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Airports Slot Allocation (Amendment) (EU Exit) Regulations 2021

Volume 809: debated on Tuesday 19 January 2021

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Airports Slot Allocation (Amendment) (EU Exit) Regulations 2021.

Relevant document: 38th Report from the Secondary Legislation Scrutiny Committee

My Lords, these draft regulations will be made under the powers conferred by the European Union (Withdrawal) Act 2018. They amend provisions of the EU airports slot regulation—No. 95/93, which I will call “the slots regulation”—to provide airlines with relief from the impacts of Covid-19 on passenger demand.

EU regulation 2020/459 was adopted to amend the slots regulation as a result of the Covid-19 outbreak to provide airlines with relief from the 80:20 rule—otherwise known as the “use it or lose it” rule—which requires airlines to use their airport slots 80% of the time. In normal circumstances, the 80:20 rule mandates that, provided an airline has used its airport slots at least 80% of the time in the preceding scheduling period—either winter or summer—it is entitled to those slots in the upcoming equivalent period. This helps to encourage efficient use of scarce airport capacity, while allowing airlines a degree of flexibility in their operations.

Due to the significant impact of Covid-19 on demand, in March last year amendments to the slots regulation instructed airport co-ordinators, when determining slot allocation for the upcoming season under the 80:20 rule, to consider slots as having been operated, whether or not they were actually used. By providing airlines with legal certainty that they would be able to retain their slots even if not operated, the aim of the amended regulation was to help mitigate the commercial impacts of the Covid-19 outbreak on the industry—because airlines might otherwise opt to incur the financial costs of operating flights at low load factors merely to retain slots—and support sustainability by reducing the likelihood of needless aviation emissions from near-empty aircraft. Those amendments to the slots regulation entered into force on 30 March 2020 and became applicable retrospectively from 1 March until 24 October 2020.

The amendments introduced by EU regulation 2020/459 and subsequent amending instruments also granted delegated powers to the Commission until 2 April 2021 to extend the period during which the slots allocated should be considered as having been operated by the requesting airline. Those delegated powers, which can no longer be exercised in the United Kingdom, could be exercised by the Commission where it found, based on Eurocontrol figures and best-available scientific data, that the reduction in air traffic levels is persisting as a result of the Covid-19 outbreak. This delegated power was used by the Commission before the end of the transition period to extend relief to airlines beyond 24 October 2020 to 27 March 2021.

The draft instrument being considered today applies to England, Scotland and Wales, and will transfer this delegated power to the Secretary of State, exercisable until 2 April 2021. Aerodromes are a devolved matter in Northern Ireland, and as there are currently no slot co-ordinated airports in Northern Ireland and the power is exercisable only until 2 April 2021, the Northern Ireland Executive have agreed that it is not necessary for this instrument to extend to, or apply in relation to, Northern Ireland.

To say a bit more on the contents of the SI, the withdrawal Act retained the slots regulation, as amended, in UK law after the end of the transition period. The draft instrument we are considering makes the changes necessary to ensure that the slots regulation continues to function correctly. This is essential to ensure the continuation of an effective regulatory regime for airport slot allocation.

This instrument is subject to the affirmative procedure because it creates or amends a power to legislate. The most significant amendment being made to the slots regulation provides the Secretary of State with the power to grant further relief to airlines if the reduction in air traffic caused by the Covid-19 pandemic were to continue. This power is intended to deal only with the impacts of the pandemic, and so was given to the Commission for a limited duration only. To transfer this power, the term

“Commission shall adopt delegated acts in accordance with Article 12a”

is replaced with

“Secretary of State may by regulations”.

This enables the Secretary of State to extend the period during which the UK airport slot co-ordinator, when determining slot allocations for the upcoming season, is to consider slots as having been operated, whether or not they were actually used. A decision to extend the period must be based on relevant data on passenger demand and scientific data on the impacts of Covid-19 on that demand.

Other changes being made to this regulation are mostly minor and technical in nature—for example, replacing the phrase

“which is the network manager for the air traffic network functions of the single European sky”

with the words “or other relevant data”. This enables the Secretary of State to take into account data from other sources, such as NATS, as well as from Eurocontrol.

The other amendments being made to the slots regulation are minor but equally important. They clarify that the Secretary of State’s power to make regulations to extend the relevant period may not be exercised after 2 April 2021, which is the same limit as on the Commission’s power. Therefore, as the exercise of the power must be based on data, any further relief provided under this power from the 80:20 rule would likely be for the summer 2021 season only.

Given the time-limited nature of this delegated power, the Government have tabled amendments to the Air Traffic Management and Unmanned Aircraft Bill, which is currently proceeding to Report stage in your Lordships’ House. These amendments would provide the Secretary of State with temporary powers to adopt relief, as appropriate, for seasons from winter 2021 onwards.

This instrument will ensure that airlines can be provided with further relief under the airport slots rules from the impacts of Covid-19 on passenger demand, if appropriate. I beg to move.

My Lords, I draw attention to my interest in the register.

It seems odd to be sitting here on a Tuesday evening debating what appears to be a very small and sensible update consequent on our departure from the European Union, and specifically in relation to the devastating impact that Covid-19 has had on the whole of the aviation industry. But it is an opportunity to raise the wider context of the need to maintain capacity in the aviation industry, and the fact that so little support has been available so far in keeping that capacity available to us for the future.

I do not mean capacity just in terms of passenger travel, as important as that will be for business and leisure. There are many who feel that people will not want to fly, and that somehow there will be a major drop in people taking business or holiday trips, but I do not believe that for a minute. I think the moment will come when we can be free again to travel and enjoy sunshine and each other’s company, and take a glass on a beach somewhere, and many people who can afford to take advantage of that will do so. But they cannot do so, certainly under anything that is related to British registration, unless the capacity exists.

The most important aspect of this is the fact that so much of our airline industry, including that mainly carrying passengers, is related to freight. At Heathrow—in which I have an interest in terms of skills and employment for recovery—about 90% of its high-value freight goes out in the bellies of passenger aircraft. Of course, it does not at the moment. Maintaining the capacity to do that and maintaining our trading capacity and relationships for the future will be vital to the recovery of our economy and to our place in a very different world.

I make an appeal to the Minister—I gave her notice that I was going to broaden the issue—that the 80:20 rule is a sensible step in terms of ensuring that airlines do not lose that capacity and those air corridors, but it is a tiny gesture to maintain capacity for the future. Substantial help now needs to be given to make sure that we do not fall even further behind our European competitors in terms of airport and airline capacity. To give one example, the relief for business rates that has been made available to very successful and profitable high street stores has resulted in an £8 million contribution to airports in the UK. That is very helpful to the smaller, provincial airports but for an airport such as Heathrow, which has an annual business rate levy of £120 million, £8 million goes a very small way to compensating.

I just make an appeal that we will need our aviation industry, taking into account climate change and pollution—in terms of both fuel and noise. The capacity to be able to travel, to compete and to engage in world trade will be vital and those who pooh-pooh the aviation and air transport industry in a way that they believe is somehow improving the prospect of meeting climate change targets for the future are delusional.

My Lords, I support the changes proposed by the noble Baroness, Lady Vere. The crisis in the airline industry has left us with really no alternative and it is always better to provide an orderly system rather than to leave matters to themselves, as it were.

However, unlike the noble Lord, Lord Blunkett, I do not count myself among those who want to see a return to normal, if normal means that we are going to have the same levels of noise, pollution and disruption which airlines give to many people. Airlines are polluting, and while they bring the mobility benefits to which the noble Lord, Lord Blunkett, referred, we must look forward to quieter and less polluting aircraft. In my view, this sort of thing is not an optional extra. If our concern with climate change is genuine, it is a must. I guess the third runway at Heathrow will itself be a long time coming, if it ever happens, but we have to make a useful contribution very urgently, probably by the time we go to Glasgow for COP 26, because as a nation we have to be able to show that there is a way forward to a genuinely better aircraft industry.

My Lords, I apologise for the House of Commons Division Bells. The noble Lord, Lord Bilimoria, has withdrawn so I now call the noble Baroness, Lady McIntosh of Pickering.

My Lords, I thank my noble friend for so conscientiously bringing forward and explaining the contents of the regulations before us. I note how hard she works for the airline industry and the aviation sector, which I know they greatly appreciate. Can she explain what the response and reaction has been to these regulations, and the extension from the EU Commission to the waiver? I note that IATA has also been active in this field and that among the low-cost carriers—in which we in the United Kingdom seem to excel in normal times, outside of Covid—unhappiness has been expressed about the potential lack of competition and impact in higher fares. I am thinking particularly of Ryanair and Wizz Air, which have expressed their reservations. I do not know whether she has had the opportunity to put their minds at rest, if that is the case.

Can my noble friend please also explain to us what the situation will be if slots have been freed up, particularly the international transatlantic slots which are obviously not operating at the moment? One hopes that by the summer they will be. If it is true that Norwegian airlines is releasing some of these slots, potentially at Heathrow or other international airports in the UK, that will be of interest to other carriers. What procedure will take place at that time?

If, as I understand it, this is the legal basis—which I welcome—for the Secretary of State to be empowered to extend the waiver from the 80:20 or “Use it or lose it” rule beyond the end of March into the busy summer season, I presume that there will be no further opportunities to discuss that decision. Does my noble friend have any indication when that decision might be made? I realise that this is a stab in the dark because we do not yet know what the position will be and how reluctant the travelling public might be. I include myself in that, as I hope to visit my family in Denmark this summer.

Finally, I ask my noble friend about another position, as the airlines would not forgive me if I did not. I thank the Government for the measures they have announced to help airports, particularly the major international airports in the UK, which will be very welcome. Will she look favourably on bringing forward a review of air passenger duty, particularly to remove the double taxation anomaly? That would be a most welcome boost when we are able to fly reasonably again.

My Lords, I thank the Minister and her officials for arranging a briefing yesterday, which was most helpful. I agree with a lot of the contribution made by the noble Lord, Lord Blunkett. I also support in broad terms the relief from the 80:20 rule, because the last thing we want, for a whole variety of reasons, is to have the sight of airlines undertaking ghost flights to hold on to routes even if they have no current passengers.

A couple of years ago—in fact, on two occasions—I introduced a Private Member’s Bill, which passed the House, to give the Government powers on slot allocation in the UK. Of course, it was governed by European competence at that stage. Slots are not only big business; they have huge implications for connectivity. While this measure does not apply to Northern Ireland airports, because they have capacity, at the end of the day a flight cannot take off unless it has somewhere to land. My anxiety has for years been about the risk from the absence of connectivity between the regions and the principal airports—what are called co-ordinated airports —such as Heathrow and Gatwick. I will return to that, although it is not necessary for this SI, but the principle is clear: if you do not ensure that regions have access to major airports with connectivity, that has economic, social and other implications. I ask my noble friend to bear that in mind.

I also doubt very much that airlines could manage even 20% of the flights on a lot of their slots at present. We had a briefing from one of our colleagues—the noble Lord, Lord Deighton, the chairman of Heathrow —where he pointed out that, in a number of months last year, its passenger flow had dropped by 95%. It is quite obvious that there needs to be as much flexibility as possible. As I understand it—I hope I am right in saying this—these measures will be available to apply in the summer season this year, but further secondary legislation or an approval Motion would have to come through to deal with subsequent seasons if the need arose, and there needs to be data on which to base that judgment. I think I have got that right; perhaps the Minister can correct me if I am wrong.

I broadly support the regulations. We need maximum flexibility at the moment. We need data but, looking forward, we need to bear in mind that it is essential for the key airports to have slot allocations. My anxiety is that when this crisis is over there could be a sudden surge in those airlines—international operators, perhaps —that have resources buying up a lot of the slots from weakened UK airlines and other slot holders. This could have a negative impact on the regions, so I ask my noble friend the Minister to also bear that in mind.

Lord Naseby, are you unmuted? Are you going to speak to us? No? In which case, the noble Lord, Lord Mann, has also withdrawn so we will move on to those winding unless the noble Lord, Lord Naseby, is there.

Can you hear me? I will make a short speech.

In the past, I have advised Singapore Airlines and SriLankan Airlines. I am a former RAF pilot and I support the third runway at London Heathrow. I thank the Minister for her practical and workable solution, delivered on time and with clarity. It is very welcome. However, I wonder whether she can expand on the prediction that it will take until 2025 for normality to return, given the creativity of the travel industry in the UK. I am not entirely clear what happens if a new airline decides that it wants to get going and to have slots. What will the procedure be? I would be grateful for clarification on that point.

I have two other small points to make. First, the Minister talked in her briefing about categories of airport in the UK, such as level 3. I am surprised that Glasgow, with its international connections, is not a level 3 airport. I assume that it is not big enough. Secondly, I re-emphasise what other colleagues have said: these proposals are very welcome but our poor airports are stranded at the moment, almost like whales out of the sea. They are losing millions of pounds. The Government have done something but something more needs to happen. One possible area for this is on air passenger duty.

My Lords, I thank the Minister for her explanation. Slot allocation at busier airports is an important method of ensuring free and fair competition in the industry. It is based, as the Minister told us, on the 80:20 rule, otherwise known as the “Use it or lose it” rule. Providing an airline has used 80% of its slots in the preceding season, it is entitled to those slots in the upcoming equivalent season. When the shock of the pandemic hit the industry, and travel restrictions were imposed, it was a very sensible response for the EU to suspend the 80:20 rule. If that had not been done there was a real likelihood that airlines would have flown empty flights, known as ghost flights, just to maintain their right to keep their slots. For environmental reasons, that would clearly have been undesirable.

As the pandemic has lasted much longer than initially expected, it has been necessary to extend the period for slot waiver. That was last done in October, lasting to the end of March. Now that the transition period has ended, this SI gives the Secretary of State the powers to extend the period again. This is a sensible approach, but I have some questions to raise with the Minister.

First, slot allocation is an international approach to competitiveness in the market. It is intended to ensure that new providers can enter the market, and that consumers get a good deal. The Government pride themselves on leaving the EU, because they want to exercise their independence from the rules followed by our neighbours. So what are the Government’s intentions on this in the long term? How far are the Government bound to the slot system by international agreements generally? Is there scope to take a different approach?

Secondly, there is increasing concern within the industry that the conditional agreements, voluntarily entered by the airlines, have not been effective—in particular, the agreement that an airline which suspends operations at the airport should immediately return its slots to allow reallocation. There has been publicity about the Gatwick situation. Virgin has said it will no longer fly from Gatwick. It no longer has a base there, but it keeps its slots. JetBlue, meanwhile, has confirmed that it wants some of these slots. Under the current non-statutory rules applying to this situation, it seems that Virgin can effectively prevent a competitor establishing itself. I am keen to hear from the Minister what the Government intend to do to prevent this situation continuing. It is not just bad for JetBlue; it is bad for Gatwick and for customers. Do the Government intend to introduce legally enforceable rules? Slots are very valuable commodities and the distortion of the market will artificially inflate their price, with the cost going directly on to ticket prices.

As airlines have grappled with the impact of the pandemic, they have been forced to reduce the size of their workforce and of their fleets. A major downsizing has occurred. There is now a serious mismatch between many airlines’ slot holdings and their capacity to operate those slots. It is therefore important that there is no incentive and no loophole that encourages slot hoarding.

I know that the Government have consulted the industry about the continuation of the slot waiver and I would appreciate it if the Minister could tell us what its views are. When does the Minister think that the Government will be in a position to make a decision on the next season? Finally, do the Government have any plans to change the list of airports for which the slot system applies?

My Lords, I thank the Minister for introducing this statutory instrument. She related it to an amendment to be tabled to the ATMUA Bill that we will consider on Thursday, which made it all make sense. It is a great shame that that relationship was not brought out in the Explanatory Memorandum, as it would have saved me quite a lot of time in trying to understand it. Just to make sure that I am clear, can the Minister confirm that this SI will effectively be used just once, to permit alleviation for summer 2021? Does it have precisely the same rules as the revised Regulation 95/93 had for winter 2021? Is it effectively a bridge to the powers that the Secretary of State will have when the amendment to the ATMUA Bill is agreed? Is another, negative order necessary to complete the bridge?

Looking to make a slightly longer speech, I alighted on paragraph 10.2 of the Explanatory Memorandum, which is about consultation. I noticed that whereas paragraph 10.1 said what the response was, paragraph 10.2 was silent. I was then lobbied. There is a rule of the Medes and Persians that lobbyists always lobby you the day before you have to make a speech. The institution lobbying me was Heathrow. While I thought that this was a perfectly sensible, uncontroversial measure, it emerges that it is not as uncontroversial as it seems.

Heathrow introduced me to the Worldwide Airport Slot Board, or WASB, comprising the Airports Council International, the International Air Transport Association and the Worldwide Airport Coordinators Group. It raised three questions. It seems that the WASB had put together for summer 2021 an agreement, which was not as simple as the terms of this SI, to better relate the management of slots in the summer 2021. Heathrow claims that this was supported by airlines, airport operators and a number of Governments. So the first question it asks is, if the majority of industry responses to the ongoing consultation do not support a blanket waiver, why are the Government pushing ahead with it? It goes on to point out the value of this general agreement and notes that it has already been accepted by Canada, Cambodia, Malaysia, New Zealand, Taiwan, Vietnam, Japan, Hong Kong, South Africa, Singapore and Mexico. It asks why the Government are looking to be out of step with other nations and not consulting on the industry proposals, as per the number of other countries around the world?

Commenting on the amendment we are to discuss on Thursday—in a sense I give notice of this now—will the Government outline and propose the type and scope of industry consultation, and the timeline to which it should take place, before a policy decision on future waivers is taken?

I hope the Minister can give me some reaction to these points. Some may be fairly straightforward, with respect to this statutory instrument, but I am sure it will be a useful input to our debate on Thursday about the amendment to the Bill.

I hope she will also forgive my making one or two general points about the situation we find ourselves in at the moment. The industry is in dire straits and, at the end of the day, glamorous as it is, it will not survive without increased support from the Government, one way or another. I welcome the Treasury’s business rates relief for airports and ground services; however, this barely makes a dent while the whole sector continues to bleed cash. The Government must do more and, as promised last year, announce robust financial support packages for the industry. The Government must now also set out a clear plan on how they expect restrictions to be lifted with the vaccine rollout.

I thank all noble Lords for their contributions this evening to what I think was an hors d’oeuvre for the much longer discussion around slots alleviation which will happen later on this week on Report on the Air Traffic Management and Unmanned Aircraft Bill. But I will be able to cover some of the points raised, particularly by the noble Lord, Lord Tunnicliffe, in my remarks. I hope to answer as many questions as possible and to go for a complete run so that I do not have to write any letters. Let us see how we do.

The consultation on this is incredibly important. My department launched a targeted consultation on 30 December with the aviation industry and, of course, with the airlines, the IATA, the slot co-ordinated airports in the United Kingdom and the independent slot co-ordinator, Airport Coordination Ltd, on the proposed amendments to the regulations. The consultation is due to close tomorrow and a decision will be made as soon as possible thereafter.

I would like to point out that I agree with the noble Lord, Lord Tunnicliffe: I find sometimes that lobbying is done by external organisations literally the day before, or the day of, the discussion, and I find it very unhelpful. He, too, will understand that the consultation is extremely important. Heathrow will have contributed to it, and the timeline from then is that we will consider all the evidence we receive, decide whether we can justify an extension on the basis of the evidence before us, and then use the powers in this regulation that have been given to the Secretary of State. The Secretary of State will then make a negative statutory instrument, which will grant this further alleviation and associated conditions. We expect this to happen fairly quickly because the summer season approaches quite rapidly. Indeed, it begins on 28 March, so we intend to lay the negative SI in February.

It is important to note that some slots will then be freed up, and my noble friend Lady McIntosh asked what would happen to them. In normal circumstances, they would be allocated in the normal way, whereby there is a tension, or an allocation to incumbent airlines and to new entrants. We are well aware that we need to maintain a robust competitive position in the UK market and that will be a consideration, but there are only certain things that we can do quickly.

I recognise the issue that the noble Baroness, Lady Randerson, mentioned about Virgin, for example, at Gatwick. One of the conditions we are considering and consulting on is whether an airline that ceases to operate at a particular airport might be excluded from a future waiver unless it gives up its slots. All these things are out for consultation.

My noble friend Lord Naseby asked why Glasgow, a very important international airport, was not on the list. It is not a question of how international or what size the airports are but whether the demand for slots exceeds the capacity. It does not at Glasgow, and therefore it does not need to be on the list, so I do not believe that there is any need to change the list of airports at this time. I note, for example, that Bristol has summer only in terms of its restrictions or need to be on the list. Obviously it is kept under review, but that is why Glasgow is not there.

Returning to the point made by the noble Lord, Lord Tunnicliffe, about the WASB—the Worldwide Airport Slot Board—and some of its proposals, part of the consultation is to understand what people are doing and what they want domestically but also internationally. It is also true that we currently do not have the powers to change the ratio. All we can do under the withdrawal Act is correct deficiencies in the commission’s current powers; the commission will obviously have the same restrictions that we have. However, we need primary legislation to change the waiver. I will come on to that very shortly— right now, in fact.

The noble Lord, Lord Tunnicliffe, asked about the relationship between what noble Lords are discussing today and what will be in the ATMUA Bill. He rightly pointed out that it was not in the Explanatory Memorandum; that is because we did not know. It became clear to us that, to extend changes beyond summer 2021, we would need to lay primary legislation; as noble Lords will know, this is not an easy thing. We became aware that the primary legislation could be added in to the ATMUA Bill. As it was going through your Lordships’ House, it was still in the first House, and we felt, although it is very unusual, that it could go in before Report. I think noble Lords will see, when it is debated on Thursday, that this is appropriate and the right thing to do.

What noble Lords are discussing today is the SI that solely takes the commission’s powers and gives them to the Secretary of State, and is for summer 2021. As I explained, the powers fall away on 2 April 2021, so we will need primary legislation for every period after that. This is because one is not able to make a decision about winter 2021-22—often October—based on the data that we have now. I take the point about consultation prior to taking decisions before each season happens—I will explain that further in due course—because we will end up in a cycle whereby, for every season, there will be the data received, a consultation and then an affirmative SI laid before your Lordships’ House. It will then be debated, which will cover the season ahead of us. In that, we will be able to explore questions around competition, the conditions attached and all the things that are happening to the aviation sector at that particular time. That is why it is so important that we have that cycle of consultation, laying the right proposals for the period ahead as, hopefully, we come out of the pandemic, people start to travel again and airlines come back stronger. That is why the ATMUA Bill contains these amendments.

The noble Lord asked why we are saying until 2024-25—that is, do we expect the pandemic to last that long? That is just future-proofing the legislation. Obviously, I expect that we will see a change over that period. It may be that we do not need to change anything in 2024-25, but it is better to be safe than sorry.

Slots and the reform of slots policy have been on the Government’s mind for quite a while. They will be considered in the round with any future review of aviation policy, so we may do something before 2024-25 anyway. We may well take a different approach but within established international slots guidance, because of course it is a very international sector. However, we support competition and believe that there may be some changes that we wish to make in slots allocation. That is definitely not for now; we will leave that for another day.

On aviation support, I note that we had two slightly differing views: the noble Lord, Lord Blunkett, was keen on capacity for passengers and freight—I am on his side on this one—while the noble Lord, Lord Bradshaw, seemed a bit more cautious. However, I note that the caution of the noble Lord, Lord Bradshaw, was around climate change and noise. The Government have made some significant interventions on both of those and we continue to do so. We will consult on aviation decarbonisation shortly, and of course we have the transport decarbonisation plan coming through. There is a lot of work to do on aviation decarbonisation. Again, on noise, we established ICCAN and various other interventions such as the airspace modernisation programme, which again will impact on noise. I suspect that in due course, with quieter, cleaner and greener planes, the impact of aviation will be less than the noble Lord fears. I am therefore with the noble Lord, Lord Blunkett, in that we should be able to build back our capacity for both passengers and freight. That is incredibly important, which is why the Government are focusing, first, on the immediate restart of the aviation sector. We have introduced the test to release programme and in due course, as more passengers are able to travel safely, we will look at making sure that we can protect transfers of passengers within travel corridors, for example, or whatever other ways we can think of to protect public health while supporting aviation.

However, in the medium and long term, an important piece of work is being done with regard to a recovery plan. That is looking at things such as connectivity between Northern Ireland and the rest of the UK, protecting consumers, supporting the sector by confirming that we will stand behind the Air Travel Trust Fund, supporting the industry through skills and making sure that they are maintained, and of course working with the CAA on regulatory easements.

I hope that I have answered all questions today. I am grateful for everybody’s input. We will return to this subject on Thursday, and I look forward to it. I commend the regulations to the Committee.

Motion agreed.

My Lords, that completes the business before the Grand Committee today. I remind Members to sanitise their desks and chairs before leaving the Room.

Committee adjourned at 7.02 pm.