannot use that good sense and training and give them a set of rules which you tell them to obey to the letter—and if you tell them that they will lose their jobs if they do not follow the rules to the letter—then they will obviously do just that: follow the rules to the letter. That would account for the terrible queues at Heathrow, which have done immense damage. The airport’s position in the international airline stakes is bad enough.
My noble friend and colleague Lord Davies of Stamford said that Heathrow was now number four in terms of aircraft movements. It has slipped to number eight in terms of the destinations it serves. That is by far the most serious slippage for a major airport. To compound that with a lack of effective ground operations in terms of clearing the queues and so on is therefore a major failure.
Just to set the record straight, what I actually said was that Heathrow is currently third in Europe for aircraft movements—behind Roissy and Frankfurt—but that it will be fourth by 2020, behind Roissy, Frankfurt and Schiphol, both in terms of movements and passenger numbers.
I accept that. I was simply making the point that in terms of destinations served, Heathrow has been way down for a long time, and it is slipping further.
On the issue of the environment, there are opportunities to get this right in Clause 84. I am interested in subsection (5), which gives the CAA a duty to fund certain research and so on, including on health—an issue which the noble Countess, Lady Mar, might be interested in. As for what the CAA can do, it seems perfectly possible to interpret subsection (5) as meaning that the CAA could do more to raise the profile of environmental research, and not necessarily by spending a great deal. It always struck me that in airports and aircraft generally there is a captive audience for the environmental message.
There is always room for improvement in what airports can do on ground operations. Five or six years ago, when I first spoke at the Airport Operators Association’s annual conference, there was a lack of willingness to acknowledge that airport operators ought to be aiming, as far as possible, to get zero emissions from ground operations. Now, all airports are trying to do that. There is no reason why, in Clause 84, we could not ask the CAA to look at things such as the effectiveness of airlines in introducing drop-in fuels—algae-based and other biological fuels that are now regularly being mixed with jet fuel by many airlines around the world—and modern aircraft design. That is because a lot of the noise problem comes not from engines but from air frames.
Incidentally, I would say to the noble Lord, Lord Bradshaw, to get off his hobby horse of railways and recognise the overall problem. I can tell him that, having lived under the flight path of Heathrow for something like 30 years, I would far rather do that than live next to the high-speed rail line in west London, where the trains run through at 100 miles an hour, less than 100 feet from people’s front and back doors, which goes on throughout the night—24 hours a day, 365 days a year. Although I recognise the noise problem, I would simply say that this is a problem for all transport systems. Rather than picking out aircraft, trains, cars, or whatever, the message is to look at a modern transport system and do it environmentally.
I have a couple of final points. The stacking issue is important, and several people have mentioned it. We will not stop stacking at Heathrow until we dramatically reduce the number of flights—in which case we may as well close the airport—or we expand the airport. The other problem, which is a much bigger problem for Europe, is the number of air traffic control centres in the European area. There were 50 such centres the last time I looked, compared with about 10 for the whole of the North American continent. Until we reduce that number we will not be able to fly in straight lines; we will have to fly in dog-legs across Europe. The Minister will know that. However, I am not sure that we will be able to get agreement on this issue given the number of jobs involved which will be defended by various countries at various times.
I have one final, brief point which the Minister might like to come back on at another time. I am puzzled about the situation whereby some airports owned by the Ministry of Defence also handle civilian flights. I am not sure what the CAA will be covering. Northolt is an obvious example. It has been increasing the number of civil flights, usually involving privately owned aircraft. I am not sure whether the Bill will cover the activities in a MoD-owned airport where there is a civilian operation as well. I welcome the Bill and look forward to dealing with some of it in Committee.
My Lords, when this Bill passed through the other place there was a great deal of agreement with relatively few areas of disagreement, which may well be the case here. Airports provide many jobs and are a convenient means of travel, as we have heard, be it for business or pleasure, but they also have some unwelcome impacts on local communities and the local environment. It is always a question of striking the right balance.
This Bill has many attributes but it also has a serious shortcoming in that it does not include any environmental duty for the CAA and, therefore, does not enable the CAA to strike a proper balance between what are sometimes competing interests with competing objectives. I understand that there are two levels for consideration: first, the general statutory framework for the CAA as a whole; and secondly, the specific statutory framework applicable to the CAA in its role as economic regulator for the UK’s largest airports. As those airports are subject to economic regulation, the Bill makes clear that the CAA should give priority to passengers’ interests. Environmental considerations will not even be of secondary importance because they are not mentioned in the Bill, other than some requirements relating to the publication of environmental information. This means that the CAA will not have the statutory authority to allow regulated airports to recover discretionary environmental expenditure through airport charges.
What does that mean in practice? Hatfield Forest, where I live, is adjacent to Stansted Airport and is a site of special scientific interest with a history going back nine centuries. It is managed by the National Trust and has many ancient trees, which are thought to suffer damage from the fumes emanating from aircraft. For many years the airport owner, BAA, has worked with the National Trust, funding research into the effect of air pollution on Hatfield Forest and providing monitoring equipment to check the levels of pollution. Some of this effort has related to a Section 106 obligation, but most has been discretionary expenditure that would be at risk if the CAA’s new remit made no reference to environmental considerations.
It is true that the regulatory remit that has applied to the CAA for the past 25 years, laid down by the Airports Act 1986, does not specifically include an environmental duty. However, this is so widely framed—some would say woolly—that it allowed the CAA flexibility to balance a range of competing objectives. In contrast, this Bill places a clear statutory duty on the CAA to put passengers’ interests first and foremost and the CAA will not have any statutory remit to take account of environmental factors even as a supplementary or secondary consideration. Noble Lords will be aware that some of the so-called low-cost airlines have a reputation for seeking to save every available penny. Stansted is dominated by such airlines. Indeed, a certain Irish airline accounts for more than 70% of Stansted’s passengers. That perhaps makes it easier to understand the concern that, if the CAA does not have any form of environmental remit, it risks being challenged in the High Court by an airline if it ever seeks to allow the airport to recover discretionary environmental expenditure. The Bill gives the CAA no means of defending such a challenge.
The argument has been made in the other place that it would distort the market if the CAA were to be given a supplementary environmental duty, because it would apply only to airports subject to regulation—currently Heathrow, Gatwick and Stansted. However, the converse is also true. Non-regulated airports, such as Birmingham or Luton, would not need the CAA’s permission to increase airport charges by a few pence to improve their environmental performance. If the risk of distorting the market is the only objection, that risk could be avoided by giving the CAA a general economic duty applicable to all airports, not just those subject to economic regulation.
The noble Earl, Lord Cathcart, who is not in his place, comes from the same direction, and I will expand slightly on what he said. Every other comparable UK regulator has some form of statutory environmental duty. For example, the Rail Regulator has a duty,
“to have regard to the effect on the environment of activities connected with the provision of railway services … to contribute to the achievement of sustainable development”.
Ofwat has a duty,
“to have regard to any social or environmental guidance issued by the Secretary of State and Welsh Assembly … to the achievement of sustainable development”.
Ofgem has duties,
“to have regard to the effect on the environment of activities connected with the generation, transmission, distribution or supply of electricity … to have regard to the effect on the environment or activities connected with the conveyance of gas through pipes … to have regard to any social and environmental guidance issued by the Secretary of State … to contribute to the achievement of sustainable development”.
It cannot be unreasonable to ask that, like the other regulators, the CAA should be given some form of environmental duty. Indeed, the Department for Transport seems to have come very close to including such a duty in the Bill because, on the day the draft Bill was published—23 November last year—the department’s press release proudly stated that it included an obligation on the CAA to have regard to,
“the effect on the environment and on local communities of activities connected with the provision of airport services”.
If only that had been true at the time. I hope, however, that when this Bill proceeds, it will be true. We will then have a better balanced Bill and, therefore, a better Bill.
My Lords, I start by declaring an interest. I am chairman of Fairoaks Airport Consultative Committee—a small privately owned aerodrome only about 10 miles from Heathrow in Surrey, but not a candidate, I can assure your Lordships, for the third London airport.
I start by saying that I, too, accept the broad thrust of the Bill. The great issue before civil aviation and the Government is the provision of sufficient runway capacity in the south-east. At the moment as everybody knows, Heathrow, if not full, is close to it, and there is much speculation and discussion as to where the additional capacity should be provided. I listened with interest to the speech of the noble Lord, Lord Soley, who was, I think, saying that he is in favour of a third runway at Heathrow. He was once the distinguished Member of Parliament for Hammersmith, as I recall. Indeed, I remember it only too well, because for a while I was the junior Aviation Minister while he was the MP for that constituency. I seem to remember him coming to represent the views of his constituency about flights in and out of Heathrow, as they passed over his constituents, in a fairly critical manner. But perhaps the world has changed. In truth, it has changed, and I must be fair to the noble Lord, because the impact of civil aviation on the population underneath is less now than it was 10 or 20 years ago. He is entitled to take that view and therefore perhaps to now accommodate the idea of a third runway at Heathrow, although that is not a popular view among those who live a little nearer to the airport than do his former constituents in Hammersmith.
I think I remember the meeting the noble Lord is talking about. It would have been in the very early 1980s. Actually, it was about night flights. I have been in favour of a third runway since 1989 or 1990, and I spoke in favour of it in the House of Commons. However, night flights are different, and I would not go back on that. We have to be very careful about night flights.
I agree with that. Indeed, I recall that one of the very first issues I was asked to deal with as the junior Aviation Minister—I was there for only nine months, I think—was the numbers of night flights permitted from Heathrow. I dare say the noble Lord came with other Members of Parliament from local constituencies to make their representations to me.
If a third runway is not to be provided at Heathrow—and the Government seem to have set their mind in that direction—then where is it to be provided? Of course, I listened with interest to the speech of the noble Lord, Lord Patten, about a sort of mega-airport, as he seemed to be saying, with two runways at Gatwick and two at Heathrow, connected by some wonderful new interconnecting railway. I must confess I have not heard that proposition before, and no doubt the Minister will want to consider it very carefully.
I also listened with interest to the speech of the noble Countess, Lady Mar. She has, of course, made her representations on these matters to your Lordships on several occasions before. They ought to be considered carefully, but it is also fair to say that very few, if any, of the major air-worthiness authorities take a similar view to her. For example, I would have thought that if there were a real issue along the lines that the noble Countess was predicating, presumably the Civil Aviation Authority would have taken some steps to move in that direction. Perhaps it will one day. Perhaps she is a voice crying in the wilderness; perhaps she is a sort of John the Baptist, who will in due course convert us all. But she does, at least, deserve the courtesy of a proper consideration of what she has said, so I shall read it with care. Like almost every noble Lord, I have been a passenger many times in my life, but I was also a pilot for some years, so I am no less interested than she is in these matters.
My noble friend Lord Jenkin of Roding referred to some of the important considerations that arise from Part 1, particularly the ring-fencing of the assets of BAA and any other airport operator which finds itself in a similar position, and the question of the right of appeal when those assets are ring-fenced. He makes an important point that will need to be considered carefully when we get to Committee. My noble friend can count on my interest at least, if not support, in these matters when that time comes.
Further provisions of this Bill which are not sufficiently covered are those for general aviation, in which I have played a small part over the years. General aviation is now largely excluded from Heathrow, for obvious reasons, and is almost totally excluded, though not quite so, from Gatwick. It is therefore required to operate from places like Farnborough, and indeed Fairoaks, to which I have already referred. That presents difficulty, particularly for interconnection with other flights, but I do hope that some provision for general aviation can continue to be made, if not at Heathrow then at least at Gatwick and Stansted.
The time marches on. I certainly intend to play a detailed part when we get to the Committee stage of this Bill. I support the broad thrust of what is proposed, but there are a number of detailed matters which will need further consideration.
My Lords, I declare my interest as a former director of Manchester Airport, and currently a member of the shareholder committee of that airport. I have, perhaps, a different perspective to some Members who have already spoken here.
Manchester Airport serves 200 of the 400 destinations the Minister mentioned, which is, I regret to tell my noble friend, more than Heathrow. However, my different perspective does not stop me from giving general support to this legislation. I think it will enhance civil aviation overall. I am particularly glad that the Minister, in his introduction, mentioned the change in governance to the CAA, as I think that could be equally important to some of the other parts.
Until we managed to get ourselves de-designated, Manchester was also covered by the 1986 acts of designation, and I remember those times as being ones of great expense for the airport, and a lot of time-wasting, though we did manage to provide employment for a great number of very highly paid lawyers. Essentially, the results of the quinquennial reviews, when we had them, were probably less onerous on us than the market conditions forced us to implement. So of course, we were pleased to be de-designated, and I am sure the same will be true for other airports.
I wonder whether we ought to reflect the new role the CAA has, and change its name to Ofair. The CAA, in exercising its role in economic regulation, needs to bear in mind two points. First is the relationship between airports and airlines. I think that relationship may best be categorised as that of an elderly married couple, who realise they need to stay together but constantly bicker about who causes the most difficulties. I think we need to recognise that that will go on, under the new regulation scheme.
Secondly, I think we should recognise—as many other noble Lords have mentioned—the importance of aviation in terms of the wealth and employment opportunities it creates in this country. It facilitates trade, as the Minister said, and acts as an international gateway for people coming into the country, and for us getting away. Manchester contributes some £3 billion to the UK economy, and supports around 100,000 jobs. However, the sector is very sensitive to the economic climate, and in yesterday’s Times I saw two reports about this. The first was about how the domestic aviation market has reduced by 20% in five years, and the second was a report that European airlines’ losses are expected to double during the current year—not profits, but losses. The competition that the aviation industry faces is not bound by our national borders, and we need to recognise that the competition that many of our airports face is not just between Gatwick and Heathrow and Manchester, but rather within the European aviation industry.
Unfortunately, I do not think we have a level playing field in this country, because of the air passenger duty. Research that we commissioned in Manchester demonstrates both the damage to UK aviation that that does, and that it particularly damages regional airports. We have evidence that a flight that was planned from Kuala Lumpur into Manchester was diverted into Paris-Orly because they do not have to pay APD there. Also, the price sensitivity of customers at regional airports tends to be higher than in the London region, where there is a high proportion of business traffic. Hopefully, with the greater independence of the CAA, it will actually think about how aviation can develop, and look at the APD as an issue for aviation.
Security is clearly an important part, and I think we all respect that aviation is in the front line of the war against terrorism. It is important, therefore, that the Secretary of State retains the important role of responsibility for this. Airports have co-ordinated with and co-operated with the Government in implementing security matters, and in fact have gone beyond what was required by the Government. Manchester is running a pilot of whole-body screening, which may be an important way forward. To be effective, security needs full co-operation between partners and a proper exchange of information about objectives. I wonder whether some of the problems that we have experienced with border control, mainly at Heathrow but also at other airports, are evidence that we do not always get that co-operation and co-ordination. We can see the consequences. In passing over security to the CAA, we should ensure that we can demonstrate that this will not create more bureaucracy but will improve the situation. When it was responsible, the DfT listened carefully to the expert views of airport staff. Presumably the CAA will continue to do that in future.
The changes in the Bill will obviously involve increased costs for airports. Briefings I have read put the figure at up to 4p per passenger. That may sound a relatively trivial amount, but currently the charge is less than 1p, so from 1p to 4p is quite a large increase. For an airport, it will be a sizeable amount of money to pay. The Minister may want to consider whether it will be appropriate to bring in those charges all at once. I ask him to think in particular about the impact that the charges might have on some of the smallest airports in the country, which are struggling at the moment and should perhaps be considered as a special case.
The Bill also assumes that regulatory charges on airlines will be met through airports. Perhaps that seems logical to the Government and the CAA, but why should airports become responsible for those charges? I am not sure about the assumption that in the current age they will be able to pass them on to airlines. Why does the Bill not simply give powers to the CAA to charge the levies directly to airlines, rather than going through the middlemen of airports?
Will the Minister explain—if not tonight then some other time—the thinking behind Clause 7, which gives market powers in relation to airport areas. “Areas” is an interesting word. Perhaps most of us would have thought that it meant “terminals”. I am not sure that competition between terminals will produce a more effective or efficient use of resources than the current planning system. Airports have invested in their facilities and want the maximum return.
Finally, I agree with the comments of the Transport Select Committee on publications from airports. The powers are too widely drawn and risk creating bureaucracy and additional costs to the aviation industry, while the benefits are less tangible. Airports should be open and transparent, and most are. After our earlier discussions I checked on the websites of Manchester and Gatwick airports. Both already publish substantial amounts on environmental policies. We should be very careful that we do not simply expect airports to do things that the CAA thinks are helpful but which do not really mean anything.
The CAA briefing on this matter gives an interesting analogy. It quotes a number of things, such as the publication of documents about the fuel efficiency of cars, which have affected consumer behaviour. That is probably the case, because consumers pay the costs of running their cars. However, in this case, if the consumers are passengers, they do not benefit from environmental information, even though it may be important and interesting to some of them. The reason that there is much more interest now in carbon reduction measures in aviation is that reducing carbon is not only seen to be a good thing but is cost effective. Airports spend less on energy and save a lot of money.
This is an interesting and important Bill. It needs to be improved in Committee, but in general I welcome it.
My Lords, I will say a few words in the gap. I apologise to the Minister and to the noble Lord, Lord Davies, for my absence at the beginning of the debate. I was in a Select Committee of the House.
I will take the opportunity to pick up on a point made by the noble Lord, Lord Soley, who pointed out that our aviation sector is still number two in the world and a very important provider of high-quality jobs in the United Kingdom. I take this opportunity to congratulate Bombardier, which secured a massive order yesterday for more than 100 Challenger business aircraft. The fuselages, nacelles and other component parts are made in Belfast. It is excellent news that has done a lot to lift some of the economic gloom that there is around. It proves the point made by the noble Lord, Lord Soley, that this is one of our key sectors in which we are still a world leader and able to bring home orders. The sector deserves significant support.
Like many noble Lords, I support the broad thrust—
I am sorry to interrupt the noble Lord. The rules are very strict. One should be present at the beginning of the debate when the Minister opens, and if one is not able to be there one should not speak. I am sorry to stop the noble Lord at this stage, but perhaps the Front Bench will agree with me.
My Lords, this has been an interesting debate on a Bill that, as my noble friend Lord Smith of Leigh said, we broadly welcome and support, despite the lack of consolidation to which the noble Lord, Lord Jenkin of Roding, referred with some feeling. A considerable part of the Bill was drafted by the previous Labour Government, including important reforms to the aviation industry’s regulatory regime. The reforms cover the legislative framework for the economic regulation of airports and for the Civil Aviation Authority, and provide a primary duty to further the interests of passengers and freight owners. The Bill provides also for the transfer of certain aviation security functions from the Secretary of State for Transport to the Civil Aviation Authority, and the widening of the Secretary of State’s powers so that holidays sold by airlines or arranged on an “agent for the consumer” basis can be included in the Air Travel Organisers’ Licence scheme in future.
On the other side of the coin, environmental protection measures, which were in the original draft Bill, have now been excluded. A number of noble Lords, including my noble friends Lord Clinton-Davis, Lord Davies of Stamford and Lord Soley, referred to airport capacity and the position of Heathrow. There is no doubt that the Minister will wish to respond to this point, and to my noble friend Lord Davies of Oldham, who raised the question of the continuing lack of a government aviation policy.
On the issue of security regulation and the transfer of certain operational aviation security functions to the Civil Aviation Authority, there must be a suspicion, as my noble friends Lord Davies of Oldham and Lord Clinton-Davis said, in the current climate in which the Government have chosen to operate that it is the Secretary of State’s spending review rather than security considerations that will drive the change. The proposed change splits policy and operational matters. The Minister will need to explain how this will improve a security regime that has been in operation successfully since the tragic Lockerbie bombing, and how the proposed significant change in aviation security policy to an outcome-focused, risk-based approach from the current “direct and inspect” policy will operate in practice.
We shall need to know also what parliamentary scrutiny the new regime will receive, not least in order that the Secretary of State’s claim that the security policy changes will not in any way jeopardise what she accepts are the current high levels of security can be tested and checked. There is a risk that staff with considerable expertise in the security field will be lost to the service as a result of the proposed transfer of responsibilities and the uncertainty and upheaval that that will create.
The Government have said that they are keen that as many employees as possible stay in post when their jobs transfer to the Civil Aviation Authority, taking their skills and experience with them. What is the latest position on this issue? Will staff retain their current entitlements on pay, conditions, pensions and redundancy agreements, or should staff be concerned that the ideas of that expert government adviser on human relations, Mr Beecroft, may be implemented and the current arrangements on protecting existing terms and conditions of employment for staff transferring weakened? What assurances can the Minister give on this point?
My noble friend Lord Hunt of Chesterton referred to the importance of addressing environmental considerations. The environmental protection measures that were in the original draft Bill are not in the Bill we are now discussing, as my noble friend Lord Simon and the noble Earl, Lord Cathcart, have also pointed out. Perhaps this reflects the Government’s rapidly declining commitment to such issues. There is no longer a clear duty on the Civil Aviation Authority in terms of economic regulation to have regard to the airport operators’ compliance with environmental and planning considerations and law. Without this, airports may well be reluctant to invest in improving environmental performance. As other economic regulators have to take account of the environment, the Government will have to explain why they have not placed such a duty on the Civil Aviation Authority.
There is a case for ticketing to show the environmental impact of different modes of travel to help passengers make decisions, if they so wish, on which form of transport to use based on the environmental impact of travelling by air, by rail or by coach. Giving passengers better information on different modes of transport and what emissions are generated by journeys would provide the opportunity to make more environmentally friendly choices when travelling.
There should be tougher targets for reducing CO2 emissions as the industry’s contribution to addressing climate change. The Government have declined to reaffirm even the target we agreed with industry and government. The Bill should lay down a duty for the Civil Aviation Authority to work with the Secretary of State, the Committee on Climate Change, NATS and air transport service providers to meet the UK’s carbon reduction targets.
The aviation industry also needs to reflect on whether it has given environmental considerations the public prominence they deserve. The image that the industry has in some eyes—fairly or unfairly—is of one that pays little regard to such considerations and the actual and potential adverse impacts they have on the public as the industry campaigns for more airport capacity and increasing numbers of flights. Being seen publicly to give environmental issues and concerns a high priority ought to be regarded as hard commercial sense by the industry, as one reason for the degree of opposition to increasing airport capacity and numbers of flights is no doubt a feeling—once again, justified or unjustified—that addressing the environmental consequences of such developments and the impact on the quality of life of those most affected is not a major concern of the industry and its leadership.
On the passenger experience, we agree with the Transport Select Committee in the other place and its concerns about the lack of any requirement to publish passenger welfare plans. My noble friend Lord Davies of Oldham reminded us that the experience faced by many passengers during the severe winter weather of 2010-11 demonstrated the need for the sector to improve its performance in relation to passenger welfare. The Bill does not appear to be robust in relation to the specific duties on airports in relation to passenger welfare and there needs to be a requirement for airports and the Civil Aviation Authority to give greater help to passengers stranded at airports. Putting this in the Bill, rather than leaving it to the regulator to decide whether to do it, would give a clear indication to the regulator that the Government expect this to be looked at as a key area.
We also agree with the Transport Select Committee in the other place that airport licences should be structured so as to address key areas of passenger satisfaction. The Civil Aviation Authority should also be a source of reliable information to passengers on issues that have a considerable impact on the quality and level of service to passengers at airports. There has been much publicity recently, for example, over queuing times at Heathrow Airport, and arguments and disagreements between the airport and the Immigration Service over how long people are having to queue. The Civil Aviation Authority should be able to play an important role here in collating the evidence and publishing it. What steps are the Minister’s department and the Home Office taking to work together more effectively to deal with the queues at immigration and passport control?
Passengers with disabilities and reduced mobility also need appropriate assistance at airports, especially when passing through security. The Government made a decision to abolish the Disabled Persons Transport Advisory Committee which provided a channel for the advice and experiences of disabled people to be given on improving transport provision. Such advice still needs to be fed-in to airports and policy-makers. The Civil Aviation Authority and the Secretary of State should have a duty to produce perhaps an annual report on the service offered to disabled people at airports and by air transport providers and the extent to which such a service meets the relevant guidelines and European legislation already in place.
However, it is not only at airports that at times passengers may not always feel that they are being treated as though they were valued customers. Another area of concern is over ticket prices and surcharges and the extent to which they are as clear and transparent as they might be. A recent survey, published last month in a national newspaper, showed that one well-known budget airline’s high-season rate for a 20 kilogram bag to go into the hold was £70 return, and if you did not book on-line but turned up at the airport with your bag the fee was £130 one way. The survey of budget airlines’ add-on charges showed that it could cost as much as £110 to change the name on a ticket and £120 because your bag weighed three kilograms over the limit. Add-on charges apply to a multitude of things, covering bags, credit card fees, name change fees, flight change fees and fees for taking on special items such as golf clubs.
When the survey tested costs for a one week return flight to Malaga for one person taking a 20 kilogram bag and paying by credit card, it found add-on costs ranging from £34.95 to £82 depending on the low-cost airline operator. One would have thought that this was an area in which the Civil Aviation Authority could play a role in the interests of passengers and in ensuring fairness and transparency.
Under the Bill, the Civil Aviation Authority remains outside the remit of the National Audit Office, despite it being in receipt of public money and being given important new functions. It should be subject to proper scrutiny and it should also have a duty of efficiency, as the noble Lord, Lord Jenkin of Roding, and my noble friend Lord Solely, said, a duty which, likewise, is not provided for in the Bill. As my noble friend Lord Davies of Oldham said, we will want to probe why the Government feel that the arrangements they have proposed will be adequate and appropriate and an improvement on what we are proposing.
We have a number of issues with the Bill that we will wish to pursue in Committee and, in some instances, also on Report depending on the responses we receive to the points we shall be raising. The Bill lays down a primary duty to further the interests of passengers. While we recognise the progress that the Bill represents, we do not consider that as much has been done in the Bill in this regard as could and should have been. However, in overall terms, we support the Bill, much of which was initially drafted by the previous Government. We shall be seeking in our detailed consideration of the Bill to make it even better.
My Lords, we have conducted a full and wide-ranging debate on the merits of the Bill. Many noble Lords have made the case for the continuing importance of our aviation sector. The continuing success of the industry is essential to our economic growth. The reforms in the Bill have been designed to allow competition to flourish and for our aviation industry to innovate and thrive. The Government, the Opposition, the regulator and the wider aviation industry all support the Bill.
I shall now endeavour to respond to some of the points made by noble Lords but they will understand if I have to be selective in what I reply to. I am grateful for the thoughtful and generally helpful response from the noble Lords, Lord Davies of Oldham and Lord Rosser. I am very happy to accept that the previous Administration put a lot of work into the Bill. The noble Lord, Lord Davies, complained that the Government did not accept Front Bench amendments in another place. Of course, our roles are now reversed and I am sure that the same accusation could have been levelled at the noble Lord when he was in government.
The noble Lord, Lord Davies, mentioned climate change. He and the noble Lord, Lord Rosser, will recognise that the Bill is about regulation of the aviation industry. However, I look forward to seeing the noble Lord’s amendment on carbon emissions and how they will work within the confines of the Chicago Convention. The noble Lord, Lord Rosser, offered gentle criticism of the aviation industry. He will be aware that the new generation of aircraft is much quieter and much more efficient.
My noble friend Lord Bradshaw and the noble Lord, Lord Soley, talked about the problem of stacking. The Civil Aviation Authority’s future airspace strategy deals with this problem and one or two others. The Director of Airspace Policy at the CAA recently made a presentation to your Lordships on the possibilities of the future airspace strategy. My noble friend Lord Bradshaw talked about the possibilities of other UK airports and, for his pains, he got a response from the noble Lord, Lord Soley, about hub connectivity.
The noble Lord, Lord Davies of Oldham, and many other noble Lords, raised the issue of capacity at Heathrow. They recognise, of course, that the Bill deals with regulation but I am happy to respond. The Government recognise the need to maintain the UK’s excellent connectivity now, and in the longer term. This is why we will issue a call for evidence later this summer alongside our consultation on the draft aviation policy framework to explore the options to achieve this. We remain committed to adopting the aviation policy framework by March 2013.
The coalition Government’s position regarding a third runway, mixed mode, and the planning cap on air traffic movements at Heathrow has not changed. I can assure noble Lords that we will follow a proper process in developing a long-term aviation policy which is in the UK’s best interests.
The noble Lord’s comments are accurate but the words I have just repeated are very carefully thought out. I must move on.
These measures are consistent with the Government’s commitment to runway alternation at Heathrow and the trial—that is, the operational freedoms—will not increase the number of flights at the airport, which remains capped at current levels. I can assure my noble friend Lord Patten that the Bill does not interfere with the aviation policy framework. The two issues are separate; future developments will not be inhibited.
I welcome the comments on the environment—particularly from the noble Lord, Lord Davies of Oldham, and many other noble Lords. The issue was also debated at some length in another place. I have listened very carefully to the points raised today. I agree that further consideration should be given to the clarity in the Bill regarding the role of the CAA in allowing licence holders to recover the costs of taking reasonable measures to mitigate the adverse environmental effects of airports in carrying out its functions. Therefore, I look forward to further discussions in Committee. It will, however, be important to get the correct balance between conflicting interests. This will be challenging and we must get it right.
Many noble Lords raised the issue of the NAO auditing the CAA. I am still not persuaded that there are convincing reasons to believe that NAO scrutiny would deliver a better result than the current and planned mechanisms by which the CAA’s functions are audited and scrutinised. In his review of the CAA, Sir Joseph Pilling considered this and concurred that he saw no need for the NAO to be involved directly. Ministers in the previous Government subsequently accepted this recommendation. I have yet to see convincing reasons why they were wrong and nothing has happened since to suggest that this advice needs to be reviewed.
I am not convinced that NAO scrutiny would be more effective than the current system which includes the following elements: the Secretary of State appoints the CAA’s auditors; the Secretary of State places the CAA’s accounts before Parliament; the Secretary of State approves the CAA’s borrowing and sets its required rate of return on capital; the Secretary of State appoints the CAA’s chair and non-executive board members; the CAA’s audit committee is made up of non-executive members who are appointed by the Secretary of State; and the CAA consults on its fees and will be required to do so under the changes set out in Clause 100. In addition, over the period 2001 to 2011, the CAA reduced its operating costs in real terms by 20%. I note that some noble Lords suggested additional functions or capability that the CAA should acquire.
Following discussion in another place on 25 April in the Bill Committee, the Minister, my right honourable friend Theresa Villiers, announced a new non-legislative measure to increase the transparency of the CAA’s moves towards greater efficiency. On an annual basis, the Department for Transport issues a report direction and an accounts direction to the CAA specifying the matters that should be addressed in the authority’s annual report and accounts. From 2013 onwards, the Secretary of State will strengthen the scrutiny of the CAA by including in the annual directions a requirement to include an efficiency statement in the annual report.
I am grateful for the contribution from my noble friend Lord Trefgarne about general aviation. The primary duty will be capable of capturing general aviation interests where they are aligned with the interests of users of air transport services. Broadly speaking, users of transport services will be passengers and freight owners using air services to and from the UK—including future users. In so far as owners of small aircraft fall within this, they will be covered. It can also be noted that only around 0.1% of flights at regulated airports comprise general aviation.
My noble friend Lord Jenkin of Roding raised concern that an airline right of appeal touching on an airport’s financial arrangements would seriously inhibit the airport’s ability to raise finances. The noble Lord, Lord Soley, and my noble friend Lord Bradshaw raised similar concerns. The Government remain of the opinion that there are good reasons to include financial resilience licence conditions, with appropriate derogations where these cut across existing financing. We also remain of the opinion that the broad rights of appeal in the Bill provide an effective means of improving the accountability of key regulatory decisions and enable the interest of both airport operators and materially affected airlines to be taken into account in the licence process.
We believe that it is correct that the right of appeal extends to financial resilience licence conditions. Any dispute as to whether a derogation would cause a breach of the existing financial arrangements is most likely to arise from questions of law over the true construction of a loan agreement and/or licence condition. These could ultimately be resolved through judicial review and, in the mean time, an airport operator could seek an injunction to preserve the status quo. Markets should therefore be reassured that the risk of existing creditor protection in an airport operator’s funding structure being unintentionally removed, triggering an event of default, is extremely unlikely. Investors are experienced in managing regulatory uncertainty in their normal course of lending to the regulated sector and we would expect them to manage this situation as well. However, I know how strongly BAA feels about the issue and I will be meeting with it shortly.
The noble Lord, Lord Rosser, raised issues about staff in the event of the transfer of security functions from the Department for Transport to the CAA. It is important to ensure that the CAA has the skills and resources to undertake its new security functions. The Government are working to a plan that would aim for the CAA to take on the aviation security regulation function from the spring of 2014. The Government hope that existing staff will want to continue working in the security environment, but if any of them decide to move elsewhere, there will be enough time to manage this.
The noble Lord, Lord Clinton-Davis, raised the issue of aviation safety standards. The UK is a signatory to the Chicago convention and is required by the ICAO to have in place a state safety programme to achieve an acceptable level of safety in civil aviation. The Civil Aviation Bill currently before Parliament does not deal with safety issues as there is already sufficient European and international legislation in place which addresses them.
The noble Countess, Lady Mar, raised the issue of organophosphates. This is a separate matter and one of research rather than legislation. I am pleased to be able to tell the House that the last piece of research that your Lordships asked the Department for Transport to commission, under successive Governments, into allegations regarding airplane cabin air quality, has now been completed and published. All the published research studies have now been formally referred to the Committee on Toxicity, the independent adviser to the Government on matters concerning the toxicity of chemicals, for it to consider.
My Lords, I thank the noble Earl for his comments. Does he agree that there is a serious problem in that the Civil Aviation Authority is responsible for people in an aeroplane both when it is on the ground and when it is in flight, but it does not impose health and safety regulations, as would be the case with the Health and Safety Executive? It looks after people on an airport site who are not in aeroplanes, but does not consider the COSHH regulations. Numerous Questions for Written Answer have been tabled on this issue, but no one takes responsibility for the passengers, pilots or aircrew.
My Lords, the noble Countess will recognise that these are complex matters. I will write to her on all the points she raised.
The noble Lord, Lord Soley, asked if the Bill will cover military airports and whether they could be exempted under Clause 77. In certain circumstances, military airports can be exempted from economic regulation under Chapter 1 and Clause 77.
My noble friend Lord Bradshaw was concerned about the market power test set out in Clause 6. His specific concern was that unless an airport operator has market power, it should not be regulated. I would like to reassure my noble friend that, under the Bill, where an airport does not and is unlikely to acquire substantial market power, it will not be made subject to economic regulation. It is a specific requirement of the market power test in Clause 6.
The noble Lord, Lord Rogan, talked about the aviation needs of Northern Ireland. The Government and the Civil Aviation Authority have no role in the slot allocation process. EC regulations established a mechanism for the allocation of slots at congested airports. This has been transposed into UK law under the Airports Slot Allocation Regulations 2006, which came into effect on 1 January 2007. Heathrow, Gatwick, Stansted, Manchester and London City airports are all designated by the Secretary of State for Transport as co-ordinated airports with their slot allocations managed by Airport Coordination Limited, an independent company which has powers under the UK regulations to monitor the conformity of air carriers’ operations with the slots allocated to them, and to take enforcement action against those airlines that do not operate according to the regulations, in particular by introducing sanctions for slot misuse. The ring-fencing of slots at Heathrow to protect regional services, other than where a public service obligation has been implemented, would be incompatible with EU law. The UK has highlighted the issue of regional connectivity with the European Commission in the context of the current reform of the EU slot regulations and is exploring the scope for including measures to help secure the ongoing provision of air services between UK regions and congested London airports. Beginning this summer, Commission working groups will examine the slot proposals, and I commend the work of the noble Lord, Lord Empey, who has been extremely active and effective in Brussels.
The noble Lords, Lord Davies of Oldham and Lord Davies of Stamford, commented on the UK Border Force. It is not covered by the Civil Aviation Bill and is accountable to Ministers and Parliament as a Home Office agency. Queues at airports are caused by many factors, including the border force receiving incorrect flight manifests and early or late airplane arrivals, resulting in bunching. The Minister for Immigration and Citizenship is reviewing what additional data may be published by the Home Office and shared with port operators. Meanwhile, the UK Border Force has responded to recent problems with queues in a number of ways. It is tackling short-term peaks with a pool of trained staff, and working with airports and airlines to ensure that they provide more accurate passenger manifests and flight schedules so that the force can flexibly deploy staff at the right times and in the right places. It is creating a new central control room for the UK Border Force at Heathrow that will use mobile teams for rapid deployment, and it will implement new rostering and shift patterns. It is also working with Gatwick and Heathrow airports to improve passenger flows using more specific measures such as e-gates and other biometric checks.
The noble Lord, Lord Davies, asked why there is no obligation on the CAA to require airports to develop passenger welfare plans. The indicative licence prepared by the CAA included, at the request of the Department for Transport, an example condition that would strengthen an airport’s resilience where appropriate. The proposals contained in Condition 7 require the licence holder to operate the airport efficiently and to use its “best endeavours” to minimise any detriment to passengers arising from disruption. It would also require the airport to draw up, consult on and gain the CAA’s approval for an annual resilience plan setting out how it will secure compliance with its obligations under the condition. The licence holder would be obliged to comply with the commitments it has made in its resilience plan.
The noble Lord, Lord Hunt of Chesterton, mentioned the issue of the difference in the quality of the air between first and economy class. The air is the same throughout an aircraft. First class seats and economy class seats are usually separated by a curtain, which is not an airtight medium.
My Lords, if I have anything further to add, I will write to the noble Lord.
My noble friend Lord Jenkin of Roding raised the issue of consolidation. We should strive to produce legislation that is comprehensible to those who have to operate it and to those who are affected by it, and the consolidation of statute law can make a valuable contribution to this. Consolidation can take different forms. On the one hand, there can be what we call “formal consolidation”, which reproduces a law on a particular topic without any changes. On the other hand, a Bill may reproduce existing law with amendments. In recent years, fewer formal consolidation measures have been prepared than previously. One reason for this has been the change to the way that Parliament amends legislation. Amendments are now routinely made by textual amendment; that is, by inserting, removing or replacing text in the original statute. The need to consolidate simply to take account of textual changes has therefore largely disappeared. The approach taken in the Civil Aviation Bill is sometimes to make brand new provisions, as in Part 1, and sometimes to textually amend existing legislation, as in Part 2. When drafting the Bill, the changes being made did not appear to call for the rewriting of the law relating to civil aviation or aviation security. The specific textual amendments to other Acts made by the Bill show more clearly the changes that are being made than would a provision which replaced the whole of the legislation being amended, with the changes buried somewhere in the middle.
I have endeavoured to respond to many of the valuable points made by noble Lords, but time does not allow me to respond to all the points that have been made, no matter how good they are. I will read Hansard carefully and write to those noble Lords who have asked me questions that I have not been able to answer. I will also be delighted to have meetings with noble Lords outside the Chamber to look at the detail of these matters. This is only the first opportunity to formally discuss the Civil Aviation Bill in your Lordships’ House, and I look forward to debating it with noble Lords in Committee.
Bill read a second time.
House adjourned at 8.20 pm.