Civil Aviation Bill

Public Bill Committee, 28 February 2012.

Clause 1 - CAA’s general duty

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I beg to move amendment 8, in clause 1, page 1, line 8, leave out from ‘interests of’ to ‘regarding’ and insert—

‘air passengers and shippers of cargo both present and future’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss the following:

Amendment 13, in clause 1, page 2, line 14, at end insert—

‘(ea) the need to balance the interests of current and future air transport users,’.

Amendment 15, in clause 2, page 2, line 33, leave out from ‘interests of’ to ‘regarding’ and insert—

‘air passengers and shippers of cargo both present and future’.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

Good morning, Sir Roger. It is a pleasure to see you presiding over the Committee today; I look forward to serving under your chairmanship and that of Mrs Riordan.

Before I speak to the group of amendments, I would like to repeat the comment that we made last week: we welcome the Bill. You asked, Sir Roger, whether there was consensus and we reassured you that there was. That will be demonstrated during the next few weeks. It was a good Bill when we drafted it—I say “we”, but of course the experts drafted it and we helped—and it is still a good Bill, although we hope to improve it.

Clause 1 is very much the key clause, because it sets out the framework of the Civil Aviation Authority’s duties for the rest of the Bill. The next three sets of amendments deal with specifics relating to the duties that we would like incorporated, and in some cases reinstated, into the Bill. Amendments 8, 13 and 15 are a gentle, probing start to our detailed deliberations. They were tabled as a result of the Transport Committee’s report, published on 19 January—especially paragraphs 28 to 31 on pages 13 and 14—and address the Committee’s concern about the definition of “air transport users”.

We would like the Minister to explain why the Government omitted the definition that they used in the draft Civil Aviation Bill, which gave the aviation industry greater clarity. Will she also explain how the Bill will prevent current passengers from being unreasonably disrupted due to works to improve services for future users? Paragraph 28 of the report says:

“In its policy paper, the Government defines the consumer as ‘passengers and owners of cargo both present and future’ but this definition is omitted from the draft bill. We heard concerns that the draft bill does not clearly define who constitutes an air transport user. The Airport Operators Association, for example, said that a clearer definition was needed in the legislation, to avoid confusion and disagreement in the future.”

The Committee recommended

“greater clarity in the wording of the bill’s definition of users of air transport services”

and suggested that

“users be defined as ‘passengers and shippers of cargo both present and future’. There should also be more specificity in the CAA guidance regarding the relative weight that should be put on current versus future air transport users’ interests.”

The Committee further recommended

“that the special position of airlines be recognised by way of a secondary duty”.

We will come to that duty shortly.

The amendments are relatively straightforward in that the Government originally proposed the definition, which seemed to provide clarity and was supported by at least some sectors of the industry and the Transport Committee. I look forward to the Minister explaining what changed and why. Given a satisfactory explanation, we would seek leave to withdraw the amendment.

Roger Gale (Conservative, North Thanet)

Before we continue, I should say that I am aware that there are Members on both sides who have not served on a Standing Committee before. The process is a little arcane, but I hope that you will get to grips with it fairly quickly. If there are problems, please let me know.

Basically, amendments are assembled in order of subject of debate, and you may find amendments that refer to later parts of the Bill grouped with the lead amendment being debated now; if those amendments were to be moved, they would be moved later. I apologise; I should have said that at the start of the Committee. I hope that that is clear.

At the end of each clause debate, there is a stand part debate, which is literally, “That the clause stand part”—remain part—“of the Bill”. I am very relaxed about that, but other Chairmen may take a different view. You can have only one stand part debate on a clause, but if it is a complex clause or an umbrella clause, sometimes it is convenient to have a broad debate at the start with the first group of amendments. I am perfectly prepared to allow that, on the strict understanding that if we do have a broad-ranging debate now, you do not get a stand part debate at the end of the clause after the debates on all the other amendments. I hope that that is clear. If there are any problems, do not hesitate to ask the Clerk or the Chair and we will try to explain.

Tom Harris (Labour, Glasgow South)

On a point of order, Sir Roger. Given that advice, would you be happy to inform the Committee in advance that there will not be a stand part debate, if there is a general debate on a clause at the beginning?

Roger Gale (Conservative, North Thanet)

That I cannot do, because it is up to you. It is in your hands. If I do not judge that the debate at the start of any particular clause is very broad-ranging—that is fine—I will let you know later that there will not be a stand part debate.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

On a point of order, Chairman. I am grateful for that clarification, which I am sure the Committee finds helpful. With regard to clause 1, however, we would welcome a stand part debate after we have gone through the amendments, because that will colour our judgment on the stand part decision when it comes. In that instance, it would be helpful if we could have that debate afterwards, once we have gone through the amendments.

Roger Gale (Conservative, North Thanet)

That is fine, clear and helpful to me as it will be to Linda Riordan when she is in the Chair. It means that we will confine the debates on amendments strictly to the amendments, on the understanding that the Committee wants a stand part debate at the end. I hope that is clear.

Theresa Villiers (Conservative, Chipping Barnet)

Thank you, Sir Roger; that guidance is useful. There will be an inevitable degree of overlap between the debates on the amendments, because they cover some of the same issues. I will try to avoid too much duplication but, for the sake of clarity, it might be necessary to have some overlap between my remarks on this group and on the next two.

I thank the shadow Minister for setting out the reasons behind the amendments and for his overall support for the general approach taken in much of the Bill. As I said in my evidence to the Committee, that is very welcome. I also note and appreciate that the amendments we are considering reflect some of the recommendations of the Transport Committee report published in January. That, obviously, is a good reason for this Committee to give them proper consideration and debate.

I turn to amendment 8 and the change in definition across various iterations of the Bill, with particular regard to “future users”. The Bill seeks to provide the Civil Aviation Authority with a clear primary duty with regard to its airport economic regulation functions—namely, to further the interests of end users of air transport services in relation to airport operational services. The change to adopt this primary duty is at the heart of our proposed reforms to deliver our goal to ensure that airport economic regulation has the interests of the passenger as the driving force behind the decisions made. Many across the industry have supported that change, as was clear from the evidence that we heard. No doubt, in relation to the consideration of an airline-focused duty, we will have more opportunity to focus on this matter.

I agree with both the Transport Committee and Opposition Front Benchers that it is important that the interests of future users of airport services are protected, whether passengers or the owners of cargo. That is an important issue for the Bill to cover. However, I do not feel that I need to support amendment 8, because the Bill already makes clear that the Civil Aviation Authority, in considering the interests of passengers and the owners of cargo, must have regard not just to present users but to future users as well. That is in clause 69.

I am not convinced that moving broadly similar wording from clause 69 to clause 1 is necessary to clarify the Bill. We are clear that under the regime proposed in the Bill the CAA will be obliged to consider the interests of both present and future users.

Nicholas Dakin (Labour, Scunthorpe)

If the Minister is not concerned about the definition, why not put it in to gain further clarity and be in line with the Transport Committee’s recommendation?

Theresa Villiers (Conservative, Chipping Barnet)

I understand the hon. Gentleman’s point, but we have a definition that works in clause 69. I cannot see the merit of transferring that reference to future users to clause 1. We need a good reason to change the Bill, and the Transport Committee’s concerns about future users are dealt with by clause 69. It may be in a different part of the Bill than was the case previously, but it is still present and is still important, and, as I will come on to shortly, it is important that the CAA makes sensible decisions when balancing the interests of different groups of users—present or future, leisure or business.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

The Minister mentioned that she was seeking clarity here, to demonstrate that the primary focus is on passengers. Our amendment 9, which we will consider next, raises the question of a secondary duty for airlines. I would not want that point to be lost by our not making it now. I would not want the Minister to think that in omitting that point—which we want to make, strongly—we were accepting an inability to make it.

Theresa Villiers (Conservative, Chipping Barnet)

As I acknowledged at the start of my remarks, there will inevitably be some degree of overlap in the exchanges between the Front-Bench teams on this group of amendments and the next, particularly on the definition of end users. I appreciate that amendment 8 not only concerns future users, but seeks to change the definition of freight end users from the owners of cargo to the shippers of cargo. This may be a convenient moment to move on to that aspect of the amendment, which raises issues similar to those that the hon. Gentleman will be raising about airlines in the next group of amendments.

As with all aspects of the Bill, careful consideration was given to the appropriate definition of freight users. It is a relatively simple task to define a passenger, but it is more difficult to ensure that we get the right definition of freight users. The Government concluded that a reference to the owners of freight was the best practical way to define the group whose interests the regulatory system should aim to protect.

It is important that the economic regulatory framework that we agree on delivers not only for the passenger, but for freight users. The conclusion was that the owner of the cargo—as opposed to the shipper, who is actually an intermediary—is the end user. Freight shippers are broadly akin to the passenger airline rather than the passenger and so, in line with what we have sought to do on the passenger side of the equation, that is why we are focusing on the owners of cargo.

Whether to focus regulation on end users or intermediaries was the subject of extensive consideration—for example, in the Competition Commission’s investigation into BAA. It was also carefully considered by Professor Martin Cave in his review of economic regulation—established, I think, when the hon. Member for Poplar and Limehouse was the Minister with responsibility for aviation—and by the previous Government’s 2009 consultation, “Reforming the Framework for the Economic Regulation of Airports”. After all that consultation, the conclusion was that a focus on end users was the most effective way to establish a new regulatory system and that the primary duty should be to further the interests of the end user rather than the intermediary, which is also consistent with the Government’s principles of economic regulation. That is why we focused on the owners of cargo rather than the intermediaries—the shippers.

However, that does not mean that the interests of intermediaries, whether in the context of shippers of cargo or airlines, will be disregarded. As the CAA said in its evidence, the intermediaries will be an appropriate proxy for the end users in many cases, so they will have an important role in the regulatory system and proper consideration will be given to their views. However, moving away from an emphasis on end users being the subject of the primary duty would undermine the clarity that we are seeking for the regime, which is why I feel unable to support the hon. Gentleman’s change in definition.

Mark Reckless (Conservative, Rochester and Strood)

The Minister refers to the end user of freight, but the Bill refers to the owner. Often, when freight is in transit, it will have been exported and sold on. Whether that is on a “cost, insurance and freight” basis or a “free on board” basis will determine whether the owner in transit is the seller-exporter or the buyer-importer. Will the Minister clarify that she is talking about ownership, rather than the end user?

Theresa Villiers (Conservative, Chipping Barnet)

We have selected ownership as a means to describe the end user. Ownership is a good indicator or descriptor of the end user, regardless of the transition of ownership during transportation. As I said, we looked at different options, but we concluded that the simplest and clearest definition is that the ultimate end user is the owner of cargo. As my hon. Friend says, in some cases that will be people in the UK and in some cases it will be people outside the UK, but in both instances it makes sense for a system designed to replicate a competitive and functional market to consider the interests of cargo owners.

Mark Reckless (Conservative, Rochester and Strood)

To clarify further, when an exporter sells goods to a UK importer and the ownership transfers only on arrival, with the buyer taking delivery in the UK, will the end user, or the owner in the Bill, be, for that purpose, the exporter of the goods?

Theresa Villiers (Conservative, Chipping Barnet)

What I am saying is that the class of end users, which is defined by ownership, is capable of covering ownership under a range of transactions. I do not think that will cause such a problem that the CAA will need to focus on the technical transfer of ownership. Whether it is the person receiving the shipment or the person sending the shipment, the interests of end users, where they have an ownership interest, are protected by the Bill.

Nigel Mills (Conservative, Amber Valley)

Does the Minister agree that the amendment would create an interesting situation for airports, such as East Midlands airport, that have a substantial freight business? There would not be a primary duty to airlines that fly passengers, but there would be a primary duty to the large number of freight airlines, which have a large volume of flights. That would be a distorted position for airports to manage. An airport would probably have to give far more regard to its freight airlines than to its passenger airlines.

Theresa Villiers (Conservative, Chipping Barnet)

I am concerned that the amendment seeks to switch the Bill’s focus away from end users. The issues are more obvious for passengers, which we will come on to, but they are broadly the same for freight customers. In many cases, the interests of the shipper or the intermediary may be the same as the interests of their customers, the ultimate end users. However, it is important, where the interests of the end user and the intermediary or shipper conflict, that the regulator gives priority and primacy to the interests of the end user.

Where there is conflict between the interests of airlines and passengers, for example, I hope all members of the Committee would agree that it is important to give primacy to the interests of the passengers, which should be the goal of this new regulatory regime. Like giving airlines a supplementary duty, making shippers of cargo, rather than their customers, the focus of the regulatory regime would undermine the strong consumer focus we are trying to give to the new regulatory regime.

Gavin Shuker (Labour, Luton South)

I would like to give the Minister the chance to correct the record, in case she misspoke. She said that the primary duty should be to passengers. I am unclear about that, because I thought the amendments we are discussing seek to balance the needs of all users of air transport services.

Theresa Villiers (Conservative, Chipping Barnet)

I certainly did not mean to say that the interests of freight end users are subordinate to those of passengers. There is a primary duty to focus on all end users, including both passengers and the owners of cargo. I am grateful to the hon. Gentleman for preventing me from wandering too far off the subject and pre-empting the discussion that we are about to have on airlines and their passengers, and their place in the regulatory regime.

Although I take this issue seriously, because it was raised in the Transport Committee report and an amendment has been tabled on the subject, we must focus on the customers of the intermediary, whether they are cargo owners or passengers. I hope therefore that the shadow Minister will consider withdrawing the amendment.

Amendment 13 addresses cases in which the interests of different groups of users might conflict. We firmly believe that a common-sense interpretation of the primary duty in clause 1 is that the CAA must pay appropriate regard to those interests. I accept that there will be occasions when such interests conflict. The example most often referred to is that the interests of present passengers may not be served directly by investment in facilities that future passengers are likely to enjoy or want, as the shadow Minister mentioned. It is also possible that budget airline service passengers may not want the same kind of facilities as full service airline passengers.

Such conflicts could clearly arise under the proposed new regime. However, in acknowledgement of that, subsection (5) empowers the CAA to determine how best to fulfil its primary duty to end users, were such conflicts to happen. It is important that the Bill addresses that issue, and I am confident that the flexibility we have given to the CAA will enable it to do the kind of balancing exercise called for by amendment 13. It gives discretion to the regulator in determining how to deal with such conflicts, and I believe that the regulator has the capacity to deal with them, and can achieve the appropriate balance between the groups.

The advantages of giving flexibility to regulators in deciding how to manage conflicts of interest between different groups include the prevention of regulatory deadlock, which has been a problem in other spheres, and the ability to balance conflicting interests between different groups. That is important in the airports sector; as we have already hinted, freight customers and passengers may have different needs, as may present and future passengers, or the passengers of different sorts of airlines. The Bill deals with those issues, and in this context, as in many others, giving the regulator discretion is the best and most flexible way to enable the independent, expert regulator to get the right outcome for passengers and freight end users.

I hope that I have provided reassurance for the Opposition Front-Bench team. Valuable as the discussion has been, I do not feel able to ask my colleagues to support the amendment, so I hope that the Opposition will consider withdrawing it.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

Given the Minister’s comments and particularly her reference to clause 69, I beg to ask leave to withdraw the amendment.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I beg to move amendment 9, in clause 1, page 1, line 10, at end insert—

‘(1A) The CAA must carry out its functions, where appropriate, in a manner which it considers will further the interests of air transport service providers.’.

This was intended to be another probing amendment that followed up concerns raised by the airlines about being excluded from the definition of air transport users. However, after last week’s evidence sessions some doubt has arisen, which I hope the Minister can address after I explain the concerns.

We agree that it is right that the primary duty focuses on the passenger, but we feel that the Minister needs to explain how the CAA will give airlines more recognition than appears in the Bill at present. Paragraph 29 of the pre-legislative scrutiny report, published in January by the Transport Committee, refers to the different views of airports and airlines on the issue:

“Manchester Airports Group was particularly concerned that the bill or explanatory material should make clear that airlines were excluded from the definition of users of air transport services. The airlines, however, took the opposite view, pointing out that, although not the end users of air transport services for which they are often the providers, airlines are the primary customers of the airports. Dr Barry Humphreys of the British Air Transport Association told us: We would like to see the role of the airlines more formally recognised in the duties given to the CAA…There needs to be a legal basis for taking account of the views of what, after all, are the principal customers of the airports.”

Dr Humphreys reiterated that view when he appeared before the Committee, saying:

“First, we believe that the CAA should have a primary duty to look after the interests not only of the passenger, but of the airlines, in relation to airport regulation. We have pursued that argument at great length—and I think we have probably lost it.”

It is clear from the Government’s line that they have lost it.

“Nevertheless, that is our preferred option.

The reason why airlines are so central to airport regulation is that they are the prime customers of airports. I understand that the passenger, of course, is a customer as well, but we are dealing here with airport regulation. This is a five-year cycle that is extremely complex, very time-consuming and very expensive. It is a process that individual passengers, with the best will in the world, are just not able to participate in. Indeed, even passenger representative groups have told us repeatedly that it is not something they either want or are able to participate in. It deals with matters such as the cost of capital, baggage systems, investment in terminals and capacity. These are technical, complex issues that realistically only the airlines and the airports are in a position to deal with. We think it extremely important that the CAA take notice of the key role the airlines play.

The Department for Transport argues that there are numerous places in the Bill where the CAA is required to consult the airlines. We welcome that and have no doubt at all that it will consult us, but in our opinion being consulted and there being a duty to take account of your views are two quite different things. We believe that having at least a secondary duty for the CAA to take account of our interests would improve the quality of the CAA’s decision making, to the benefit of the ultimate consumer.”––[Official Report, Civil Aviation Public Bill Committee, 23 February 2012; c. 67-68, Q131.]

Mr Haines from the CAA made it clear that his organisation believed there already was protection in the draft Bill for airlines but the airlines are not convinced. It would be helpful if the Minister could reiterate the Department’s view on this. Mr Haines was robust in his rebuttal of the suggestion of a secondary duty for airlines. In his evidence he gave four reasons why there should not be such a duty. He was very persuasive when he said:

“First, we think such a duty is wholly unnecessary. There are about a dozen places in the Bill that require us to consult airlines…Secondly, we think such a duty might cause confusion…Thirdly, there is a risk of confusion…Fourthly, such a duty would be quite a significant step away from successive Governments’ policy.”––[Official Report, Civil Aviation Public Bill Committee, 23 February 2012; c. 39, Q67.]

He then went on to compare the situation with other regulators.

I received a response yesterday from British Airways that casts another light on the CAA’s view. In response to the comment that a duty to airlines is unnecessary as the Bill requires the CAA to consult airlines on many issues, BA said: “The right to be consulted is wholly different from a clear requirement on the CAA to have regard to the reasonable interests of airlines. It is well recognised, including currently by the CAA, that the interests of airlines and passengers are very well aligned. The key issue is how the CAA will work out what the passenger interest is. The CAA and all other parties agree that airlines are generally best placed to represent the view of their passengers. Enshrining this agreed position in a secondary duty ensures that the CAA must follow this agreed approach in so far as it is consistent with the primary duty. If they do not the alternative is to follow a survey-based approach which would be costly and ineffective.”

Julian Huppert (Liberal Democrat, Cambridge)

As I understand it, the hon. Gentleman was arguing that airlines are the best people to represent their customers. Does he accept that airlines often do not treat their customers as best they could? Does he agree that there is a large discrepancy between what customers want and what the airlines want, and that the airlines do not speak up for customers in far too many cases?

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I take the hon. Gentleman’s point that every business in the country has disgruntled customers and that airlines, like any other business, sometimes let down their consumers. We do not want to create a conflict between the consumer or the passenger and the airlines—the users of airport services—but we want to create a secondary duty to recognise that airlines are also customers of airports, so their views ought to be taken into account. The CAA recognises that. The question is how significant the airline’s views should be. Our line is that it should be a secondary duty, so the passenger is the primary responsibility but airlines should also be consulted. When it comes to the complex questions of airport regulation, which I will address, what passenger will be equipped to deal with those? The airlines, on behalf of their passengers—on behalf of their customers—could play an effective role.

Dr Huppert rose—

Jim Fitzpatrick (Labour, Poplar and Limehouse)

If the hon. Gentleman will allow me, I will come on to that point.

As I was saying: “Where an operator or regulator may gather survey data on the desirability of a new terminal building or other investment project, airlines will be in a better place than passengers to thoroughly consider the implications on all passengers of the costs of such projects, as reflected in ticket prices. Airlines are better placed to negotiate with airport operators for a balance of service quality and price which reflects the aggregated demands of passengers. Only airlines and not the CAA or the airport regulator have the experience and the knowledge of the passengers to understand how much of their vision of air travel that the passengers are willing to pay.”

In response to Mr Haines’s second point that a secondary duty would cause confusion and would always be trumped by the primary duty to the consumers, BA states: “There is no evidence that such a duty would cause confusion. As there is no evidence that the interests of passengers and airlines are in conflict, there is no reason to believe that a secondary duty will be trumped by the primary duty to passengers. The inclusion of a secondary duty would simply reflect in statute the existing consensus and the existing policy position of the CAA that airlines’ interests are well aligned with those of the passenger, but it would ensure that airlines and passengers were protected against a subsequent change in the policy position of a regulator. One response to this would be to say that if airline interests are aligned with those of passengers, airlines should be content with the passenger interest being the clear focus of regulatory attention. However, passengers are unable to know the true cost of the preferences they express, and a simplistic appeal to survey data on passenger requirements from airport services is unlikely to fairly reflect the trade-off between service quality, capacity and price, which is better expressed by airlines. The CAA’s current duties include a clear duty to further the reasonable interests of airport users, where an airport user is defined as an airline. This duty has never proved problematic, and has not prevented the CAA from giving appropriate weight to the interests of passengers.”

On the third element of the CAA’s views, which concerned the finely balanced area of regulatory decision, BA states: “This is a disturbing confusion of the proposed new primary duty. The primary duty is clear that the CAA must act to further the interests of passengers current and future. As such, where passengers’ or other parties’ interests do not align, the CAA must always act in the interest of the passenger. To the extent that the airline and passenger interests align, and the CAA’s starting point is that they do, and diverge from investors’ interests, the new legislation already clearly requires the CAA to act in passengers’ and airlines’ interests. BA do not accept that a secondary duty towards airlines would give them undue weight in CAA decision making, over and above that proposed by the new legislation.”

BA states that the CAA’s final point about other regulators results from a confusion about the nature of the aviation industry: “Within airport regulation, this is tantamount to arguing that the CAA does not have a duty to Birmingham airport when regulating Heathrow. In fact it does, and were Birmingham to be materially affected by a CAA decision at Heathrow, we believe it would have a right to appeal. In making this point, the CAA fail to recognise their own position that the interests of passengers and airlines are closely aligned. A better argument is therefore whether other regulators have a duty towards their consumers in setting regulation. The answer is that all of them have a primary duty, or equivalent, to their consumers. It is true that consumers typically do not have a right of appeal, but that is because economic regulation is complex and expensive to appeal. It is therefore beyond the resources of private individuals to appeal price control decisions. In aviation, it is common ground that airlines, who are both incentivised and resourced to appeal economic regulation decisions and whose interests typically align with the passenger, are well placed to act for the consumer and exercise this right of appeal.”

I am interested to hear the Minister’s views on the amendment, as it is designed to seek clarification of the first recommendation of the Transport Committee report in January:

“We recommend greater clarity in the wording of the Bill's definition of users of air transport services. We suggest that users be defined as ‘passengers and shippers of cargo both present and future’.”

We have just covered that point.

“There should also be more specificity in the CAA guidance regarding the relative weight that should be put on current versus future air transport users’ interests. We further recommend that the special position of airlines be recognised by way of a secondary duty in the Bill.”

Nigel Mills (Conservative, Amber Valley)

I think the hon. Gentleman is arguing that there should be a secondary duty on airlines. Does his drafting make it clear that the duty to airlines would be secondary and that the one to users would be primary? Or does his drafting make the two equal? That is how I read his proposal.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I apologise for any confusion. The primary duty is to the passenger—the consumer. Our line is that there should be a secondary responsibility within the CAA, enshrined in the Bill, to say they should be consulted. As I said at the beginning, the passenger will trump the secondary duty. That is reflected right the way through the interest. The Bill clearly says the CAA will consult airlines all the way through. However, a number of airlines have contacted members of the Committee of all parties, to say that they do not think it is an adequate protection just to be consulted. They think something should be written into the Bill. That is why we are using the amendment to ask the Minister for the Department’s views.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful to the Opposition for raising this issue, which is clearly important for stakeholders and airlines in particular. My officials and I looked at the issue extensively prior to publication of the Bill. It is key to get the matter right, but I cannot agree to the amendment as I do not think it would improve the Bill. I fear it would significantly weaken it because it would undermine our efforts to put passengers at the centre of airport regulation.

A fundamental element of the Bill is to update the current regime, which is universally agreed to be out of date and in need of reform. One problem with the current regime is that the CAA has four equal duties that it has to consider in carrying out its economic regulatory functions. That has led to uncertainty and lack of predictability, particularly where different duties pull in different directions. The changes that the Bill proposes in relation to the primary duty will sharpen the CAA’s focus on passengers and the owners of cargo. It will increase transparency and support efficient investment by providing greater clarity and certainty for stakeholders about CAA decision making.

The primary duty seeks to provide clarity to the CAA that the interests of the passenger must take precedence and gives the consumer, as the end user of air transport services, a central role in the new system.

Tom Harris (Labour, Glasgow South)

The Minister mentioned quite rightly that the passenger, the end user, must be the primary focus. Can she say in practical terms what difference will be made to the experience of the daily commuter or annual holidaymaker as a result of the clause? What change will occur in that travel experience, if that person is to be the focus of the legislation in an approach to regulation, for example?

Theresa Villiers (Conservative, Chipping Barnet)

There is a range of potential improvements in the passenger experience that could flow from the primary duty in clause 1, accompanied by the licensing regime that we will come to later in the Bill. In particular, that includes focusing investment on the sort of improvements that passengers want, such as better baggage-handling equipment and better surface access. However, it will also enable the CAA, via the licence system, to intervene in real time, rather than a five-yearly price review being the main instrument of regulation. When things are palpably going wrong at an airport, such as its being not prepared for extreme cold weather, the CAA has much more flexibility under the licence system to intervene and get things fixed, rather than having to wait five years for a price control review. I am sure that we will have further opportunity to debate that, but those are the sorts of improvements that we expect passengers to experience as a result of the modernisation of the regime.

Tom Harris (Labour, Glasgow South)

Perhaps I was not quite clear. The Minister has discussed changes in winter resilience or baggage handling that would, I expect, be made by airports anyway. Will she discuss the actual change of experience that individual passengers will have as a result of what she is proposing or of what she is opposing from my hon. Friend the Member for Poplar and Limehouse? For any individual, what will their change in input actually be?

Theresa Villiers (Conservative, Chipping Barnet)

I will shortly come on to mention instances of where airline and passenger interest may conflict. As a Minister, it would not be proper for me to predict exactly how the CAA will approach different issues relating to airports, but there are instances of where airline interest is not aligned with passenger interest. The most obvious example is that it is in the passenger’s interest to have a wide range of catering outlets at the airport, but that may not be in the interests of an airline that is selling food on its planes. In those circumstances, it is only right that the CAA should look to the primary duty when deciding on its approach to economic regulation, and that the passenger’s interest must prevail.

Surface access is a similar issue. It is not unreasonable to believe that passengers value high quality public transport links to airports, but many airlines may, frankly, not care very much and they may resent being asked to contribute to meeting the costs of those surface transport links. In those circumstances, the CAA should be looking to the passenger interest rather than that of the airline.

Seema Malhotra (Labour, Feltham and Heston)

Can the Minister envisage a scenario where something that is perceived to be in the passenger interest may actually have adverse or perverse consequences if the interests of airlines are not taken into account? For example, if there was a measure that was in the interests of the passenger experience, but would cost a disproportionate amount to implement, and if there was no obligation to take account of airline interest, there could be a disproportionate impact on the passenger through a rise in prices due to the increased costs being passed on by the airlines.

Theresa Villiers (Conservative, Chipping Barnet)

The hon. Lady is absolutely right to highlight the importance of ensuring that the investments that regulated airports go ahead with do not place an excessive or unreasonable burden on their users. However, there is no need for a supplementary or primary duty to airlines to deliver that. The Bill requires the CAA to take a proportionate approach when making its decisions and have to regard to the reasonable needs of users.

Tom Harris (Labour, Glasgow South)

I want to pursue a point that the Minister made a few minutes ago. I find it extraordinary that airlines would have different interests from passengers when it comes to surface access to airports. For an obvious market reason, it is surely always in the interests of airlines to accommodate and to facilitate the arrival of passengers at airports. Perhaps she is aware of examples of which I am not where airlines have opposed improvements in surface access to airports, but it seems that that would be contradictory to their own interests.

Theresa Villiers (Conservative, Chipping Barnet)

I agree with the hon. Gentleman; there are many positive benefits to having top-quality surface access, and airlines stand to benefit from their passengers having ready access to high-quality public transport links to airports, but I suspect that some airlines would very much resent some of their landing fees paying for those improvements. I do not want to put words into the mouths of airlines, but they can be very robust in defending their commercial interests and arguing that what an airport proposes, and the regulator approves, is excessive and too expensive. I do not want to single out any particular airline, but some are vocal in the extreme about what they do not want to ask their passengers to pay for, so I am afraid that there is no consensus. There may be broad consensus that it is good to have good transport links, but there is certainly no consensus on who should pay for them and how much.

Graham Stringer (Labour, Blackley and Broughton)

The Minister is absolutely right that there is competition between airlines and airports on duty-free and other catering outlets, but in the second part of her response to the initial question from my hon. Friend the Member for Glasgow South, she said that the CAA could interfere in and direct an airport’s investment in catering facilities. Is she really saying that that is a consequence of the Bill?

Theresa Villiers (Conservative, Chipping Barnet)

I am saying that we should ensure that the CAA has flexibility, so if there were regulatory issues on such a matter, it would have maximum flexibility. Ultimately, its goal should be the protection of the interests of the end users. I am not contemplating the CAA micro-managing retail facilities, but, again, the approach that airports take to such facilities is controversial for some passengers, and I do not think that it is necessarily sensible to exclude it explicitly from the Bill. The hon. Gentleman need not have too much anxiety that the CAA will suddenly come out with detailed proposals on the approach taken to food retail in airports.

Graham Stringer (Labour, Blackley and Broughton)

I fear the powers that the Minister is giving to the CAA, rather than what it will do. If that will not really be an application, can she give examples of where the CAA may pursue the passengers’ interests and not the airlines’ interests?

Theresa Villiers (Conservative, Chipping Barnet)

Additional capacity and entrants to the market are other important areas where the interests of passengers and airlines may conflict. Extra capacity and additional airlines being able to start operating from an airport are not necessarily in an airline’s interest, so that is an important example of where the CAA would have to consider the end users’ interest rather than the airlines’. If I may, I will make a little progress, because otherwise the Chairman might start frowning at me. You have been very patient so far, Sir Roger.

Roger Gale (Conservative, North Thanet)

So far.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful for that.

I return to the shadow Minister’s explanation of amendment 9, because I fear that he has not understood how it would work. It would not introduce a supplementary duty, but a primary duty to have regard to the interests of airlines. It imports equivalence, as my hon. Friend the Member for Amber Valley pointed out, and that is one reason why I have such strong reservations. Introducing equivalence would fundamentally undermine the goal of the Bill—to protect and promote the interests of end users.

Gavin Shuker (Labour, Luton South)

The Minister is saying that clauses 1 and 2 describe the primary duties of the CAA, despite the fact that the term “where appropriate” is used.

Theresa Villiers (Conservative, Chipping Barnet)

As I said, amendment 9 would introduce a new primary duty to airlines. I do not think that there is a case for a primary or secondary duty, and I cannot support the amendment. Regardless of what the amendment technically means, rather than focus on the technicalities, I am happy to respond to the arguments put by the shadow Minister on the basis of a supplementary duty, because that is a key matter for us to consider. It is clear what sort of questions the Opposition Front Bench wishes me to answer.

Gavin Shuker (Labour, Luton South)

I do not in any way intend to be difficult, but I want to be clear about the Minister’s reading of clause 1(2):

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

Does she consider that to be a primary duty or a secondary duty?

Theresa Villiers (Conservative, Chipping Barnet)

Clauses 1 and 2 involve primary duties.

I now return to the meat of the question. Whether the amendment is more extreme if it is a primary duty and less extreme if it is a secondary duty, the same points underline my opposition to the amendment, regardless of its technical content. Of course, in many instances the interests of airlines and passengers will coincide because of the competitive pressure on airlines to deliver what their passengers want. They are in the business of doing that. By opposing the amendment, I am not for a moment saying that the airlines do not represent the interests of their passengers; in many cases, the interests of passengers and airlines are aligned.

I also agree with the point made by Barry Humphreys of BATA, and repeated by the Opposition Front Bench spokesmen in reference to BA’s statement, that it will often be airlines that have the knowledge, motivation and resources to press the case for the improvements that end users want and that hold airports to account, rather than the pressure coming directly from passengers. That is why the Bill gives such an important role in the regulatory system to airlines, particularly on licence conditions and appeals. As we will come on to, the appeals rights given to airlines are infinitely stronger than the cumbersome and limited judicial review rights under the current regime. The Bill makes it clear that we take the role of airlines in the process seriously because of the many instances where their interests are aligned with the interests of passengers.

Nicholas Dakin (Labour, Scunthorpe)

I draw attention to the British Air Transport Association’s submission, which underlines its view that its understanding of the detail makes it a strong advocate or proxy, as the Minister said earlier, for the end user. But—this is the point of my intervention—BATA also says:

“Without a Secondary Duty to airlines there is a greater likelihood that appeals will be brought against CAA decisions and a greater risk that the regulator, rather than the competitive air transport market, will determine what is in the passenger’s best interests.”

I would appreciate the Minister’s views on that.

Theresa Villiers (Conservative, Chipping Barnet)

Inevitably, early in the process, it is almost guaranteed that there will be quite a lot of appeals as the system settles down. Anxiety about the number of appeals should not drive our decisions about what is the appropriate regulatory framework. Frankly, as I have said before, airlines are robust in pursuing the interests of their passengers and shareholders, and they will appeal where it is appropriate to do so.

Going back to the core of what the Bill is trying to do, I refer the Committee to the evidence of Andrew Haines from the CAA. He made it clear that listening and responding to the concerns of airlines, where they represent the interests of passengers, will be a key task for the CAA under the new regime. As he pointed out, there are many instances where the Bill and the new regime will require the CAA to consult the representatives of airline groups. The airlines will be key players in the framework and it is not necessary to introduce a supplementary duty to ensure that their voices are appropriately listened to by the CAA. As I have said, airlines have a stronger role under the new framework than under the current framework that we are seeking to replace.

As we have already discussed, there will be instances where the interests of airlines and passengers conflict, which may not happen often, but it clearly could happen. Emma Gilthorpe from BAA gave a few more examples. I hope the Committee will agree that, where the interests of passengers and airlines are not aligned, the regulator should favour the passenger.

Seema Malhotra (Labour, Feltham and Heston)

I fully appreciate the Minister’s response. However, there is a fundamental difference between the opinion of someone giving evidence and what may or may not happen over five, 10 or 15 years if we are looking at a new framework that will have to go beyond the individuals currently involved. I am still not clear why there would be a detriment in having a supplementary or secondary duty, aligned with what people believe, which would future-proof the way the CAA and airport regulation works in future.

Theresa Villiers (Conservative, Chipping Barnet)

Airlines’ interests are protected in all cases where they are aligned to passenger interests. That is an important benefit that the Bill will give them. As I have said, it is entirely reasonable for the Government to take the position that where airlines’ interests are not aligned with those of air passengers—that does happen—the regulators should look to protect the customers of airlines rather than the companies themselves.

Tom Harris (Labour, Glasgow South)

Is not the point that of course the passenger must be the priority, but the fact that this would be a secondary priority would give a clear signal to the CAA that airlines were not as important as passengers? A commitment to putting passengers first could be put in the Bill while making it clear that where the interests of airlines did not conflict with those of passengers, they would be preserved as a secondary consideration.

Theresa Villiers (Conservative, Chipping Barnet)

That would be an interesting thing to consider if the Opposition had tabled an amendment that included a secondary duty. But they have not so I do not think, strictly speaking, that I should respond to that.

Gavin Shuker (Labour, Luton South)

Will the Minister give way?

Theresa Villiers (Conservative, Chipping Barnet)

One more time and then I am going to finish.

Gavin Shuker (Labour, Luton South)

I am grateful. I will give a practical example where an airport might choose to invest in air bridges instead of buses to get people to planes. Why is the Minister so opposed to having choice between different airlines? For example, one airline may choose to operate on a low-cost model and another on a high-cost model. Surely the best interests of passengers are best served by having choice and not purely by being represented as a mythical passenger with one voice.

Roger Gale (Conservative, North Thanet)

Order. I am listening to the debate. You are trying my patience a bit because the shadow Minister indicated that he wanted a stand part debate on this. You have a choice but you are pushing at the limit. If you want the stand part debate now you get it now or you have it at the end. We either stick to the amendment or we have the stand part debate. I do not mind which, but do not push your luck too far.

Theresa Villiers (Conservative, Chipping Barnet)

I will not try your patience, Sir Roger. I can reassure the hon. Gentleman that the goal of the Bill is to enable the CAA to make decisions on how to prioritise the different needs of passengers. We are not mandating a particular level of service. We are leaving those decisions to the airports, overseen by a regulatory structure which has as much flexibility in it as possible. I do not for a moment say that there is a particular type or level of investment that has to be mandatory under the scheme. I want to give the discretion to the expert regulator to make appropriate regulatory decisions on such matters.

The amendment would be opposed by a number of groups. It would not be welcomed by the CAA, by airports or by passengers. Airport operators in their oral evidence argued for the retention of a primary duty to passengers, as did Passenger Focus. My officials have met airline representatives on a number of occasions both before and after the publication of the Bill. Certainly there are several other issues that airlines are probably focused on; the primary duty or supplementary duty has not been the main focus of recent discussions.

We have sought to reassure airlines that their proximity to passengers’ interests is acknowledged in the airline right of appeal that is enshrined in the Bill and that, in carrying out its regulatory duties under the new framework, the CAA will need to consult airline representative bodies on a range of key decisions. Those consultation obligations are taken very seriously, as the chief executive of the CAA indicated in his evidence to the Committee. BAA’s evidence to the Committee detailed various ways in which airline representatives would need to be consulted on the proposals in the Bill. Not only this Government but the previous one rejected the inclusion of a duty to airlines in the new regime, for the reasons that I set out. In light of the significant drawbacks that amendment 9 would create, I hope the Opposition will withdraw it. If they do not, I must ask Committee members to vote against it.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

We hear what the Minister says, particularly regarding the potential confusion caused by our description of a secondary duty. Perhaps it would have been better to call it a supplementary duty. We welcome the fact that the appeals procedure will improve airlines’ ability to make representations in the system, and we welcome the flexibility that it will give them. We are clear that the CAA will have to take account of airlines’ views. We will reflect on the matter before Report, but in the light of the Minister’s explanation, I beg to ask leave to withdraw the amendment.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I beg to move amendment 12, in clause 1, page 2, line 10, at end insert—

‘(ca) the need to ensure that the holder of a licence under this Chapter complies with applicable planning laws,’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss amendment 14, in clause 1, page 2, line 14, at end insert—

‘(ea) the need to promote due consideration on the part of each holder of a licence under this Chapter of issues arising out of surface transport links to and from airports,’.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

We will further outline our views on the industry’s environmental responsibilities when we debate amendments 10, 11 and 16, which cover the need for a general environmental duty. Amendments 12 and 14 are similarly drafted in that they both refer to airports’ responsibilities in respect of planning laws. In “Reforming the Framework for the Economic Regulation of Airports: Decision Document”, which the Department for Transport published under the previous Government, we commented that

“we believe the CAA should satisfy itself that an airport operator is giving appropriate consideration to its environmental obligations and the requirements of the planning process before it agrees to incorporate a proposed investment into a price control. However, as a result of stakeholder responses and further consideration of evidence, we agree there is a risk that the general wording proposed in the consultation document could be interpreted more widely than intended. In order to avoid the possible risk of distortions arising as a result of airports subject to economic regulation being subject to additional environmental obligations, we have decided that the CAA should be required:

‘to have regard to the airport operator’s legal obligations to comply with applicable environmental and planning law’”.

The document continues:

“We do not believe that in complying with this duty, the CAA should seek to pre-empt the conclusions of the planning authorities or duplicate the role of the relevant enforcement bodies. The CAA is funded by industry and as the airline market is broadly competitive, the costs of the CAA duplicating the roles of the planning authorities or the Environment Agency, for example, would be passed on to passengers. This would clearly be unacceptable.

It is the role of the airport operator to make sure the proposed investment does not violate environmental obligations it is subject to and has a good chance of getting planning permission. However, we believe the CAA should be satisfied that the airport operator is giving appropriate consideration to its environmental obligations and the planning process before it agrees to incorporate a proposed investment into a price control. In satisfying itself of this, the CAA should not duplicate the role of the planning authorities or the Environment Agency.

We believe this supplementary duty sends a clear message to industry about the importance of ensuring that economic regulation is consistent with an airport’s environmental obligations (resulting from both environmental and planning law), in a way that we believe imposes minimal additional burdens on either the CAA or the airport operator.”

We have tabled the amendments because we still consider those comments appropriate. It is important that the CAA does not duplicate that which has been done at extra cost to it and the industry, but we believe it has a role here. As I mentioned, we will cover some of the same ground in the next group of amendments, which deal with the regulatory asset bases of airports and recovering costs.

Amendment 14 can be considered in relation, for example, to High Speed 2 and Heathrow. Heathrow’s location is one of its strongest attractions, and although it may be overlooked in the proposal for an estuary airport, its being in the west makes it attractive to points further to the west of England and Wales, as well as north to Birmingham, due to the motorway links. The cancellation of the third runway, designed partly to maintain UK connectivity to our only hub airport, places further stress on Heathrow, and issues raised in relation to the sale of British Midland International to International Airlines Group demonstrated those concerns. I might be wrong, but I think that Heathrow services six UK cities now, while Schiphol services 18, yet Heathrow advertises itself as the UK’s hub airport.

The amendment raises the question of surface links to airports being part of any licence agreement with the CAA, and is designed only to probe the Government. The Transport Committee referred to that issue in paragraph 38 of its pre-legislative scrutiny report:

“Without giving the CAA a supplementary duty”

—I think that we got the language right this time, Minister, as opposed to “secondary”—

“on the environment in relation to its economic regulation role, there is some risk that airports may be reluctant to invest in improving environmental performance. Whilst, as the Minister says, there may be ‘absolutely no doubt’ about measures taken to comply with statutory environmental obligations, there remains a doubt about whether the costs of discretionary measures, such as improved public transport access, can be recovered by airports in charges to airlines”.

That clearly is the key point.

At a meeting yesterday, representatives of Gatwick referred to the state of the Gatwick Express. While they proudly pointed out their recent additions of airlines and destinations—Vietnam, Hong Kong, Korea and Air China—they raised concerns about the transport links between Gatwick and London, and the difficulty that their passengers have with respect to the Gatwick Express. In evidence to the Committee last week, Gatwick’s representative, Kyran Hanks, said:

“In general, we support the direction of the Bill and think it is a timely change from the Airports Act 1986, but there are two points that I want to bring up. First, Gatwick is now in separate ownership and it is not clear from the Bill that the separate ownership of Gatwick airport, and the competitive dynamic that has now been introduced in the south-east, is being adequately supported by the drafting”

—obviously, we will come on to that point in relation to licensing. He continued:

“The second aspect I would ask you to consider is the Government’s policy on airports—I have to get this right—being better, not bigger. It is not clear whether some of the surface access provisions at Gatwick airport, particularly the provision of the Gatwick Express, will be protected by the passage of the Bill. We have seen the Gatwick Express degrade over the past two to three years and we hope that the Bill will reverse that trend. I ask you to consider those two aspects.”––[Official Report, Civil Aviation Public Bill Committee, 21 February 2012; c. 8, Q6.]

If the Government want better, not bigger, as they clearly do, it seems necessary to support that type of improved infrastructure request from Gatwick. Hearing the Minister’s views would be useful; I know that the Department is looking carefully at the Gatwick link, but clarification on how the Minister sees the amendment will help us to decide whether to press it to a Division, or whether to seek to withdraw it in due course.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful to the hon. Gentleman for tabling the amendment, and for his explanation of the rationale behind amendments 12 and 14.

As hon. Members may appreciate from my evidence to the Committee, I feel I cannot offer the Government’s support on the proposed changes for the following reasons. Both amendments look to add supplementary duties—I acknowledge that they are certainly supplementary in this instance—to those already contained in clause 1. As I have said in evidence, I am in absolutely no doubt about the importance of ensuring that airports, both regulated and unregulated, comply with planning law and that they take very seriously the importance of good surface transport access for passengers, as we have discussed. I believe, however, that the Bill already affords the CAA the correct balance of duties without the need for additional supplementary duties along those lines.

I do not feel these amendments are necessary because the Bill as drafted would permit the CAA to have regard both to local planning law and to the importance of surface access. As we have already discussed, the Bill sets out a clear primary duty to further the interests of passengers and owners of cargo with a short, focused set of supplementary duties that the CAA must have regard to when carrying out its primary duty.

In practice, the supplementary duty proposed in the amendments would have no substance. I do not believe, for example, that amendment 12 would add anything substantive to the Bill. It is the sort of amendment that would be difficult to get past parliamentary counsel if it were to end up in a Bill. It is self-evident that any regulator, when subject to a framework that seeks to replicate a competitive market and protect the interests of end users, can permit investment in measures to comply with planning law. In a competitive market, airports can and have to invest in measures to comply with planning law. It cannot possibly be in the interests of passengers that an airport be fined or closed for failing to comply with planning law.

Therefore, the powers—the supplementary duties—contained in amendment 12 fall fairly and squarely within the powers that the Bill, as drafted, already gives to the CAA. I cannot believe that an airline that sought to challenge investment in measures that were designed to comply with planning law would have any prospect of challenging them as inappropriate.

Jim Shannon (DUP, Strangford)

Just for clarity, planning regulations and environmental controls are devolved matters in the other regions of the UK, for instance, Northern Ireland. How will this provision affect the regions of the UK—Scotland, Northern Ireland, Wales—where planning is devolved and controls of the nature indicated by the Minister would be UK-led? I am keen to see how the influence can happen in the regions without their say so and co-operation.

Theresa Villiers (Conservative, Chipping Barnet)

As I said, I do not think the amendments would have an impact one way or the other. I hope I can provide reassurance: there is no doubt that a regulatory system designed to further the interests of passengers and to replicate a functioning market can enable the CAA to authorise investment aimed at compliance with planning law.

In response to the shadow Minister’s questions about the Gatwick Express and Heathrow Express, we are confident that they will continue to be treated in the same way as now—that is, to be part of the regulatory asset base. The reason why the previous Secretary of State, my right hon. Friend, the right hon. Member for Runnymede and Weybridge (Mr Hammond), decided in July 2010 to omit a supplementary duty along similar lines was that we do not feel it would have any substance in practice. As the shadow Minister said, this matter was also considered by the previous Government. Regardless of whether an express supplementary duty is included in the Bill, the CAA will of course need to have proper regard to airports’ obligations to comply with all applicable legal obligations, including planning law.

No doubt we will have a debate under the next set of amendments about wider environmental considerations, but on the planning law amendment, there can be no doubt that it would be within the powers given to the CAA to authorise investment to enable an airport to comply with local planning law.

On amendment 14 and surface transport links, as we have already discussed, I agree that they are very important for any airport to be successful. High quality public transport access to airports can also deliver a wide range of benefits, including relief of congestion on local roads and addressing concerns about air quality where relevant. I am confident that the Bill in its current form will enable the CAA to ensure that these considerations are taken into account where it is in the interests of passengers to do so. The CAA is certainly confident that the Bill will enable it to permit investment in surface transport projects by regulated airports. Again, there is no need for in-depth surveys of passenger views to work out that they value good surface access. Improving and authorising investment on surface access is consistent with the primary duty to safeguard passengers’ interests.

Strong surface transport links is just one of the many issues that are important to passengers. Placing a specific obligation on the CAA in that context would not be right, because it could create an unequal weighting of this issue over other issues that might also be important to passengers. The CAA will need to make important trade-offs between competing issues, and it should be provided with the flexibility to determine what is most in passengers’ interests and what is important to them.

Furthermore, the inclusion of such a supplementary duty could create market distortions where other, non-regulated airports are not under similar obligations. Again, these are principles that we will consider in more detail in the next group of amendments.

As with the concerns raised about the role of environmental considerations in economic regulation, clause 1 is not the appropriate vehicle to achieve the Opposition’s goal. The Government believe that all airports should take surface access seriously, which is one of the reasons why our extensive transport improvement programme includes the tube upgrade, Crossrail, Thameslink and HS2.

All airports should take surface access seriously, and the economic regulation of airports is not the appropriate mechanism to place special additional burdens on airports. If we are to look at surface access, we should look at it fairly across the board and across the entire airport sector, whether regulated or not.

I hope I have provided some reassurance to the shadow Minister. I would be grateful if he withdrew his amendment; if not, I ask my hon. Friends to vote against it.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I am sorry, but we feel that amendment 12 is worth pressing. I mean no disrespect to the Minister, but we see an environmental duty as central to the Bill. We do not believe that these two amendments, which address environmental protection, planning law and surface access to airports, would lead to a distortion in the market. They are entirely appropriate and would sit squarely within the CAA’s responsibility to take such matters into account when regulating Britain’s airports.

We wish to press amendment 14 at the appropriate time.

Roger Gale (Conservative, North Thanet)

I have taken note of the fact that the hon. Member for Poplar and Limehouse wishes to move amendment 14 formally. I want to explain to the Committee that, although amendments 12 and 14 are grouped together, amendment 14 finds its place slightly later in proceedings. There will be no further debate when we come to amendment 14 because it has already been debated; it will be moved formally at that point, which may well be under Mrs Riordan’s chairmanship.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I beg to move amendment 10, in clause 1, page 2, line 14, leave out ‘and’ and insert—

‘(ea) the need to work with NATS, the Secretary of State and air transport service providers towards meeting the United Kingdom’s carbon reduction obligations,’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss the following: amendment 11, in clause 1, page 2, line 14, at end insert—

‘(ea) the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates,’.

Amendment 16, in clause 2, page 3, line 5, leave out ‘and’ and insert—

‘(ca) the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates, and’.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

These are very important amendments, as I mentioned earlier. Amendment 10 requires the Minister to explain why the Bill does not put the appropriate emphasis on aviation contributing to meeting the UK’s carbon reduction obligations. We have called upon the Committee on Climate Change to advise on tougher CO2 emissions targets for the aviation industry. The Climate Change Act 2008 introduced by the previous Labour Government requires that emissions be reduced by at least 80% by 2050, compared with 1990 levels. To put us on target to achieve this, the Committee on Climate Change’s fourth carbon budget sets an interim target of 50% by 2025. Aviation clearly has a role in this, and Ministers need to clarify what that should be. After all, the Prime Minister says he wants this to be the greenest Government ever.

It is clear that the aviation industry in all its elements is working hard to cut its emission levels. Indeed, it has already stated that it can make the 80% reductions compared with 2000 levels, and it is our view that the Committee on Climate Change should advise on the case for tougher targets. Indeed, my right hon. Friend the shadow Secretary of State for energy and climate change made that case on Second Reading. In its written submission and in oral evidence, the Aviation Environment Federation made a clear case for the CAA to have a role in all this. Referring to the CAA and the environment in the context of economic regulation, it said:

“The recent review of the CAA’s role and function began in 2007 with the Pilling Review and continued in 2008 with the setting up of an advisory panel on economic regulation.

One of the key recommendations of the Pilling Review was that the CAA should be given a general statutory duty in relation to the environment, together with a ‘clear policy framework from Government’. Noting that existing legislation refers to a role for the CAA in ‘securing the sound development of the civil air transport industry of the United Kingdom’”.

I am sure the Committee will be aware just how much has been achieved by the industry and how much research and development is being undertaken by its various components in conjunction with academia. I recently visited Imperial college to see how many different projects are under way there to support the greener, cleaner aviation industry. The amendment would create a statutory duty on the CAA to work towards those ends. The Minister was forceful in her response to the hon. Member for Norwich South when she said:

“I am pleased that someone has brought up the environmental issue, because I want to be absolutely clear that I yield to no one in the seriousness with which I take the environmental impact of aviation… I have always been rigorous in asserting that we need to take seriously the environmental impact of aviation, and that of course requires, in appropriate circumstances, legislation and regulation. My point is that airport economic regulation is not an appropriate vehicle for delivering that kind of environmental regulation.”––[Official Report, Civil Aviation Public Bill Committee, 23 February 2012; c. 83, Q188.]

So if not here, why not; and if not here, where? Pilling thought this to be the case and the point was raised not only by the AEF. The Transport Committee also had a view when it said in January in paragraph 34 of its report:

“The previous Government’s list of proposed secondary duties for the CAA, in respect of economic regulation, included:

‘to have regard to the airport operator’s legal obligations to comply with applicable environmental and planning law.’”

The Minister also suggested that a supplementary duty on the environment was unnecessary, given that airports voluntarily invest in improving their environmental performance because it is in their commercial interest. The Transport Committee subsequently said:

“Without giving the CAA a supplementary duty on the environment in relation to its economic regulation role, there is some risk that airports may be reluctant to invest in improving environmental performance.”

So, will environmental issues drive passenger choice? We will come later to the other questions of noise and air quality, which are equally important environmental matters. When asked in the evidence sessions what criteria passengers use for choosing airports, several witnesses cited cost and convenience. We would argue that few passengers would look at the environmental credentials of an airport in making travel plans. What they want is to fly to a particular destination from the most convenient departure point at the best possible price. I do not argue for a second that the industry does not accept its environmental responsibilities. It clearly does, but it is for the Government to set targets and then measure and ensure that they are met. Amendment 10 would allow that to happen.

On amendment 11, I do not want to repeat the points that I have made in support of amendment 10. Several points obviously also apply to the environment, but amendment 11 has a much wider scope. The proposed new subsection that it contains was raised on Second Reading by my hon. Friend the shadow Secretary of State for transport when she said:

“Although it is right that we set out a primary duty on passengers to send a clear signal to the CAA about how it should manage competing interests, it is right also that we set out further duties. In doing so, however, the Government have chosen to omit the reference to environmental obligations which we intended… That is a mistake, so I very much hope that the Minister will reflect on it and think again.”—[Official Report, 30 January 2012; Vol. 539, c. 575.]

In March 2009, the consultation document on economic regulation, published by the then Secretary of State, proposed that

“the CAA should have an environmental duty with respect to its economic regulatory functions.”

The final report of the Cave review recommended

“a duty on the CAA to protect the environment, subject to guidance on specified environmental matters by the Secretary of State.”

In December 2009, we published our decision document on economic regulation and concluded that one of the regulator’s supplementary statutory duties should be

“to have regard to the airport operator’s legal obligations to comply with applicable environmental and planning law.”

I mentioned earlier the strongly made rebuttal points of Mr Haines of the CAA in opposition to a secondary duty for airlines. On the environmental duty, however, the opposite seems to be the case. On the statutory duties of other regulators, it can be seen that, quoting from submission CA13, the Office of Rail Regulation’s duties include

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

Ofgem’s duties include

“‘[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 any [social and environmental guidance] issued [by the Secretary of State]’ and ‘to contribute to the achievement of sustainable development.’”

Ofgas’s duties include

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

Ofwat’s duties include

“‘to have regard to any [social and environmental guidance] issued [by the Secretary of State and Welsh Assembly]’ and ‘to contribute to the achievement of sustainable development.’”

Perhaps the Minister will comment on the decision to remove the environmental duty, because the Transport Committee came to a similar view to that proposed in the amendment when it, as I have recently quoted, said:

“Without giving the CAA a supplementary duty on the environment in relation to its economic regulation role, there is some risk that airports may be reluctant to invest in improving environmental performance.”

Also in submission CA13 are three examples of what are known as regulatory asset bases. To emphasise why many believe that a statutory duty is an absolute requirement in the Bill, I want to quote them. Example 1 states:

“Homeowners around Heathrow whose properties were threatened by the third runway were offered a ‘Property Market Support Bond’ by BAA, to mitigate the blight. Similar arrangements were introduced by BAA for homeowners around Stansted Airport in 2004 threatened by a second runway. In both cases, the arrangements were supported by the 2003 Air Transport White Paper but they were nevertheless voluntary. Under the present economic regulatory regime airport operators can include the costs of such arrangements in the regulatory asset base (‘RAB’) for each airport, which enables the costs to be recovered from airlines through airport charges. If, however the CAA’s primary statutory duty in economic regulation is towards the passenger and there is no duty upon the CAA to have regard to environmental or community effects, airlines could challenge the legality of any CAA decision which sought to allow such ‘discretionary’ expenditure to be included in the RAB.”

Example 2 states:

“In submitting development plans for airport expansion, airport operators generally include measures to mitigate environmental and community effects, e.g. improved public transport provision, landscaping and energy efficiency measures. If planning consent is granted, some of these measures will be defined as formal planning conditions, e.g. those which are not considered contentious and/or are seen as an integral part of the proposed development and/or where there is not considered to be any significant risk of the developer not providing the promised mitigation. Under the new arrangements, any mitigation measures not formally defined as planning conditions and not required by law would be deemed to be voluntary and therefore inadmissible for the purposes of setting price caps. And if airport operators could no longer rely upon the CAA to allow environmental/mitigation expenditure in the RAB, this would deter them from doing anything more than the bare minimum required. At present the CAA has flexibility to make a judgement as to the reasonableness of the expenditure when considering its admissibility for the purposes of the RAB and operating costs—the key determinants of the price cap. This flexibility would be lost: the CAA would only be permitted to allow cost recovery where there was an absolute requirement for the expenditure arising from environmental or planning law.”

Finally, example 3 states:

“As well as planning conditions, approval of a development is invariably accompanied by a Section 106 Agreement”—

under the Town and Country Planning Act 1990—

“consisting of additional obligations which the developer voluntarily agrees with the planning authority. For airports, many of these will relate to reducing and minimising the effects on the environment and local communities. S.106 agreements tend not to be written in robust legalistic language and often relate to process not substance, relying upon the airport operator’s good faith to fulfil the spirit and not just the letter of the obligation. Many s.106 obligations can have significant cost implications for the airport operator. Hitherto, the operators of designated airports… have been able to recover the costs associated with honouring the obligations in spirit and not only to the letter. If, however, the CAA’s primary statutory duty in economic regulation is towards the passenger with no statutory duty… to consider environmental or community effects, airlines could challenge the legality of any CAA decision which sought to allow an airport operator to recover costs incurred in relation to s.106 obligations.”

Nigel Mills (Conservative, Amber Valley)

I think I am following the hon. Gentleman’s argument, and I have some sympathy with it, but the amendments refer to “airport operation services”, which clause 68 defines as not including air transport services. Presumably, a lot of the noise and blight he is talking about arises because of the noise that planes make when they fly over people’s houses. The amendments would not allow that to be considered; they would allow only the on-the-ground functions to be taken into account.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

It is certainly our understanding that the amendments would cover aviation generally and would protect local communities from all the environmental consequences that could affect them.

If there is no statutory duty, is there a possible risk? The statutory duty was included in the original Bill. In answer to question 67, Mr Haines, of the Civil Aviation Authority, said:

“We would not be averse to an environmental duty”––[Official Report, Civil Aviation Public Bill Committee, 23 February 2012; c. 38, Q67.]

However, he went on to qualify that. We believe there should be such a duty, and we will press the Committee for its view on that at the appropriate time.

Julian Huppert (Liberal Democrat, Cambridge)

It is a pleasure to serve under your chairmanship, Sir Roger. Thank you for calling me to speak on the amendments.

I agree with the shadow Minister that this is a key issue. There is no doubt that climate change is the biggest threat that we face as a species, and we must take serious action to reduce emissions and the effects of carbon dioxide and other pollutants.

We must look not just at the direct CO2 emissions that are officially measured, but at more general emissions, including those associated with things that we import into this country and with transport carbon dioxide. They are very important, but they are not fully captured at the moment. There is a global problem about how we account for transport carbon dioxide emissions.

Aviation pollution is a significant component of that. It is particularly an issue because it is amplified by the height at which many of the particles—carbon dioxide and various other things—are emitted. Aviation pollution is growing at an incredibly fast rate internationally, and that is why it is a problem.

I would very much like to see an environmental duty in the Bill. That is an important issue, and I raised it on Second Reading. The Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), said that if we could demonstrate that information would not be provided or actions would not happen under the Bill, Ministers would have an open mind and would be prepared to look further.

The information that that Minister was looking for has been made clear in the submissions from the Aviation Environment Federation, HACAN ClearSkies, the Gatwick Area Conservation Campaign and Stop Stansted Expansion, with which I am most familiar. I will not go through them in detail; the shadow Minister did a very good job of reading out their submissions almost verbatim, so I do not need to do the same. I trust completely that the Minister will have an open mind on the issue. The Minister has a very good track record on that.

I am pleased that those who were formerly in government have now understood the importance of aviation and the environment. They pushed heedlessly for a third runway at Heathrow, not caring about the impact that that would have internationally or about the local effects that it would have—it would have led to massive increases in the projected contribution to global warming—

Jim Fitzpatrick (Labour, Poplar and Limehouse)

Will the hon. Gentleman give way?

Julian Huppert (Liberal Democrat, Cambridge)

I will give way to the shadow Minister on this point. I look forward to hearing his apology for Labour’s support for a third runway at Heathrow.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

The hon. Gentleman might have to wait some time for an apology from me to the Liberal Democrats, but he is entitled to wait as long as he wishes. Very strong environmental protections and criteria were laid down in respect of the proposal for a third runway. Those obligations were accepted by the industry. It said that it could meet them. The application of the planning approval in relation to the operation of the third runway was always conditional on those obligations being met. We have nothing to apologise for.

Julian Huppert (Liberal Democrat, Cambridge)

It is fascinating to hear the shadow Minister defend the policy that his party has now apparently moved on from, but I will leave that to him. According to the projections in its White Paper, by 2038 one quarter of the UK’s total contribution to climate change could have come from aviation.

However, my point was not about the shadow Minister and the former Government. While they were busy doing what they were doing and we were busy arguing against a third runway at Heathrow and in favour of high-speed rail, the Minister did manage to turn her party around to the very sensible position that it now has in favour of high-speed rail and against a third runway at Heathrow. I pay tribute to her personally for the work involved in doing that.

In her evidence, the Minister said that she yields to no one in the seriousness with which she takes the environmental impact of aviation—particularly noise, but also carbon—and that we need to take seriously the environmental impact of aviation. We can all believe her and trust that she means that and will do what she can to deliver on it. I am confident that she will be able to find a way to deliver an environmental duty in this Bill as it becomes an Act. I hope that the Minister will agree to take that issue away and look carefully at how that can be done. It is not a trivial issue. The shadow Minister and the amendment have shown why it is not trivial.

The amendment is certainly well intentioned, but it contains a number of flaws. That is why I hope that the shadow Minister will use it as a debating point, rather than a point on which to have a Division.

Mark Reckless (Conservative, Rochester and Strood)

I thank my hon. Friend for giving way; I am cautious about disturbing the flow of his speech. He rightly pays tribute to my right hon. Friend the Minister and the Government in general for the environmental policies to resist airport expansion. Does he agree with me that given that strength on this issue, it is essential that Transport Ministers make these decisions? We do not want to delegate the decisions to the CAA any more than we want to delegate them to the Mayor of London.

Julian Huppert (Liberal Democrat, Cambridge)

I thank the hon. Gentleman for his comments. He and I should at this moment be in the Select Committee on Home Affairs, discussing extradition. That is a different use of aviation, but one that I will not dwell on. Yes, Government should set the policy, but the CAA should be able to ensure that it is implemented. We need to ensure that it is. I hope that the Minister will examine the issue that the hon. Gentleman raises, with regard to how exactly we go forward.

I said that I would outline why I have concerns about the particular form of the amendment. There are a number of issues. First, it does not mention what the shadow Minister himself mentioned at the beginning of his speech—the Committee on Climate Change. It is a great shame that the amendment does not talk about working with it; it advises the Government on setting and meeting carbon budgets and has already done a huge amount of work. Its 2009 report looked at many of the details about how one could try to keep aviation emissions the same as they were in 2005, while increasing passenger numbers.

As the shadow Minister correctly says, the aviation industry is working to become more efficient by putting more people on planes and using lighter planes and better engines. Rolls-Royce, for example, does a huge amount of work in my constituency of Cambridge, looking at new materials that would not require as much energy to keep cool, which is necessary to prevent melting. Passenger numbers can be increased by a certain amount, although not by the exorbitant amounts that have been talked about in relation to the idea of a “Boris island” airport, which I thoroughly oppose. However, there can be an increase. It is therefore very important that the Committee on Climate Change should have a key role.

There is also a fundamental problem in that, as I understand it—I am sure that I will be corrected quickly if I am wrong—emissions from international aviation are not currently included in the Government’s carbon reduction obligations. There is the slightly bizarre issue that domestic aviation is included, but international aviation is not. I understand exactly what the shadow Minister is trying to achieve, but requiring the CAA to try to meet the UK’s carbon reduction obligations would hit only domestic aviation. Although that is important, we want to see something broader. I am sure the Minister will be able to come up with a broader solution.

There is also the fact that only carbon dioxide emissions are dealt with. We have generally fixated on carbon dioxide, but the effects are actually much broader. The Committee on Climate Change’s 2009 report looked at 11 different factors in radiative forcing, some of which are positive; some emissions change the albedo and hence reduce the amount of heating. That is a very complicated factor. I would like to see an analysis of the effects of all those factors—particularly with respect to aviation, where emitting particles and other compounds are at very high levels. We need to go wider on that.

There is also the problem, raised on a number of occasions, that the provision would apply, as it is written, only to regulated airports. We should have an environmental duty on regulated airports, but we should also have such a duty on non-regulated airports, because the emissions are very similar; the world does not care where the plane took off from.

The Aviation Environment Federation made an interesting suggestion in its submission. It sought a general amendment in the Bill that would amend section 4 of the Civil Aviation Act 1982. I am not an expert as to whether that would be the best way to go ahead, but I hope the Minister will look at that when she tries to find a sensible way forward.

Nicholas Dakin (Labour, Scunthorpe)

I am listening carefully to the hon. Gentleman, who speaks with passion and conviction as well as knowledge. However, I am unclear about his argument. He seems to be arguing for an environmental duty, but he does not like the amendment. He has not put down amendments, but he is looking for the Minister to come up with an alternative. Is that correct?

Julian Huppert (Liberal Democrat, Cambridge)

That is an extremely good summary of my position. I would like to see an environmental duty and I hope we will be able to work across all parties to find one that delivers the aims that we share. I have faith in the Minister’s ability to find that.

I have not managed to write the full details and go through all the legislative process; as anybody knows, writing amendments that are exactly what is looked for is not a trivial activity. The Minister has the resources of the Government, and I trust she will be able to come up with something. I hope she will take the matter away now and come back with something on Report that does deliver the environmental benefits that we need and that we, the Liberal Democrats, have campaigned on for many years. The previous Government passed an Act to deal with the issue. As the Prime Minister said, we aim to be the greenest Government ever, and I am sure the Minister will be able to deliver that in the Bill.

Tom Harris (Labour, Glasgow South)

I welcome the hon. Gentleman’s comments and look forward to his voting with us in favour of the amendment. Of course, it would be unconscionable and completely unexpected for a Liberal Democrat to say one thing before a vote and to turn it on its head and vote another way when it comes to a show of hands.

Julian Huppert (Liberal Democrat, Cambridge)

Will the hon. Gentleman give way?

Tom Harris (Labour, Glasgow South)

Yes, why not?

Julian Huppert (Liberal Democrat, Cambridge)

I hoped that we could reach a good conclusion; I am disappointed that the hon. Gentleman wants to make party political silliness instead. I hope he listened to what I said. I explained exactly why I could not support this form of amendment; there are a number of problems with it. I hope we will come up with something at the end that I will be able to support.

Tom Harris (Labour, Glasgow South)

I will try to contain my shock at the fact that the hon. Gentleman will not support us; I noted from the start that he is sitting with the Conservatives, so I am not particularly surprised.

Fiona O'Donnell (Labour, East Lothian)

Does my hon. Friend have other examples of Liberal Democrats thinking that a Bill was flawed, but supporting it just the same?

Roger Gale (Conservative, North Thanet)

I am sure that the hon. Gentleman does not at the moment.

Tom Harris (Labour, Glasgow South)

You pre-empt my answer accurately, Sir Roger. Similarly, I will avoid the temptation to resurrect the old arguments from a couple of years ago about Heathrow’s third runway. That would be completely out of order in terms of this debate, although for the record I should say that I was and remain a strong supporter of it.

I want to hark back to the debate in January 2009, because the Minister took part in that from the Opposition Front Bench. In urging Geoff Hoon, the then Secretary of State for Transport, to oppose the third runway, she described climate change as “a compelling urgency”. That was after the now Prime Minister had said that his Government would be the greenest ever.

At the end of last year, the Environmental Audit Committee said that the Government’s decision to review the target for cutting emissions by half by 2025 makes business think that the Prime Minister is not really serious about being “the greenest Government ever”. Even the hon. Member for Richmond Park (Zac Goldsmith) said on a slightly different issue that investors in renewable energy might be reluctant to invest in alternatives to Britain’s out-of-date coal-fired power stations if they were not convinced that the Government would support it with policy. I fear that we are facing exactly the same problem with the airline industry.

We want investors to look at alternative ways of reducing carbon emissions and we want the industry to become greener and more efficient. If the Government turn their face against the amendment and against putting in the Bill a commitment that the CAA will work with the industry to reduce our carbon emissions, what signal does that send to the industry, entrepreneurs and investors who might be looking at possible ways to use their capital to run the industry more efficiently?

The Minister once spoke robustly in defence of the environment. If climate change is of compelling urgency, how can she possibly oppose the amendment without admitting that she no longer believes that to be the case? I hope that when she sums up, she will re-commit the Government to being the greenest Government ever. The simple fact is that they are not and no one disputes the fact that they are not, but they still have time to be so. She could retrieve the Government’s reputation by acknowledging the sense in my hon. Friend’s amendment and asking her hon. Friends to support it.

Pat Glass (Labour, North West Durham)

If I may, I want to explore why the Government are removing the environmental duty. I anticipate that the Minister will tell us that the Bill is long overdue and will consolidate other areas of regulation that need to be brought together and updated, as I think we all agree. Where we differ is on removal of the environmental regulation, and I am looking for an explanation, because I simply do not understand.

We have a couple of weeks to debate and better understand the Bill, but according to my early reading of it, it is much more than simple economic regulation of the CAA. If it were only that, it would not deal with safety or extension of the ATOL system. Unless the Minister tells me otherwise, I can therefore only assume that it is not a clean and simple Bill about economic regulation with no place for a statutory duty on environmental issues, and that the relevant section has been deliberately taken out. That is the issue I want to understand, and I hope the Minister can give an explanation. I accept the point that was made earlier on this issue, and I hope that she will come forward with something better; if she does not, I do not understand why she took that section out.

Nigel Mills (Conservative, Amber Valley)

May I gently remind the hon. Lady that the amendment would apply only to regulated airports, which in a couple of years might consist only of Heathrow? It would not apply to all the other airports that contribute.

Pat Glass (Labour, North West Durham)

That may well be the case, but surely something is better than nothing.

It has been said already that the CAA would not be the only economic regulator to have a statutory environmental duty. Ofgem is an economic regulator, but it has a statutory duty to have regard to the environment, as do Ofwat and many others, so we do not seek to create a precedent.

I do not believe that anyone could argue that such a statutory duty is not needed. I appreciate that aviation emissions currently make up only 6% of UK emissions, but we all know that that is expected to rise to 25%— even if the Government stick to and meet their current targets—and removing the environmental duty does not make that situation easier. The environmental factors associated with airports and air travel go much further than emissions; they include air quality at and around airports and in the wider environment; noise pollution at and around airports; and surface transport links and access. Those issues are incredibly important not only to those who live close to airports, but to those who live further away and who have to travel long distances to the nearest airport. Those who live close to airports are naturally concerned about air quality and noise pollution, and they will be unhappy to see the Government remove the statutory duty from the Bill.

The Government may take the view that there is no need for a statutory duty and that the CAA will, of its own volition, naturally have regard to such things. Ministers may even consider self-regulation as the way forward, but I do not think people living close to airports will accept that relying on the CAA’s good nature or on self-regulation will work. They might look at what has happened recently in banking, in the press and in many other walks of life and say that self-regulation is sometimes not enough. They will not feel confident in the commitment of the Government or the CAA without the reassurance provided by a statutory duty.

Theresa Villiers (Conservative, Chipping Barnet)

As I made clear in my evidence, I am not suggesting that self-regulation is an adequate response; I am saying that it is not appropriate to deliver the regulation needed in this area via economic regulation. Policy should be decided by Ministers and applied in a fair and even-handed way across airports, regardless of whether they are regulated for economic purposes.

Pat Glass (Labour, North West Durham)

I thank the Minister for that, but I have already pointed out that a precedent is not being set here, and other economic regulators have a statutory duty to have regard to the environment.

Environmental issues such as surface transport links and access are important to those who live close to airports, who naturally want departing passengers to leave airports as quickly as possible without clogging up local roads. Similarly, they want arriving passengers to be moved on to their final destination as quickly as possible and in a way that causes as little inconvenience as possible to others using road and rail links.

However, we do not all live right next to airports, and we do not all live in London. Having relatively easy transport links to main hub airports is also important to those, such as myself, who live quite a long distance from local airports. Such people need to be confident that the CAA has a statutory duty to have regard to their needs, as well.

On emissions, which are of major concern to us all, we need to know that the CAA will have proper regard to the need to play its part in meeting the 2050 targets in a world in which aviation emissions will increase and the emissions challenge will get harder. Given that increasingly challenging situation, I simply do not understand why the Government have chosen to remove the statutory duty, and nor, I suspect, do many others.

I therefore have a number of questions for the Minister. Why have the Government removed the statutory duty on the CAA to have regard to environmental issues? Having done so, how do they propose to meet the increasing challenge of dealing with air quality, noise pollution, surface transport links and access for those who live close to airports and those who have to travel to and from them? What message does removing the duty from the Bill send to the industry? Finally, if the duty is not to be in the Bill, where will it be?

Julie Hilling (Labour, Bolton West)

It is a pleasure to serve under your chairmanship, Sir Roger.

I will not speak for long, but I want to express the enormous disappointment among not only green groups, but the many people who live near airports or who are affected because of having an airport in the vicinity. There is great concern worldwide about air travel’s effect on the environment and the damage it can do to the ozone layer, but many people are more concerned about what happens day to day—about the airport’s effect on their daily lives.

Noise is the most obvious issue we talk about when we debate airports. Although it is a serious issue, it affects a smaller group of people than other environmental concerns. Similarly, the actual flight is only a small part of the carbon footprint of any journey by air. What about the environmental cost of getting people to the airport by road and rail? What about the cost of road congestion, which is a big issue in my community in Greater Manchester? What about the cost to the environment of the car-parking spaces that seem to spread across the fields, particularly around Heathrow and Gatwick, where we seem to grow cars instead of crops?

Of course, industry faces competing priorities. Its main priority has to be getting passengers to their destination in the most profitable way possible. Profits, or at least costs, are even more important for regional airports, many of which are struggling to survive. For airports it is about having as many flights as possible, and airports such as Heathrow are having to work out how to squeeze them into restricted air and ground space. It is about getting passengers to the airport in the easiest way possible, because they need to ensure that passengers choose to travel with them in future. To believe that operators will consider environmental issues out of the goodness of their hearts seems somewhat naive. My local airport does what it can to be a good neighbour, and it has invested greatly in rail links and other mitigating effects—it is now investing in Metrolink to bring in more people—but I do not believe that a vague requirement, rather than an absolute duty, is enough.

I also do not believe that passengers make any choices because of an airport’s green credentials. I am sure that, like me, other passengers work out where they want to go, what the price is and how easy it is to get to the airport. Deciding whether to fly or catch a train may be my one environmental consideration, but I do not make any further such considerations in choosing where to go.

I strongly urge the Government to include environmental duties not only for regulated airports, but for all airports. The Minister says that the Bill is not the place for environmental duties because it is about economic regulation, but it is about more than that—it is about aviation security.

Theresa Villiers (Conservative, Chipping Barnet)

The amendments are about economic regulation. I am not saying there is nothing on the environment in the Bill—the Bill contains important provisions on environmental information. The Opposition propose introducing a supplementary environmental duty into the economic regulation of airports, which is inappropriate. As I have said, I accept there is a case for environmental regulations to address the impact of aviation, but economic regulation is not the vehicle for that.

Julie Hilling (Labour, Bolton West)

I find that interesting, particularly as a member of the Select Committee on Transport, which has taken evidence on this issue. A major concern has been the question whether such duties should be in this Bill at all, or in a future Bill—that at some point, we will have another aviation Bill, in which we include environmental duties. Whether or not this particular clause deals with such matters, in my view environmental duties should be part of this Bill, rather than waiting for a future Bill.

Theresa Villiers (Conservative, Chipping Barnet)

Why are communities living around Manchester airport less entitled to protection than communities living around Stansted or Gatwick? The hon. Lady is effectively arguing that there should be one rule for airports that are subject to economic regulation and another rule for those, such as Manchester, that are not.

Julie Hilling (Labour, Bolton West)

I am disappointed with the Minister’s comments, because she clearly did not hear what I said a few moments ago, when I strongly urged the Government to include in the Bill environmental duties for all airports.

Furthermore, the Office of Rail Regulation and all sorts of other regulators have a duty to have regard to environmental concerns. It seems a bit perverse that, in considering new duties for the CAA, we are not saying it should have a duty regarding the environment. I urge that, as part of the Bill, environmental duties be established across the industry and across all airports.

Mike Freer (Conservative, Finchley and Golders Green)

Will the hon. Lady explain why clause 84 is insufficient?

Julie Hilling (Labour, Bolton West)

I am sure we can debate the insufficiencies of clause 84 when we get there.

Mike Freer (Conservative, Finchley and Golders Green)

The hon. Lady talks about solving environmental issues. Clause 84 is all about environmental issues, so surely she referred to it when framing her speech.

Julie Hilling (Labour, Bolton West)

Clause 84 is not about duties or about what the airport and the rest of the industry have to do; it is about reporting information. That is not enough. I can report information on the size of the carbon footprint involved in my getting to a particular place, but the important thing is what I am going to do about my carbon footprint, and what duty I have to reduce it. We have to say to the aviation industry that the environment is a big issue, both in terms of carbon footprint and for those who live near airports. People who live near airports are extremely disappointed that the Government have not used the Bill as an opportunity to look at the problems and do something about them.

I finish by urging the Minister to look at other ways of including in the Bill a duty on the CAA to take account of environmental issues.

Fiona O'Donnell (Labour, East Lothian)

It is a pleasure to serve under your chairmanship again, Mr Gale. [Hon. Members: “Sir Roger!”] The last time I did so was under the re-committed Health and Social Care Bill, which I apologise for referring to earlier. Thank you for your patient and gentle approach to handling less experienced members of Bill Committees.

Although I welcome the general tone of the hon. Member for Cambridge, I encourage him to think again. Last year we had the Arab spring, and this year I think we will see the Lib Dem spring. What message will he be taking back to grass-roots Liberal Democrats about the coalition Government’s commitment to addressing climate change if he does not seize this opportunity?

Julian Huppert (Liberal Democrat, Cambridge)

I will be happy to tell the grass roots how I argued for a broader environmental duty than that proposed in the amendment, how we have introduced a Green investment bank, how the green deal will help projects through to the end of the ‘20s, and much more—but I fear that you will stop me listing all the achievements, Sir Roger. The test of the greenest Government ever is to be greener than the previous one, which is not a high threshold.

Roger Gale (Conservative, North Thanet)

Order. That is enough.

Fiona O'Donnell (Labour, East Lothian)

Thank you, Sir Roger. I apologise for omitting your title earlier. Given the hon. Gentleman’s comments, can we look forward to his tabling some amendments to the Bill, or is history repeating itself? It is all about talking the talk, and Lib Dem coalition members are not walking the walk when it comes to living up to the environmental expectations of their own party.

I am pleased that my hon. Friends the Members for Poplar and Limehouse and for Barrow and Furness have tabled this amendment, because it allows me to talk about the opportunity to send a message about the UK’s taking a lead on climate change ahead of the Rio plus 20 summit in June. What discussions has the Minister had with the Secretary of State for Environment, Food and Rural Affairs about air quality? Earlier, the Minister accused my hon. Friend the Member for Bolton West of not caring about people who live close to other airports and concentrating only on those that would be regulated under the amendment, but we have a particular problem in London with air quality. The Secretary of State has said that there is nothing she can do, and that such a measure is too expensive. Does the amendment not provide an opportunity to address air quality, which is the second biggest public health challenge that we face after smoking? It is estimated that poor air quality contributes to approximately one in five deaths in London, so we should not walk away from the opportunity to do something about it.

Julian Huppert (Liberal Democrat, Cambridge)

The hon. Lady is right to say that there are serious problems with air quality in London and a number of other areas. Does she therefore support campaigns to tackle the problem such as “the big switch”, which Liberal Democrats in the London assembly are promoting? Will she encourage her colleagues in the London assembly to do the same?

Roger Gale (Conservative, North Thanet)

Order. She might, but not in this Committee.

Fiona O'Donnell (Labour, East Lothian)

I am extremely grateful for that interjection, Sir Roger. I am certainly keen to work with the campaign for clean air to push the Secretary of State to work with other Departments to ensure that we improve air quality. I look forward to hearing from the hon. Member for Cambridge in other forums about exactly what the Liberal Democrats are doing to put pressure on the Government.

My contribution will be brief, and I sense a lack of enthusiasm from Government Back Benchers for a prolonged debate on the subject. However, I urge the Minister to take the opportunity to drive home the message that the UK is a global leader, and to carry on the historic work of the last Labour Government, who were the first to enshrine legal targets for climate change. I hope that she can find a way to support the amendment, so that we can improve the Bill.

Seema Malhotra (Labour, Feltham and Heston)

I am delighted to make what will be a very short contribution to the debate, speaking in support of amendment 11 and the statutory duty to consider the effect on the environment and local communities.

There is an age-old debate about economics and the environment that separates the two, sometimes unhelpfully. A debate could also be had on the economics of the environment and the implications and associated costs relating to environmental measures, as well as the cost of not joining up strategies that surely must be interrelated, on aviation, economics and the environment. If we do not take action and impose a duty now, as we move towards a new regulatory regime, there is a danger that, with increased demand and pressures on operators, we could well lose something that has sometimes been voluntary or a part of local agreements on noise insulation and other compensation schemes. The past, the way things have worked, and good will are not necessarily a predictor of the future. As we look at ways in which we will have to consider the work force of airports, and the ongoing impacts on them, we need to think and be clear about how we are dealing with the effects of aviation on surrounding communities.

As the Minister knows, there is increasing research to show the impact of noise on cognitive learning, local schools and sleep patterns, as well as research about the type of noise—whether sudden or gradual—and the impact that that has on levels of stress and mental well-being. I am sure that the Minister will want to do whatever is possible in this area to ensure that local communities are always looked after, as we consider the country’s economic interests.

My questions are as follows: does the Minister recognise that something is lost as a result of removing the environmental duty? If so, what does she acknowledge is lost? Where does she think we can address those issues in a joined-up way that ensures we can deliver our needs for aviation efficiently, including efficient and joined-up regulation? Does she see possibilities for that in amendments to later clauses, or, if it needs to be outside the Bill, where does she propose that we deal with the environmental impacts and effects on local communities? How will the Minister’s proposals ensure that our regulation is joined up and therefore easy to follow and implement?

Graham Stringer (Labour, Blackley and Broughton)

Let me start with a question that I hope the Minister will answer in her summing up. The Transport Committee’s concern about an environmental obligation is not the question of whether environmental improvements could be paid for out of the regulatory asset base, but whether airports would be reluctant to put surface transport and other environmental improvements into their regulatory asset base. From previous practice over 30 years, it is clear how the CAA goes about assessing what should be in the regulatory asset base.

Under the proposed scheme, the passenger interest comes first when determining any economic regulation. Will that mean a change in the definitions of what goes into the regulatory asset base? Will it change the “retail prices index plus or minus x” formula? That is the key issue if one is looking to improve surface transport, as in Manchester. Manchester airport is contributing to a tram system, and in the end, the passenger, via the airlines, ends up paying for that. That is the key issue.

Clause 84 gives a lot of information on the subject, and in clause 1, my hon. Friend the Member for Poplar and Limehouse proposes ensuring that the information is there, so that we expose the issues. I have another reason for wishing to have more environmental information and obligations set out: it would expose some of the contradictions in the Government’s “better, not bigger” policy. The hon. Member for Cambridge spoke passionately about improving the environment. At the core of his speech—this is the core, really, of the constraints on runways, not just at Heathrow but in the south-east system—is that there should not be airport expansion. That is the Lib Dem policy. It means slowing down economic growth. Closing down access to London airports is the equivalent of switching off the internet, or cutting down internet access to other parts of the world—[Interruption.] Of course it is, because that is how business is done. If one looks at Heathrow, the absolutely key business airport in this country, one sees a steady decline in the number of destinations that it serves.

Jim Shannon (DUP, Strangford)

I congratulate the hon. Gentleman on making that point. It is important, in the middle of an environmental impact assessment on the effect of airports, that the other thrust is not forgotten about: the expansion of airports, and the need for aviation to drive our contact with other countries such as Brazil, China and India—three major countries. If we do not have aviation contacts, we will not have economic growth. Does the hon. Gentleman feel that we need a balance? It is clear that there has to be that balance.

Graham Stringer (Labour, Blackley and Broughton)

My hon. Friend makes a perfectly valid point. If we take all the cities in China, there may be, to take an arbitrary figure, 12 million or even 20 million commercial connections that this city does not have. It should worry all of us that we do not have those commercial connections and that we do not make it as easy as possible for people to do business.

Julian Huppert (Liberal Democrat, Cambridge)

I will not comment on the hon. Gentleman’s point about the internet, because you will tell me off again, Sir Roger, but he is right to say that there is a difference between the predict and provide model, which means massive expansion of the carbon emissions relating to aviation, and which he seems to be supporting, and the model supported by the Committee on Climate Change, which allows for a 60% increase due to efficiencies, but enables us to keep our environmental activities progressing. He is right that there is a distinction. I am happy to support the Committee on Climate Change.

Graham Stringer (Labour, Blackley and Broughton)

I am not, and I will explain why, on environmental and commercial grounds. I was talking about commercial grounds. On the benefits of having as much environmental information as possible, it was said earlier that people do not care where aeroplanes take off from, and in one sense they do not, but if a business person or someone going on holiday from this country, wants to go on an intercontinental journey—to India, China, Brazil or Japan—it is much easier for them now to go first to Schiphol, Charles de Gaulle, Frankfurt, Madrid and Copenhagen, where British Airways is increasingly hubbing.

The environmental consequence of the constraints on the London runway system is not globally and internationally to reduce emissions but to increase them. If planes take off and land twice, emissions are increased, as that is when most emissions take place. So the constraint on the London airport system—I suspect Government Members know and understand this and are quite worried about both the environmental and commercial implications—means that the desired improvement in the environment is prevented and the environment is actually made worse. The more environmental information we have that exposes that contradiction the better.

The hon. Member for Cambridge intervened to make a point about predict and provide. Lib Dems regularly state that there has been a predict and provide model for airports. That is absolute nonsense. There has never been a predict and provide model for airports. Only one new runway has been built in this country since the second world war. I should have said it at the beginning, although it is not a declarable interest, but I was on the board of Manchester airport for 13 years and chaired it at different times. That is the only place where there has been a new runway. The development of airports in this country has not been designed and planned by the Government. It has taken place where the airport itself could show that there was an investment case, paid for by the passengers who travel with the airlines. That happened at Manchester, Heathrow and elsewhere. That is not a predict and provide model. The Lib Dems’ use road-building capacity as an analogy, but that also has its flaws and is not a direct comparison.

My hon. Friends talked about the noise and pollution at airports. While I am in favour of improving information and making the environment better, it is worth recalling that as Heathrow, Gatwick and Manchester—the big airports in this country—have increased in size, the noise footprint has got smaller. As we have moved through chapter 1, chapter 2, and chapter 3 jets, airports have got quieter. Fewer people are affected and those who are have less noise. It is as simple as that. We want that to get better. We should like to get to chapter 10 aircraft but there is a limit because there is little that one can do about the noise that airframes make. Those are improvements and we should record them because some of the comments—not from my hon. Friends—imply that things are getting worse. They are getting considerably better and we should be proud of that as a country.

Where there are problems—Heathrow is a particular problem—it is not because of the noise levels but because of the NOx levels. How those NOx levels are measured is a complicated technical issue, but I can think of no other industry where the levels of oxides of nitrogen, which are a health problem and should be reduced, do not come directly from the industry itself. They come primarily from cars and lorries in the vicinity, not all of them going to Heathrow. One of the benefits of having a huge airport on the doorstep is the enormous amount of economic activity. Because of that success there is pollution. That should be dealt with. I have never been able to understand why the airport itself should be responsible on its own for the production of those gases. I therefore understand why my hon. Friends on the Front Bench decided to make the offer because the policy, quite simply, is hopeless. What is it? Better, not bigger.

The solution to the problems of getting people to other parts of the world is simple. Runway capacity is needed. That is an extra runway at Heathrow, Gatwick or Stansted. One does not need to go on a degree course to work that out. There is no better way than that. There is no process, as there was until the early 1990s when airlines were deregulated in Europe, to direct flights to Manchester. Forget “better, not bigger”. Either London is restricted or it is not. If access to London is restricted the UK economy is restricted. I understand why my hon. Friends offered the process of a discussion. Again, like the environmental figures, this exposes what is essentially a difficult but simple issue: how much capacity.

Like my hon. Friend the Member for Glasgow South—a distinguished former Transport Minister—I remain firmly in favour of a third runway. To do anything else is to be anti-business and growth in this country. I hope that makes it clear. I will vote with my hon. Friend the Member for Poplar and Limehouse on the environmental impacts, because there is the need for more information. However, there needs to be a more three-dimensional understanding of the costs and benefits of aviation.

Nicholas Dakin (Labour, Scunthorpe)

Thank you, Sir Roger, for calling me to speak in this debate, which has been wide ranging. I hope my short contribution will remain focused on the issue. Several hon. Members have referred to the fact that the Government set out their stall to be the greenest ever. That recognises the consensus across the House on taking forward green issues. It can be a party political bunfight, but in reality it demonstrates where we have arrived consensually on greening our approach. The Minister’s commitment is well documented, as my hon. Friend the Member for Poplar and Limehouse said in his opening remarks. She has a good record on her commitment to and delivery for the environment.

All the contributions to date have underlined the importance of the environment and ensuring a commitment to it in this legislation. The pivotal issue here is whether there should be an environmental duty in the Bill. We have heard of the need for that in relation to carbon emissions, noise, environmental nuisances and air quality among other matters. My hon. Friend the Member for Blackley and Broughton outlined well the three-dimensional nature of the environment. It is not a single issue but a multiplicity.

Detailed studies of the matter—including Pilling, Cave, the original Bill and the Transport Committee report—have all consistently come out in favour of an environmental duty. Greater minds than ours have spent time on this in thorough ways and on each occasion have come out in favour of an environmental duty. I understand that the first press release by the Government contained a commitment to environmental duty. Even at that point, the commitment and consensus around the need for an environmental duty was there.

We heard evidence from Cait Hewitt of the Aviation Environment Federation. She said:

“We agree very much that all airports should be treated even-handedly in this respect, which is partly why we support a general environmental duty on the CAA that would inform all its activities across the airports at which it works.”

I recognise that the number of airports affected in the end may be constrained, but I am referring to her evidence. She went on to say:

“We are not asking for the CAA to take additional environmental measures beyond those that are required already by Government policy; we are simply asking for the appropriate legislative framework to allow the CAA to deliver Government policy at those airports at which it feels it is appropriate.”––[Official Report, Civil Aviation Public Bill Committee, 21 February 2012; c. 20, Q27.]

The extent of the environmental duty is captured in that evidence. We have heard many other views. The other witnesses before us during that session agreed with that evidence, and much written evidence has been submitted from a whole range of organisations with environmental interests, which have consistently—my hon. Friend the Member for Poplar and Limehouse has referred in detail to many of them—argued for an environmental duty in the Bill. I have picked out one submission from a Mr Chris J R Lowe, who took the trouble to write to us and who describes himself as a retired professional engineer and someone who is active with the Campaign to Protect Rural England. He underlines the importance of the Transport Committee’s conclusion that 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.”

The question that we come to at the end is, “Why not put an environmental duty on the face of the Bill?” As has been said during the debate, there is an overwhelming argument in favour of it from the various studies, and today’s arguments are also in favour. It comes back to the question of greenness and being the greenest Government ever. It is about leadership. It is about the message.

Nigel Mills (Conservative, Amber Valley)

In the end, do we not come back to the fact that the amendments will apply to a small number of airports only? They will apply not to most of the issues that relate to flying, but rather to all the ground issues at an airport. On the strength of hon. Gentleman’s argument, these amendments are fundamentally flawed and should not be voted on.

Nicholas Dakin (Labour, Scunthorpe)

I welcome the hon. Gentleman’s helpful intervention, which reminds us of our job on a Public Bill Committee such as this. Our job is to improve the legislation. As the hon. Member for Cambridge has reminded us, drafting amendments is not always easy without the full force of those who are good at it.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

Talking of people who are not good at drafting amendments—no, let us not go there.

The Bill will allow the CAA to operate licences for airports. The CAA licenses every aerodrome in the country. There are also designated airports that operate price controls, and there are additional criteria on market dominance and power, as defined in future clauses. If the CAA were to introduce an environmental duty on airports with passenger levels above 5 million a year, that would cover 84% of air travel in the UK. That is not an insignificant number of airports and air travellers.

Nicholas Dakin (Labour, Scunthorpe)

I thank my hon. Friend for his intervention, which helpfully clarifies both the point and the importance of the environmental duty.

The hon. Member for Cambridge has put down a challenge for all of us, including himself, which is that if we want the environmental duty in the Bill, as he does, as we do, and as would be consistent with this being the greenest Government ever, we need to use all our intelligence and ability to get it drafted correctly. He also laid down a challenge to the Minister to respond in a positive way to that, and if these amendments are not the appropriate way to do so—we believe the amendments give us that opportunity—the Minister may direct us to a better way, and we may be interested in working with her and her colleagues to achieve that.

Theresa Villiers (Conservative, Chipping Barnet)

As I emphasised in my evidence on such matters to the Committee, I take seriously aviation’s environmental impact—noise, carbon, and air quality—and I am grateful for the kind words on my efforts from my hon. Friend the Member for Cambridge and the hon. Member for Scunthorpe. I am happy to reiterate the Government’s commitment to being the greenest Government ever, and I welcome the thorough and wide-ranging debate on these amendments. However, I cannot ask the Committee to support them, but I will be reflecting carefully on all the points made today. The reason why I cannot ask the Committee to support the amendments is not that I consider regulatory intervention on environmental matters to be unnecessary—there may be instances where it is appropriate—

Linda Riordan (Labour, Halifax)

I remind the Committee that with this we are discussing the following: amendment 11, in clause 1, page 2, line 14, at end insert—

‘(ea) the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates,’.

Amendment 16, in clause 2, page 3, line 5, leave out ‘and’ and insert—

‘(ca) the effect on the environment and on local communities of activities connected with the provision of airport operation services at the airport to which the licence relates, and’.

Theresa Villiers (Conservative, Chipping Barnet)

I am delighted to see you in the Chair, Mrs Riordan. As I said at the end of the last sitting, the debate on this group of amendments has been good. We heard a thoughtful contribution from my hon. Friend the Member for Cambridge, who has great expertise on transport matters and a strong focus on the environment. I will, of course, consider carefully all the points that he made.

Other insightful contributions came from the hon. Members for North West Durham, for Blackley and Broughton, for Scunthorpe, for Bolton West and for Feltham and Heston, with pithy interventions by my hon. Friends the Members for Amber Valley and for Finchley and Golders Green. Although I cannot ask the Committee to support the amendments, it is not because I consider regulatory intervention on environmental issues unnecessary. I am unable to support the amendments because economic regulation is not the right vehicle for pursuing the important goal of reducing aviation’s environmental impact.

We heard this morning from the Opposition Front Bencher that the last Government took a different approach from the present Government. However, the differences are perhaps not quite as great as Opposition contributions suggest. The previous Government did consult on including text along the lines proposed in amendments 11 and 16, which we are considering in this group, but after a mixed consultation response, they decided to restrict themselves to a duty on the Civil Aviation Authority to have regard to airport operators’ legal obligations to comply with applicable environmental and planning law. Hence, before they left office, the last Government ended up broadly in the same place as the much more limited amendment 12, which we debated earlier.

For reasons that were discussed when we considered the last set of amendments, the current Government decided that the supplementary duty proposed had no substance. Such a duty is not needed, because the Bill already gives the CAA the power to authorise appropriate investments to meet environmental and planning law obligations. That is why the then Secretary of State decided in July 2010 not to include that duty in the Bill.

The previous Government did not advocate the wider, overarching environmental duty for which some Opposition Members expressed support; nor did they propose empowering the CAA to use economic regulation as a means of imposing environmental obligations on airports where those are not consistent with the primary duty or the attempt to replicate a functioning market. Ultimately, by the time they left office, they did not support amendments of the sort that we are considering in this group. Neither the last Government nor the present one considered that to be the right approach.

We accept fully the importance of addressing both the positive and negative externalities associated with airports’ activities. A number of hon. Members rightly highlighted the quality of life and health concerns relating to noise and, of course, the importance of addressing climate change and air quality issues. We believe that such issues must be addressed appropriately in relation to all airports, not just those that happen to be subject to economic regulation.

Environmental impacts are present at every airport, and it is fairer, more rational and more efficient to consider the aviation sector across the board when deciding what regulatory intervention is needed. For example, the European Union emissions trading scheme covers the whole airline sector in the European Union, and restrictions on noise are imposed at a range of airports around the country, some of which are subject to economic regulation and some of which are not.

As Dr Barry Humphreys from the British Air Transport Association pointed out in his evidence to the Committee, the CAA undertakes a number of functions, in addition to economic regulation, where it can and does have regard to environmental matters. An important example is provided by its work with NATS on airspace management. The Transport Act 2000 explicitly requires it to take into account environmental guidance from the Secretary of State, which she gives to the Civil Aviation Authority. If there is a case for imposing an environmental regulation on an airport, it is worth doing regardless of whether that airport happens to have substantial market power and falls within the scope of those airports subject to economic regulation.

I particularly want to respond to concerns raised by the shadow Minister on what I dub the Brian Ross point, highlighted by Brian Ross of AirportWatch and the Stop Stansted Expansion campaign. It is important to consider carefully the issue around voluntary investment in measures to mitigate the environmental impact of airports—the sort of market support schemes that the shadow Minister referred to. The Bill allows the CAA to authorise appropriate investment in measures that mitigate environmental impact, even where they are voluntarily undertaken.

That view was confirmed by the CAA. As the CAA commented clearly in its evidence, a system that safeguards the interests of end users and seeks to replicate a functioning market can and does embrace appropriate investment in environmental measures. That is because, as Iain Osborne of the CAA pointed out, unregulated airports across the world invest in environmental measures. Environmental investment has been allowed under the current rules despite the CAA having no explicit environmental duty in relation to economic regulation. That has been allowed even where the schemes in question are voluntary, as the examples presented to the Committee by the shadow Minister have evidenced.

Neither the current system nor the proposals in the Bill would impose on the CAA a requirement for investment on environmental matters that goes beyond the kind that could be delivered in a competitive market. That kind of environmental requirement should be applied fairly and evenly across the sector, taking on board the impact of different airports, regardless of whether they are subject to economic regulation. Such requirements should come with the sanction of Parliament and Ministers, rather than being delegated to the CAA in its capacity as economic regulator.

We already have an example of how the Government are using the Bill to apply a measure that goes across the airport and aviation sectors in a fair way—a measure that we believe will provide important environmental benefits that are much more significant than those delivered by an environmental supplementary duty in economic regulation, which we do not feel is the right way to address the question. An example of such a requirement is set out in clauses 83 to 93. The Government propose to take forward an information requirement that we consider to be more concrete and of more practical benefit to the public than the provisions in the amendments, and to provide a more realistic and sensible way to deliver environmental goals.

We will come to this in more detail in the later stages of the Bill, but the Bill gives the CAA a role in promoting better public information about airline and airport performance, the environmental impact of aviation, and the travel choices made by consumers. We believe that provision of that information will prove a useful addition, enabling the consumer to make informed choices and helping to drive up standards of service delivery. That has been strengthened in several ways since the 2009 consultation carried out by the previous Government. For example, the CAA may publish guidance and advice with a view to reducing, controlling or mitigating the adverse environmental effects of civil aviation in the UK.

We very much share the aim of addressing the local and carbon impact of aviation, but I am not convinced that the amendments in this group are the right way to deliver that. We believe that they are significantly flawed and not consistent with what the previous Government proposed to do before they left office. However, that does not mean we will not carefully consider the points made in today’s debate, or that we are not prepared to consider the matter again. We are particularly conscious of the points made in evidence given by the environmental groups. We will continue to keep the matter under careful consideration.

Graham Stringer (Labour, Blackley and Broughton)

I have been listening carefully to the Minister, but I do not think she has answered my point about whether there will be a change in the regulatory asset base that the CAA uses.

Theresa Villiers (Conservative, Chipping Barnet)

The framework is designed to give the CAA significant flexibility, so I cannot guarantee that absolutely everything that is currently in the regulatory asset base will stay there permanently. If the hon. Gentleman could remind me of whether he referred to a specific element of the regulatory asset base, I might be able to give him a clearer pointer.

Graham Stringer (Labour, Blackley and Broughton)

Yes and no. Although environmental expenditure could be considered to have been in the regulatory asset base and has been in the past—that was the Government’s point when they were considering the overall environmental impact—the Committee was concerned about whether that would disappear.

Theresa Villiers (Conservative, Chipping Barnet)

It is difficult to give advice on the RAB generally. However, there is every reason to believe that Heathrow Express, for example, which is a key part of the surface access to the airport and is currently on the regulatory asset base, will continue to be on the RAB. A common-sense understanding of what is in the passengers’ interests shows that it is in the passengers’ interests that a surface access project of that nature should continue to be part of the RAB. Indeed, the Bill also contains important transitional provisions to provide some assurance for investors about the continuity of financial arrangements from the old regime to the new regime. The combination of those factors makes me confident that things such as the Heathrow Express are likely to continue to be on the RAB under the new regime, just as they are now.

I conclude by saying that if the Opposition are not prepared to withdraw their amendment, I must ask hon. Members to oppose it.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

It is a pleasure to see you presiding over business this afternoon, Mrs Riordan. We look forward to your chairmanship of the next few sittings.

We feel strongly about the three amendments, as has been made clear by my hon. Friends’ earlier contributions. We appreciate the endorsement by the hon. Member for Cambridge of the principle, if not of the actual words or, indeed, of his votes—one day, perhaps.

The Minister and the CAA accept that the CAA has a role to play in environmental matters—it had that role previously, and will continue to have it. However, the difference is that we are moving the goalposts in the Bill. We are changing the environment and creating a primary statutory duty to put the passenger at the centre of the CAA’s policy. On the rejection of our suggestion for a supplementary or secondary duty for airlines, the Minister rightly pointed out that the new appeals procedure has a much better way of dealing with regulatory price fixing and so on for airports. We accepted that as an amendment, and we agree that it will lead to an improved situation. However, there is no such right of appeal in respect of environmental matters. Certainly, we have clauses 84 and 85 on information reporting, and they are very welcome.

When the hon. Member for Amber Valley says that our amendments do not cover airlines, just airports, he misses the point. With respect to him, clause 68 defines airport operator services widely. If he looks at that, he will see that it clearly covers all aspects of airport operation, including take-off, landing and the rest. I hope that he accepts that we are in tune with the Bill’s definition of civil aviation. I have heard the Minister’s explanation, especially regarding the view of the previous Government.

Julian Huppert (Liberal Democrat, Cambridge)

We want to see the environmental work done, and I am afraid that the amendments do not do it. Unfortunately, clause 68(4) specifically excludes air transport services and air traffic services, which are defined in clause 69, so there is a technical problem with the hon. Gentleman’s amendments. I hope that he will withdraw them, so that we can have correct amendments that do what they are intended to do.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I hear what the hon. Gentleman says. We believe that our amendments are in line with our aims, and we will press them to a vote. I accept entirely that expectations are placed on the CAA in respect of environmental matters. As I said earlier, we fully support clauses 84 and 85 on information and publicity, but passenger choice of airport is determined not by green credentials but by convenience and price. We welcome the Minister’s commitment to keep the matter under careful consideration, but I regret to say that we are not persuaded either by that reassurance or that our amendments would not do the job that they were drafted to do, so we want to press them to a Division.

Linda Riordan (Labour, Halifax)

I understand from Sir Roger that the Committee has had a very wide-ranging debate on the amendments to the clause. I therefore expect the clause stand part debate to be short. Members should not attempt to go over ground that has already been covered in previous discussions.

Theresa Villiers (Conservative, Chipping Barnet)

Abiding by your advice and guidance, Mrs Riordan, I do not propose to rehearse the reasons why the Government do not believe that supplementary duties on the environment and in relation to airlines are appropriate additions to the clause. I would like to focus on some other parts of the clause that have so far not been examined in detail by the Committee.

As we have considered, the clause delivers the primary duty to end users of air transport services, which is at the heart of the regulatory regime. Subsection (1) provides that the CAA must carry out its functions under chapter 1 of the Bill in a way that it considers will further the interests of passengers and owners of cargo, both present and future,

“regarding the range, availability, continuity, cost and quality of airport operation services.”

“Airport operation services” are defined in clause 68.

The proposed primary duty will be supplemented by a set of further duties to which the CAA must have regard in performing its primary duty, which cannot individually or collectively be overturned. The proposed duties replace the four equal duties imposed on the CAA under the present legislation governing airport economic regulation, which has been criticised both by the industry—by airports and airlines—and the Competition Commission. By replacing those with a primary duty, we will provide greater clarity on how the CAA is to discharge its economic regulation functions, and we will put consumers’ interests at the heart of the regulatory framework, as part of our agenda to improve our airports and international gateways.

I turn to the factors that the CAA must consider when performing its primary duty. First, subsection (3)(a) states that the CAA must have regard to

“the need to secure that each holder of a licence… is able to finance its provision of airport operation services”.

Although the CAA must promote the interests of end users, that supplementary duty confirms that the CAA has the power to encourage efficient and economic investment by allowing a reasonable return over time. It does not require the CAA to ensure the financing of regulated airports in all circumstances. It is likely to base its approach on the needs of a reasonable and efficient airport operator. That is achieved in a number of ways.

For example, the CAA has an equal supplementary duty to promote efficiency on the part of the licence holder. Furthermore, the financing duty is subordinate to the primary duty of furthering the interests of passengers. Increasing the price cap to enable an inefficient licence holder to obtain sufficient return to finance the airport is unlikely to be consistent with the duties to safeguard end users.

Secondly, subsection (3)(b), another part of the clause that we have not yet considered, requires the CAA to have regard to the

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

Subsection (3)(c) requires the CAA to have regard to

“the need to promote economy and efficiency”

by licence holders in the provision of airport operation services. Those duties aim to reflect the ultimate aim of economic regulation, which, as I mentioned this morning, is to seek to replicate the outcomes of a competitive market, where airports provide the services demanded by passengers at minimum cost.

Thirdly, subsection (3)(d) provides that the CAA must have regard to any guidance issued by the Secretary of State when carrying out its functions under chapter 1 of the Bill. That ensures that the Government’s views are considered by the CAA.

For the reasons that I have set out and discussed in relation to the amendments, I hope that the Committee will be able to support the clause.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

When the discussion opened this morning, I was concerned about ensuring that all our points would be covered, and I asked Sir Roger for a stand part debate in case the amendments did not give us the opportunity to make them. However, we have registered during the discussions of the amendments that the Bill could go further, especially on environmental matters.

The majority of Committee members are clearly happy with the clause as it stands. Notwithstanding our efforts to add duties for the CAA to clause 1, we support the Bill. As I mentioned earlier, the framework contained in clause 1 and its six subsections will bring aviation regulation into the 21st century, and we support that.

Theresa Villiers (Conservative, Chipping Barnet)

I have nothing further to add to my remarks. I agree that we have had an extensive debate. Clause 1 has been rigorously scrutinised.

Graham Stringer (Labour, Blackley and Broughton)

This is a small question, but its answer may prove useful on Report. Subsection (3)(c) mentions the requirement to “promote economy and efficiency”. The Audit Commission always has three “e”s—economy, efficiency and effectiveness. Why is effectiveness not there?

Theresa Villiers (Conservative, Chipping Barnet)

That is because we expect it to be in the interests of an airport to be as effective as possible. We are seeking to remedy those points where the market pressures on airports are not sufficient to deliver the desired outcomes, hence the emphasis on efficiency.

Clause 2 - Secretary of State’s general duty

Theresa Villiers (Conservative, Chipping Barnet)

I am delighted to put forward the reasons why the Committee should support clause 2. It is similar to clause 1 in many ways, so I will probably not need to detain the Committee at length. Clause 2 reflects the fact that although a key tenet of the reform proposals are to transfer more powers to the CAA and take politicians out of key areas of airport economic regulation, as is consistent with best practice, the Secretary of State will still carry out certain important functions. Clause 2 seeks to impose on the Secretary of State, in carrying out those functions, broadly the same framework of duties that we discussed at length in relation to the CAA and clause 1.

Clause 2 provides that when the Secretary of State exercises any function under chapter 1 and most of chapter 3 of the Bill, she will be subject to the same primary duty as the CAA, and to similar, although not identical, supplementary duties. As is the case with the CAA, those additional duties will affect and inform the manner to which the primary duty is applied, but cannot override it. The overall effect of clause 2 means that where the Secretary of State issues guidance to the regulator, as she is empowered to do, she will need to have regard to the duties set out in clause 2 when making decisions. In particular, she must do so in a way that is consistent with the primary duty to passengers and owners of cargo.

The Secretary of State’s primary duty will be to:

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

As we discussed in relation to the CAA, there may be instances where different groups of end users have different priorities and conflicting interests. Clause 2 provides a similar way to reconcile and deal with those issues. There may be conflicts between the interests of users of air transport services where the Secretary of State carries out her functions with regard to the primary duty.

Clause 1(6) provides that if the Secretary of State considers there is a conflict between the interests of different classes of users of air transport services, or in the different matters referred to in subsection (1), she should carry out her functions so as to further such of those interests as she thinks best. So the discretion that we have conferred on the CAA is similarly conferred on the Secretary of State in dealing with this type of conflict of interest, which we discussed in relation to the earlier amendments.

Clause 3 - Prohibition

Theresa Villiers (Conservative, Chipping Barnet)

The clause introduces a general prohibition on an operator levying charges for its airport operation services where an operator of a dominant area at a dominant airport does not have licence. It is subject to limited exceptions both in the clause and in clause 4. This clause would incentivise operators of a dominant area at a dominant airport to apply for a licence and bring themselves under regulatory control. It is the mechanism needed to bring about that result. If this clause were deleted, there would be no means to compel a person who becomes the operator of a dominant area at a dominant airport to submit to economic regulation. This approach is based on the Airports Act 1986, which prohibits operators subject to regulation from levying charges without permission.

The prohibition applies to all charges for airport operation services levied by the relevant operator at the airport, not just those levied in respect of the dominant airport area for which the licence is required. So, for example, if a licence was required for a runway, the operator could not levy charges for services provided by it at the terminal until the operator gets a licence. This is subject to some technical exceptions set out in subsection (8), which relate to charges such as penalties payable by airlines under other legislation. That is set out in subsection (2). The reasons for that subsection are to provide a strong incentive for a person to seek a licence in order for the CAA to regulate them in their provision of airport operation services. The licence must include a provision specifying the area covered by the licence.

Subsection (2) applies if a licensed operator of one dominant area at an airport becomes the operator of another dominant area. Where the new area is not covered in its existing licence, the prohibition on charging would apply to the newly acquired dominant area and any other area within the airport operated by that person, which is not covered by its original licence. For example, if an operator had a licence for a cargo processing area and it acquired a terminal, it could not recover rent in relation to the terminal until it was licensed.

Under subsection (3), “operator” is for these purposes given an extended meaning to include others such as persons connected to the operator, and persons to whom the operator or a person connected to it has assigned to require payment of a charge. This is an anti-avoidance provision. Subsection (4) provides that if a person requires payment of a charge in breach of these provisions, it is not recoverable by that person and if it has been paid, it is recoverable from that person. Subsections (5) to (7) provide a limited exception to the prohibition. It applies where there is an appeal in respect of a market power determination or an operator determination that is invalid. In such circumstances, charges are recoverable despite subsection (4) in the period before the invalidity is finally determined.

The provisions are considered necessary to provide appropriate commercial certainty in the event of such litigation against a determination that a person is not the operator of an area and/or a determination that the area is not a dominant area at a dominant airport. If litigation on either of these points resulted in the decision being quashed, but for these clauses, the airport operator could be required to repay charges to airlines and others for services that it had provided in good faith. We cannot reasonably expect airports to provide services over significant periods when they are unclear whether they can recover their charges. It would be necessary for airports to seek to price in this risk, which would be likely to raise costs for passengers, and is therefore not something we want to encourage. With that explanation, I hope that hon. Members will consider supporting the clause.

Clause 4 - Prohibition

Theresa Villiers (Conservative, Chipping Barnet)

I can be brief, as the clause is straightforward. The clause introduces an exemption to the prohibition on levying charges in clause 3, which I just outlined for the Committee. It applies where a person is the operator of an airport area on the day when the area or part of the area becomes a dominant area at a dominant airport. In such cases, the effect of subsection (2) is that the operator is exempt from the prohibition until a licence for that airport area is granted or certain other stated circumstances arise. Such circumstances are generally situations in which a licence would not be required.

The clause will protect existing operators of airport areas who would otherwise become subject to the prohibition without proper opportunity to obtain a licence. I commend the clause to the Committee.

Clause 5 - Prohibition: exemption

Theresa Villiers (Conservative, Chipping Barnet)

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

Subsection (1) states that an airport area is dominant if the CAA has made a determination that the market power test is met in relation to the area and publishes a notice to that effect. Subsection (2) provides that an airport is dominant if all or part of its core area is a dominant area or part of a dominant area. Subsection (4) describes what comprises a core area: broadly speaking, the core area includes runways and associated facilities, passenger terminals and cargo processing areas.

It follows that non-core airport areas include car parks with pedestrian access to the terminal building, or the forecourt of a passenger terminal including pick-up and drop-off points. Therefore, if the only dominant airport area at airport X comprises the pick-up and drop-off points, airport X would not be a dominant airport, because no part of the core area would comprise or be included in a dominant area. In such circumstances, no part of the airport could be subject to regulation.

The rationale is to ensure that no part of an airport is subject to regulation unless some part of the core area is dominant. That construction is required to prevent unnecessary regulation where there is a problem only with peripheral areas. I commend the clause to the Committee.

Nicholas Dakin (Labour, Scunthorpe)

It is a pleasure to serve under your chairmanship, Mrs Riordan. I rise to draw attention to the evidence that we heard on the clause from Emma Gilthorpe of BAA and to give the Minister the opportunity to deal with it. She outlined in detail the purpose of the clause, but it sounded complicated to me, and that was the concern raised by Emma Gilthorpe. She said:

“My concern is that the way clause 5 is constructed is incredibly complicated and quite difficult to interpret”,

although maybe the Minister did well at interpreting it. None the less, that is the concern of people in the business.

Emma Gilthorpe gave an example, saying that,

“it is unclear to me whether, for instance, some of the rail assets, particularly Heathrow Express—a service that is very much prized by passengers using Heathrow as an integrated hub—would be in or outside of the regulatory construct. If it was not in, no business case would support private investment in Heathrow Express.”

She continued:

“It is very important that we get these parameters clear and predictable”—

the key word is “predictability”—

“so that future investments are not impaired.”––[Official Report, Civil Aviation Public Bill Committee, 21 February 2012; c. 8, Q6.]

Emma Gilthorpe felt that a simpler construction would best deliver that. I make that contribution just to give the Minister an opportunity to deal with those points raised in evidence to us.

Theresa Villiers (Conservative, Chipping Barnet)

I would be happy to do that. I am grateful to the hon. Gentleman for raising the points. I acknowledge that there is a degree of complexity in the clause. The overall result of our reform of airport economic regulation will be to inject far more clarity than there is currently, but yes, in this clause, there is some complexity. One of the main reasons for that is the Government’s decision to keep open the option of inter-terminal competition in future. That was touched on in the discussions with witnesses. The Competition Commission is not currently saying, “Let’s go ahead with it,” but it is something that it has considered in the past. It is in use at some airports in the United States, JFK being the obvious example.

The Competition Commission’s view was that it would be useful if we kept this open as an option for the future, so the Bill is drafted to ensure that if, in future, the Competition Commission decided that the best way to protect the interests of end-users was through competition within airports, it would not be necessary for the Government of the day to return to Parliament to ask for an amendment to the regulatory regime to enable that to happen. The Bill does not in any sense mandate inter-terminal competition. It merely means that we are doing our best to futureproof the regulatory system, so that if a future Competition Commission decided that that was the best way to protect passengers, the regulatory system would be capable of dealing with that.

On the specific point about the Heathrow Express, which has come up a few times, I understand BAA’s technical concerns about the matter. We are keen to explore them with BAA. As I said this morning, I am confident about important surface infrastructure such as the Heathrow Express; there is every likelihood that that would continue to be on the regulated asset base. As I said in response to the point raised by the hon. Member for Blackley and Broughton, it is probably not possible for me as a Minister to give 100% cast-iron guarantees on that kind of thing. There is a degree of legal risk whatever one does, but with regard to investments of that type, they are on the regulated asset base at the moment, so one would expect that to continue under the new regime, because the Heathrow Express is manifestly a provision that benefits end-users.

Clause 6 - Market power test

Graham Stringer (Labour, Blackley and Broughton)

I beg to move amendment 7, in clause 6, page 5, line 22, leave out

‘, or is likely to acquire,’

and insert

‘had for a period of at least 24 months’.

It is a pleasure to serve for the first time on a Committee that you are chairing, Mrs Riordan. The amendment is designed to probe the Government’s real views on deregulation and the regulatory burden. I know what the Government’s rhetoric is—that they are removing one existing regulation for every one that they introduce and that they are reducing the regulatory burden. However, this Bill as a whole seems to be increasing the regulatory burden.

I shall just go through a few of the questions that the Minister answered during pre-legislative scrutiny. She is always straightforward with her answers, and I have the greatest respect for her, but I think that she is getting the regulatory impact assessment and the regulatory burden wrong. In response to recent questions about the air travel organisers’ licence, which is covered later in the Bill, the Minister made it clear that her preference was for a market solution to the ATOL problem, but in fact we have extended regulation.

When the Minister was recently before the Transport Committee on the draft Bill, I asked her in Q162 whether the Bill was deregulatory. She replied:

“The regulatory impact demonstrates that this new regulatory system will cost considerably less for airports to operate.”

She then brought in her official, but in answer to Q163, she repeated:

“The assessment we have done is that this will cost airports and airlines less to operate than the current system”.

That is clear.

When I checked with Manchester Airports Group about the regulatory impact, it was clear that in its estimate there would be an increased regulatory burden of £274,500, which is not a huge amount for an airport the size of Manchester airport, but it represents a huge percentage increase in the regulatory burden. That is not the main thrust of the amendment, but I am talking generally about regulation. I can give the Minister the calculations if she wishes. We may come back to that later in the Bill. It is not so much the figure, which I accept is not huge, but the fact that it is an increase, and there are increases elsewhere in the system. East Midlands airport has done a similar calculation for me, which also shows an increase of a third in the regulatory burden.

The amendment is a very strong deregulatory proposal, and I have not plucked it out of thin air. I refer the Minister to the original report from the 2005-06 Transport Committee, “The Work of the Civil Aviation Authority”. Paragraph 128 on page 45 states:

“We recommend that the Government review the continuing need for the designation of airports subject to economic regulation by the CAA as a matter of principle, and that it publish an assessment of the relative merits of this approach compared to the use of standard competition legislation to regulate the abuse of dominant position by airports. The Government should consider de-designating Manchester and Stansted as a first step.”

It goes on to say, not as a recommendation, but in supporting script:

“This review should be informed by experiences in other countries, such as Australia, where price controls were removed in 2002.”

That recommendation forms the basis of the amendment. Remember: it was a Committee with a significant Labour majority and the report received all-party support. For a more modest basis for the amendment, when I asked the Minister in the Transport Committee why there should not be deregulation of airports other than Heathrow, she said that it was not in the passengers’ interests. The principle of the amendment is to say, “Let’s try it first.”

The core issue in the Bill is a market test that decides which airports will be regulated under the Bill. If one looks in detail at what is happening in the marketplace, one can see huge amounts of competition. Since Manchester airport was deregulated—in 2009, I think—there has been greater efficiency, greater effectiveness and greater economy, because it is in serious competition with Liverpool airport, Robin Hood airport, Birmingham airport and Stansted airport. It is also in competition with European hubs, albeit at a minor level compared to the larger British airports such as Heathrow, because it has intercontinental flights.

The same case can be made for the London airports in a way that was more difficult to make in 2006, when the original recommendation was made, because BAA then was one body. Since 2006, Gatwick airport has been sold and there is a recommendation—opposed by BAA—to sell Stansted airport. However, if one looks at the market in the south-east of England, one sees that Gatwick airport is competing with Heathrow; one has only to talk to the owners of Gatwick to realise that. If Stansted becomes separate from BAA, it will compete with both Gatwick and Heathrow; it will compete more for the point-to-point low-cost carriers and the package carriers than for other carriers, but it will compete. There will be a three-way competition.

More importantly, however, as I mentioned during the previous discussion, Heathrow is in a fight for its life against airports such as Charles de Gaulle, Schiphol, Frankfurt, Copenhagen and Madrid, whose Governments have had the sense to allow them to expand and increase collectively by far more runways than there are in the south-east of England. So the amendment is saying, “Let’s have 24 months, look at how the market works and see whether the Minister’s contention—that it is for the benefit of passengers to carry on with the current regulation—is right, or whether it is actually for the benefit of passengers to allow the market to determine the charges.”

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I am curious about how my hon. Friend arrived at the period of 24 months. Is it because of an examination of the Select Committee’s early report, and the recommendations that he mentioned, or is it because of some economic instrument that he has come across?

Graham Stringer (Labour, Blackley and Broughton)

It was slightly better than an estimate off the top of my head. I thought that if we were going to see whether the passenger was going to suffer or benefit, we would need to go through two annual cycles, because airports really work on a summer season and a winter season; even an airport such as Heathrow, which is essentially full, works on that seasonal basis. That was where the 24-month period came from. It could be 36 months. This is a probing amendment, so the period could be varied; it could be for two years and then it could be extended by two years if there were no problems. There are lots of different ways of doing things, but it is worth looking at the free market competitive solution rather than having the CAA determine which airports are to be regulated.

Gavin Shuker (Labour, Luton South)

I note that to put in that 24-month period, my hon. Friend has chosen to delete the words, “is likely to acquire”. Can he say a little more about why it is important to delete those words? My question is meant to be helpful; I apologise if it is not.

Graham Stringer (Labour, Blackley and Broughton)

The amendment is really a vehicle for testing this debate. The clause is basically saying that airports that are dominant in their market, or that are likely to acquire that market domination, should be regulated. The reason why the amendment would delete the word “acquire” is that we do not know what is happening; let us first have a look at what the market is doing.

The Bill has all the hallmarks of a Bill that the Labour Government were putting through in detail, but it has not been examined as thoroughly as it should be. Otherwise, we would not be told that parts of it are removing burdens from airports when they are clearly putting burdens on airports.

I also want to talk a little about having a free market solution and about the scarce economic resource that the two runways at Heathrow are. How the previous regulatory system worked was, in many ways, perverse. The runways at Heathrow airport are an incredibly scarce resource and, because a lot of people go through Heathrow, it is easy to achieve a return on capital expenditure, so the price over many years has been driven down. So Heathrow gets more and more crowded, even after the building of terminal 5.

In the previous review at Heathrow, the cost limit was only RPI plus 7.5%, which, given the size of terminal 5 —it was £5 billion or some such huge figure—is a small percentage increase after years and years of landing charges being forced down by a perverse formula.

Similarly, at Gatwick the cost limit is RPI plus 2%, and at Stansted there is no increase whatever. So Gatwick is below real inflation and Stansted is a good deal below inflation because the cost limit is at zero. Would it not have been more sensible, particularly at Heathrow, to allow airports to charge more? They are a scarce resource and some aeroplanes with grandfather rights have been landing there for a long time at relatively low charges, which is not the best way to determine how we run the south-east airports.

I do not want to repeat our earlier debate on whether there should be a third runway at Heathrow. Clearly, I, like other members of the Committee, think there should be, but for now there will not be one. So what does one do about trying to keep British aviation as eminent as it is in world aviation? That is difficult if we are not going to build more runways and we do not have the right to control where airlines go, but it seems to me that there are three possible reforms related to the amendment.

First, the real economic cost could be charged for landing at Heathrow. Secondly, we could consider the allocation of slots, because there are still some small planes using slots at Heathrow airport because they have grandfather rights. There is a grey market in those slots that needs to be regulated and made transparent so that the market can determine what is the best aeroplane to land at Heathrow in terms of who is willing to pay.

If that were done, the unjustified criticism levelled by Ken Livingstone and Boris Johnson that there is no need for a third runway at Heathrow would disappear. They say that there are still charter flights going out of Heathrow to Tenerife, or wherever, which is because a plane or airline that has had a slot for 10 or 20 years can keep it. It would be much easier for the country to get the best use out of Heathrow airport and the runways if we had a market solution through both regulation and the allocation of runway slots.

Even for 24 months, are passengers going to be terribly vulnerable? One has to remember that, although the Civil Aviation Authority had previously been the only economic regulator of airports, since European directive 2009/12/EC the 10 largest airports in the United Kingdom have been regulated from Europe. Even though I have argued for this amendment, which would take all the airports in the United Kingdom out of economic regulation by the CAA, there would be a more general European level of regulation, which, if people were worried about protection for passengers and airlines, would be there.

I hope that that has given the Government something to think about, because I think—I know—that Conservative MPs go back to their constituencies and complain about gold-plating legislation and unnecessary regulation. Government Members should think hard about this Bill, because it seems that it increases the regulatory burden. There is a way through this, without very much risk—to have a free-market solution to at least some of the problems of the south-east.

This is not some wild idea; it went through an all-party Select Committee some years ago. I have had personal discussions with people from airports—not in the past 12 months, but over a number of years—about a situation where we have a surplus of runways throughout the country, but a scarcity of runways in the south-east. As we cannot direct planes as to where they will land, it would be sensible to look for a market solution, rather than more regulation.

Mark Reckless (Conservative, Rochester and Strood)

It is a pleasure to follow the hon. Gentleman and his interesting proposal, which has some even more interesting economic analysis.

The usual rationale for a regulator is monopoly power, as we see here with airports. Left to themselves, one might expect those airports to set their price at a rate that maximises their monopoly profits at a level significantly above marginal cost. The gains to the operator of the airport from that extra profit are greater than the losses to the consumer, because of how they are priced.

When we come to airports, however, and the experience of both the air traveller and the freight owners, the charge at the airport is just one relatively small part of the overall price of the air fare and of the overall experience in terms of their use of the aviation industry. Giving the CAA a single duty in the Bill to promote and act in the consumer’s best interest, be that the passenger or the freight owner, is not necessarily set against what the hon. Member for Blackley and Broughton has described.

When one looks at the users of Heathrow and the business use—the relatively high fares in business class, the types of destination that people are going to and the long-haul nature of many of the flights—we see that if we could get better reliability at Heathrow, that would be a gain to those users far greater than the charge that might be added.

We could see a regime where, for instance, the CAA thought that the consumer interest was that there should be an element of spare capacity at Heathrow and that prices were being held down or that that was being stopped from happening. If the CAA allowed those landing charges to rise significantly in terms of proportion, but not so significantly in terms of the overall cost of the air ticket and the value to the user, we might see a regime where there was more spare capacity and more resilience at Heathrow.

Were some of the flights to which the hon. Gentleman referred to move away from Heathrow—be they charters or flights to lower-value destinations or some prestige destinations, or ones that have just grandfathered and happen to have always been from there—that would lead to a greater amount of excess capacity and we could see other airports come in. That could be, for example, Gatwick, with a potential second runway beyond 2019, or Birmingham, which has a lot of existing capacity and which will be connected in by HS2, so that it will be 30 minutes to Old Oak Common or 40 minutes to Euston. That could lead to a more market-orientated system.

The CAA is a regulator respected by most or all hon. Members. Can that regulator not be allowed to focus on consumer interests? If the consumer interest at Heathrow is not having the lowest possible landing charge, but having a more resilient and reliable airport to serve the needs of “just in time” for freight, and reliable quality transport and timing for business operators, the CAA might hear what the hon. Member for Blackley and Broughton said and, in promoting the interests of the consumer and the freight owners, take those views into account.

Nigel Mills (Conservative, Amber Valley)

I was going to make these remarks in a stand part debate, but they will fit naturally here. The clause uses the definition of what triggers a regulation as “substantial market power” as opposed to dominance. As the hon. Member for Blackley and Broughton said, a lot of the regulation on airports now is from the European Union. EU directives on competition refer to dominance and not substantial market power in the way they drive their tests. Here we are legislating with regard to the CAA using the term “substantial market power”.

There is a subtle difference between the meanings of dominance and substantial market power. We may end up with more airports getting regulated using the test we are proposing rather than the one we could have proposed. There is also some uncertainty in the definition as it flies backwards and forwards through the Bill. Although we use “substantial market power” in clause 6 to define where we need regulation, in clauses 3 and 5 we go back to “dominant”. Clause 5 is titled “Dominant areas and dominant airports” and clause 3 mentions “dominant airport”. It is almost as if we have switched from “substantial market power” to “dominant” and back again.

It is instructive to read some of guidance issued by the Office of Fair Trading. Recognising that the EU directives talk of “dominant”, it talks about market power being a useful way of determining what is dominant. The CAA’s own final competition assessment guidelines talk about substantial market power being an abuse of a dominant position. We seem to be exchanging terms. It may be much clearer just to go for a definition of dominance, which has a clear definition in the EU treaties. I think all players in the industry understand what the test is.

To illustrate that, the OFT’s guidance sets out that the European Court has said that if an entity has a market power of more than 50% it will be assumed to have dominance and therefore regulation could apply. OFT says further that if the market share is more than 40% there might be a need for regulation. I do not think that any airport other than Heathrow has more than 40% market share. Gatwick is probably the closest to that, although I doubt whether it has that percentage in any segment. I think it has some 23% of the UK holiday market, 15% of the UK business market—nowhere near that dominance threshold of 40% or 50%.

Looking at London or the south-east, obviously the percentages are much higher, but they still do not get anywhere near the 50% test that would trigger automatic dominance. When the CAA publishes its preliminary assessments of substantial market power, it carries out a long exercise on Gatwick and Stansted to try to work out if it can justify regulating either of those airports. It goes through every segment of travel and area to try to get to a threshold where it can apply the regulation. Perhaps I should not say “try to get to a threshold”. However, it appears to start from a position that those airports are regulated, and appears to want to keep them that way. I agree with the hon. Member for Blackley and Broughton and my hon. Friend the Member for Rochester and Strood that we should regulate airports only where is a definite need to do so, and where there is a real advantage to the user, rather than looking to regulate unless we can find a way out of it. When reflecting on the Bill, I urge the Minister to consider whether, either accidentally or deliberately, using the definition of substantial market power rather than dominance will give the CAA more freedom to regulate airports than we intend.

Let us consider the scenario in which East Midlands airport has more than 40% of the UK freight market—a scenario that could trigger such issues. Moving freight at airports is incredibly easy. I suspect that all airports move freight—it simply has to be driven a few extra miles down the road before it goes on a plane. I cannot see any need for regulation in such circumstances; we certainly could not say that that constituted market dominance. However, when we start applying different factors in choosing markets, segments and areas, a scenario could arise in which we attempt to regulate, and the last thing any of us wants is the CAA to decide in a few years’ time that it is time to regulate a few more airports to justify its existence. Using the word “dominance” would give a clearer definition and would be consistent with the European treaty. All the operators in the industry would have a clearer definition of the rules they have to apply.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful to members of the Committee for their contributions to the debate on the amendment, especially the hon. Member for Blackley and Broughton, who tabled it. He has great expertise in aviation and his input on such matters in Parliament is much valued. I cannot support his amendment for various reasons that I shall share with the Committee. I shall also deal with some of his broader points, and I am grateful for his explanation that the amendment is essentially probing, rather than likely to be pressed to a Division.

In effect, the amendment would raise the bar to test whether an airport was subject to economic regulation under clause 6. The three tests it would amend are well understood and broadly accepted by the industry. The significant change proposed to the wording of test A could, in practice, mean that airports that should be subject to economic regulation fall outside the CAA’s remit. Of course, I agree that we should not regulate airports when doing so is unnecessary, overly burdensome or not in the passengers’ interests. However, such matters are dealt with properly under the current wording of clause 6.

There is a real risk that an airport could abuse its market position to the detriment of passengers if the amendment were accepted. If there were a real risk of an airport abusing its market position, we should give the CAA the necessary powers to protect the interests of passengers. It would not be in passengers’ interests to require the CAA to wait for at least two years before it was able to act under chapter 1 of the Bill. If a regulatory regime were justified, it would be important to ensure that it could be applied in a timely way. To be effective, we should give the CAA the power to intervene proactively and speedily when the tests set out under the clause are met. I am worried that the amendment would leave passengers and freight owners unprotected for a protracted period.

I turn to the broader points made by the hon. Member for Blackley and Broughton. When debating regulation with him, I keep finding myself in the peculiar position of opting for an approach that is more regulatory than his. It is a demonstration that, while the coalition is absolutely firm on the need to minimise unnecessary burdens on business, we accept that proportionate regulation has its place and can achieve important goals—in this case, the protection of passengers and owners of cargo from exploitation by airports that enjoy substantial market power.

The hon. Gentleman began by considering the cost impact of the Bill as a whole. Our estimate in our published impact assessment is that, over 20 years, the Bill will reduce economic regulation costs in the aviation industry by about £160 million. There will be a small additional cost, the present value of which would be £10 million, meaning a net reduction over the 20 years, in present value terms, of £150 million. I note the estimate the hon. Gentleman gave in relation to Manchester. Of course, we strive to minimise burdens on business, but we believe that overall the Bill will reduce costs for the aviation industry, which is one of its benefits.

I welcome the input of the Manchester Airports Group. Manchester airport is not only a high quality airport and an important part of the north of England’s economy; it is also proactively involved in debates on airport policy generally. It has done extremely well with its pilot of security scanners, for example. It is always good to have the input of Manchester airport.

The hon. Gentleman argued that it might be more sensible to rely on general principles of competition, rather than having a specific regime for airports. In the test set out in clause 6, we build in a protection whereby resort to specific airport economic regulations is justified only where the CAA can conclude not only that the benefits will outweigh the costs, but that the mechanisms available under general principles of competition law will not be sufficient.

The hon. Gentleman seemed anxious about the possibility of extension of regulation, and expressed concern that Gatwick and Stansted continue to be regulated when there is a debate about whether they should be. Under both the present and what we hope will be the future system, it is open at any time for any airport that is currently regulated to ask for a review. Another advantage, which I hope will provide some reassurance to the hon. Gentleman, is that the current regime is very binary—one is either subject to a five-yearly price cap or not. There are almost no other options available to the regulator. One advantage of the proposed changes is that they give the regulator a spectrum of options, depending on the seriousness of the problem. They could involve such measures as price monitoring. That will give the CAA the flexibility to have regard to and use measures that are potentially more proportionate than a heavy-handed, once-every-five-years set of price controls.

The hon. Gentleman referred to the competitive pressure on regional airports. I agree that that is so—not least in these difficult economic times—and that, to an extent, Heathrow faces competition from other European hubs. The thrust of the Bill is to get those decisions out of the political arena—currently, they are taken by the Secretary of State, albeit with advice from the CAA—and give them to an independent regulator. That will be fairer and will take the politics out of the system.

Gavin Shuker (Labour, Luton South)

Is Heathrow likely to remain subject to the market power test under the Bill?

Theresa Villiers (Conservative, Chipping Barnet)

The Bill provides for transitional arrangements, so that airports that are currently regulated can be carried over automatically into the new system. As there is considerable overlap with the substantial market power test—that is one of the reasons why we selected this provision: it reflects current practice—there must be a strong likelihood that the application of that test under the new regime will be broadly similar to its application under the current regime. It is therefore likely that the airports that are currently regulated will continue to be regulated, but, as I have said, that is for the CAA to decide. At any time, those airports can come forward with a request to be deregulated.

Another specific problem with the amendment is that it might be inconsistent with the airport charges directive. The hon. Member for Blackley and Broughton made some interesting points about slots. However, he will appreciate that the House’s options regarding slots are somewhat limited, as this matter is determined by European law and governed by an independent organisation, as required by European law. The airports package currently being discussed in Brussels gives us the opportunity to look at related issues, so I will take his contribution on board in those future discussions.

I should like to deal now with the points made by my hon. Friend the Member for Amber Valley, which were also referred to on Second Reading, about the interaction of the terms “dominance” and “substantial market power”. The first thing I need to emphasise is that “dominance” in this context is not used in the same way as in general competition law. Here, it has a specific meaning. There are a number of reasons why we have opted to focus the test on “substantial market power”. The previous Government consulted on the test and received a broadly positive response on the retention of “substantial market power”. It is based, crucially, on the designation criteria that the Secretary of State currently uses, so we are not heading into uncharted territory.

As I mentioned in relation to the point made by the hon. Member for Luton South, there are established decisions on this matter already, so we are seeking to maintain a degree of continuity. The industry is familiar with a “substantial market power” test and how it works. We carefully considered the distinction between the two terms as progress was made in drafting the Bill, and the decision was taken not to equate “substantial market power” with “dominance” in the sense that it is used elsewhere in competition law rules.

I hope that provides some clarity, and I ask Members to oppose the amendment if it is not withdrawn.

Graham Stringer (Labour, Blackley and Broughton)

This is a probing amendment and I will withdraw it, but there is enough in the debate about it for us to return to it in a different form on Report.

I should like to reply to two or three of the points that have been made. The hon. Member for Rochester and Strood argued that perhaps if the CAA looked creatively at the interests of the passenger at Heathrow, it would get the regulation right. What matters to many of the passengers at Heathrow is reliability. Reliability is just not possible when both runways are being used at about 99% capacity. The people there do an extraordinarily good job to get so many planes in and out every day, but things go wrong—planes come in without fuel; there are delays of one sort or another. It is not always possible to get complete reliability when the runways are used at that level.

The purpose of my amendment is to point out that it is not simply a question of whether the Bill is more burdensome and to ask whether the CAA can really stand in the place of the consumer—the passenger who pays for the air ticket. We have assumed in all the debates so far that there is a homogenous passenger and that it is the same if that passenger is flying from Liverpool using Ryanair or is a filthy rich banker flying first class to New York. Clearly, their interests would not be the same.

When I fly Ryanair from Liverpool, I know it will be cheap and cheerful. It is pretty reliable, low cost and I get where I want to go. I have never been a filthy rich banker, but from time to time, usually when other people have been paying, I have travelled business or first class—a new expense—and one expects and wants a different service. Reliability is important.

The hon. Gentleman has more faith than I do in the CAA’s or any bureaucracy’s ability to distinguish between those demands. The market is much more segregated than between the Ryanair passenger and the extremely rich person who can purchase a ticket.

Mark Reckless (Conservative, Rochester and Strood)

I have no great faith in bureaucracy. What is special is the structure of the market. Were the price charged to the airlines by the airport operator at Heathrow to rise, it is not clear in an economic analysis that that would harm the end consumer. It is at least as likely that it will simply reduce the value of the slot. It is the scarcity of slots that allows the airlines their monopoly power in pricing. If the cost to them rises, the cost to the consumer might stay the same, but the value of the slot will fall. Because more money is going in, it might benefit the consumer in that way.

Graham Stringer (Labour, Blackley and Broughton)

That is a different and significant point about how a full market solution might work. We are only partly there, but I understand what the hon. Gentleman says. It is a powerful point.

The hon. Member for Amber Valley shared, I think, my scepticism about the interventions that the CAA might make. Maybe it was a trite debating point, but it shows the power that the CAA could have if it were to start talking about where coffee, hot dogs or whatever are sold. It is a relatively small point, and I do not think that it is likely to happen in the real world, but it represents the fact that the CAA, under the Bill, can intervene more often and more regularly in the airports. Hopefully, it will understand passengers’ needs, which often differ; I doubt it, having dealt with the CAA. It is good at many things, but I am not sure that it would be able to stand in the place of the passenger. That has never been tested, as this is a new Bill.

Although if we are to have an economic regulator, it makes sense for it to intervene when there is a problem, the Bill gives the regulator the power to intervene too often and, frankly, in a burdensome and nuisance-causing way. If a bureaucracy is given a power, the worry must be that it will use it. It certainly worries me a lot that we are transferring from a costly, double-edged process held once every five years to something that could happen fairly regularly. We are relying a lot on the good will of the CAA.

That brings me to the Minister’s first point about the process leaving passengers vulnerable for 24 months if things go pear-shaped. Again, I am not wedded to 24 months. The point of the amendment is to reverse the process. Any assessment of substantial market power or dominance will always have a theoretical basis, whereas if we let the market rule and let Heathrow, with only two runways, do what it can to compete with Frankfurt, Charles de Gaulle and so on, it might go mad, price itself out of the market and do awful things. However, I doubt that the people who run Heathrow would do that.

The Minister makes a sensible case: if something awful happens and intervention is needed, and considering how the market really behaves, we should give somebody the power to intervene quickly, whether it is the Secretary of State or the CAA. I accept that general point, but I still argue that it would be interesting to test the market in a world where airports and airlines compete very differently from how they competed 30 years ago. It would be interesting to try that.

Nigel Mills (Conservative, Amber Valley)

Does the hon. Gentleman agree that a slightly perverse outcome of making BAA sell Gatwick and Stansted is that we end up with all three airports still being regulated, on the basis that they somehow have a dominant position over the market in London and the south-east? It is a bit of a nonsense, but looking at what the CAA has published, that seems to be what it wants to achieve.

Graham Stringer (Labour, Blackley and Broughton)

I could not agree more. As the hon. Gentleman heard in the comment that I read out from the 2006 report, the Transport Committee was looking then, as a first step to getting more competition within the London markets, at taking Stansted out of BAA’s ownership, so deregulating it, or, effectively, not economically regulating it. It is very strange for the Competition Commission to suggest breaking up BAA—a sensible thing to do; the Transport Committee has been recommending that since 1998—and then say, “We will still regulate you as though you weren’t dominant.” The hon. Gentleman is right; why create a competitive situation but still keep control of the charges? It is a nonsensical response to that agenda.

I will withdraw the amendment, but I hope we can return—if not with exactly the same amendment—to the issue of whether the Bill is burdensome, and potentially gives too much power to the CAA to interfere. It is one thing, as the Minister says, to take it out of the political arena, but another to create a bureaucracy in which there is no democratic control on it if things go wrong. I am worried about that issue and certainly think it worthy of further discussion on Report. However, I beg to ask leave to withdraw the amendment.

Theresa Villiers (Conservative, Chipping Barnet)

It will be useful to dwell for a moment on the substantial market power test. It is envisaged that in conducting the market power test, the CAA will take due account of all applicable guidelines and recommendations relating to the analysis of markets and market power that have been produced by the UK and European competition authorities.

As I said, “substantial market power”, in test A of clause 6, is the term in the current criteria used by the Secretary of State, when designation decisions are made over whether an airport should be subject to price control. It is well understood and accepted in that context. The previous Government consulted on the wording of that limb and other limbs of the test for whether an airport should be subject to economic regulation. In light of that consultation, we do not see a reason to change the wording.

In carrying out test A, the CAA expects to follow the guidelines published by the Office of Fair Trading and the European Commission for the assessment of market power. Those are generic guidelines for use in any industry and provide a useful starting point for assessing the degree of competition faced by an airport. To work out the most appropriate regulatory activity, the CAA undertakes economic analysis of the degree of market power held by the airports in question.

The core matters that the CAA will be examining are the standard issues looked at in competition assessment—not only by the CAA, but by the OFT and other competition regulators. Essentially, the CAA will be looking at whether the airport can act independently of its competitors or customers, and whether the airport delivers sustainable, high quality and good-value services, as would exist in a well-functioning, competitive market.

In general terms, assessing the degree of market power involves the evaluation of two main issues. First, there is the degree to which passengers, cargo owners and airlines can reduce their use of the airport if they do not consider the price-service offering to be reasonable. The ability of customers to go elsewhere, or to switch some or all of the business away from the airport, is likely to depend on a number of factors, which a competition assessment seeks to explore in a structured manner. Secondly, the CAA will need to consider whether the extent to which customers are likely to switch away from the airport will be sufficient to discipline its pricing, service quality and investment decisions.

Substantial market power can allow airports to raise prices, deliver inadequate levels of service quality and scale back investment. That can harm consumers by, among other things, limiting airlines’ ability to offer passengers choice and value. I leave the Committee with an example that might indicate that the continued economic regulation of airports is justified. When the cold snap hit, unregulated airports such as Manchester and Newcastle seemed to make a much better fist of their response than Heathrow did. Passengers continue to need protection, and we must ensure that the CAA has effective powers to protect them.

Clause 7 - Market power determinations

Theresa Villiers (Conservative, Chipping Barnet)

I will be brief, because clause 7 is relatively straightforward. Subsection (1) empowers the CAA to determine whether the market power test is met in relation to an airport area whenever it considers it appropriate to do so. To comply with provisions in the airport charges directive, subsections (2) to (4) of clause 7 also require the CAA to make a market power determination in respect of an airport area if it is requested by the operator of that area or by a person who is likely to be materially affected by the determination; if the request consists of or includes all or part of the core area of the airport—broadly speaking, at least one of the runways and associated facilities, passenger terminals or cargo processing areas; and if the request concerns an airport with more than five million passenger movements in the previous year.

Under subsection (5), the obligation on the CAA to conduct a market power test on request does not apply if it has previously made a market power determination and considers that there has not been a material change of circumstance since that determination. That is because such a determination should not differ from the previous one, so it would be a waste of time and resources to carry out a new one.

Clause 8 - Publication of market power determination

Theresa Villiers (Conservative, Chipping Barnet)

Clause 8 contains provisions for the publication of market power determinations that the CAA makes under clause 7. Under subsection (1), after making a market power determination the CAA must publish a notice of the determination as soon as practical and send a copy to the operator of the airport area that is subject to the determination; to any other person who requested the determination; and to any bodies representing airport operators or airlines that the CAA considers appropriate.

If the CAA’s notice under subsection (3) does not include the reasons for the market power determination, the CAA must publish them as soon as practical and send a copy to those who received the original notice. Given the significance of such decisions, it is important that the CAA is required to publish them, and the reasons for them, as soon as is practical. An existing market power determination subsists until notice of a further market power determination is published as set out in clause 7(9). Accordingly, it is requisite to impose the specific duty for publication on the CAA.

Clause 9 - Operators of areas

Theresa Villiers (Conservative, Chipping Barnet)

Clause 9 defines an operator of an airport area as the person who has overall responsibility for the management of all that area. That means that where two separate entities both have some form of management control over an airport area—for example, the lessor and lessee of a passenger terminal building—only one of them will be defined as the operator of that area for the purposes of the clause, so only one of them can be made subject to regulation.

It is important to be able to identify a single operator of an airport area so that it is clear who exercises requisite control for regulatory purposes. In some cases, for example where there are complicated leasing arrangements, it may not initially be clear who the airport operator is. The CAA believes that the current structure of designated airports is unlikely to give rise to difficult issues in that regard.

Subsection (2) empowers the Secretary of State by regulations to make provision about when a person is or is not to be treated as having overall responsibility for the management of an airport area. Subsections (3) and (4) provide that the regulations may, in particular, make provision for determining who the operator is where specified matters, such as access to and development of the area, are controlled by different persons.

Nigel Mills (Conservative, Amber Valley)

Will the Minister comment on how the measures would work where a group of companies own multiple airports? Would the operator be the individual subsidiary, say East Midlands Airport Ltd, or would it be Manchester Airports Group? That may be relevant where one company owns more than one airport in a market area. One may want to test whether the combined effect of the ownership leads to dominance or market control, whereas the individual airport perhaps would not.

Theresa Villiers (Conservative, Chipping Barnet)

The answer will vary depending on who is actually in control in the sense that I have just outlined. However, my hon. Friend is right to say that the factors that the CAA will take into account will include ownership of other airports. The legal operator will be the one that is ultimately licensed.

Mike Freer (Conservative, Finchley and Golders Green)

On subsection (1), will the Minister clarify whether, in

“overall responsibility for the management of all of the area”,

“all of the area” means the perimeter of the airport or all operational areas within the airport?

Theresa Villiers (Conservative, Chipping Barnet)

As I outlined in relation to earlier clauses, we have a distinction between core and non-core areas, and the reason for that is essentially to ensure that we do not accidentally give the CAA authority to start regulating, for example, car parks where they are not associated with airport facilities, such as runways and terminals, where there is the exercise of substantial market power and where the appropriate tests in clause 6 are satisfied. We have this slightly complex system to ensure that peripheral areas, such as car parks, will not be subject to airport economic regulation unless they are linked to an airport where there is a dominance that covers core economic services, such as a runway or terminal facilities.

Graham Stringer (Labour, Blackley and Broughton)

On a point of order, Mrs Riordan, may I have some guidance? Clauses 9 to 12 all deal with competition within terminals, and, although it is not a four-clause stand part debate, I would like to talk in general terms about all four clauses.

Linda Riordan (Labour, Halifax)

If the clauses are related, of course you can.

Graham Stringer (Labour, Blackley and Broughton)

Clauses 9 to 12 are sneaky clauses, because they effectively provide for secondary legislation to determine that there will be competition within terminals. In those airports with more than one terminal, which—there may be others—seems to be Heathrow, Gatwick, and Manchester, no case has been made that there is a problem or that they would be improved by having competition within those terminals, and there is no experience in this country of having such competition. Rather than include “just in case” legislation, which may create a burden on people in the future when no case for it has been made, it should not be there.

What we know from experience of John F. Kennedy International airport—I guess that many Members of the Committee will have travelled to New York through JFK, where each of the many terminals is handed over to an airline or several airlines—is that it is a very expensive and inefficient airport. So, where we have international experience, it is not good experience, and where we have domestic experience, it shows that there is no need for this change. On that basis alone, we should not create a power whereby, just through the use of secondary legislation and a statutory instrument, this change can be introduced without proper, full debate and discussion about some of our country’s important economic assets. Again, that indicates to me that this is a regulatory Bill rather than a deregulatory Bill.

If one gets down to specifics, there is not a problem, but if one looks theoretically at what might happen—as these clauses ask us to look—I would speculate, and international experience would almost certainly support my speculation, that we would get increased costs and capacity issues related to those increased costs; that it would be very difficult, given the configuration that we have in this country, to cater for different airline needs; that there would be transactional costs as one moved from one regime to another, which all Governments of whatever party always underestimate; that it would be more difficult to plan; and that it would be difficult to make price controls that were transparent and fair.

I will talk a little, first of all, about differing airline needs; I can talk in some detail about Manchester airport, but less clearly about Heathrow and Gatwick. The third terminal at Manchester, which I was responsible for signing the contract on, was specifically designed for British Airways to be the centre of its European network of airlines. Because of the changes in the aviation industry, BA has consolidated, primarily into Heathrow and Gatwick. That has left us with a terminal in Manchester that is not suitable for package holiday flights.

I just use that example to show that terminals are not always as flexible as one might expect them to be. If one was to consider how to introduce competition into that terminal, one would find that it would be very difficult to do so. The same is true of the second terminal at Manchester, which opened in 1993 and which I was also responsible for. It has a very simple design; passengers come in at one level and go out at another level, and it is designed entirely for international traffic. It would be very difficult to mix it up with domestic traffic. If one was to introduce competition, there would be large costs involved in changing that second terminal over. There are specific air-bridges designed for the kind of tour operators that use it.

Is anybody seriously saying that, by introducing competition, the costs of running an airport, or even the costs of a single-terminal operator, would be reduced, if there was the much more complicated situation of two operators operating in the same area? Unfortunately, I am old enough to remember when the European regulations came in that demanded competitive baggage handling even though there was not sufficient space for competitive baggage handling within a lot of airports. Baggage handling became not more efficient but less efficient, because there simply was not room to handle the baggage when there were three separate operators. That was a European directive—it was not the Conservative Government of the time—but it was particularly unhelpful for running an airport.

There are also capacity problems. If one is to have competition, which means, I suppose, that different operators operate parts of a terminal and offer different prices for different airlines to use it, it is possible only if there is spare capacity. We have to be able to move from one to the other or to expunge somebody’s contract. Again, spare capacity is likely to increase inefficiency and costs.

I have mentioned the transactional costs of moving from one regime to another. I have never known any Government of any colour to get the estimates right for the transactional costs of moving from one regime to another. Any estimate can normally be multiplied by three.

Airlines think that they decide where they go and that they are mainly responsible for bringing in customers to an airport, but—I have done this myself—airports, particularly competitive airports in the regions that have it much more difficult than Heathrow and Gatwick, are going out to try to attract airlines into their terminals. If an airport wanted to attract Malaysia Airlines into a terminal, it would be much more difficult if it had to negotiate with two different operators. If an airport wanted to bring business to this country and to the city in which it operated, the proposal would be another unnecessary hurdle to attracting such business. Finally, price controls would also add complications.

This is a particularly ill-thought-out proposal. I do not where it came from. There is not a problem; if there were a problem, this would not be the solution. I hope the Minister will withdraw these clauses, which all address the same issues, or else I would hope to press at least one of them to a vote.

Julie Hilling (Labour, Bolton West)

I also want to address all four clauses. I contemplated giving the same speech four times to see whether I would improve each time, but I do not think the Committee would appreciate that, so I will speak once to all four clauses.

The proposal, which will allow an airport to be compelled to transfer a terminal to another operator, has been said to be an idea without merit. There is no industry clamour for it, and I have been told that it has been included just in case, in the future, someone somewhere decides that it is a good idea. Well, I am sure there are lots of things that we might want to put in a Bill just in case someone somewhere, in the future, decides that they are a good idea, but, rightly, we do not do it.

I will outline why I do not believe it would be a good idea to have these clauses in the Bill and why they should be removed here and now. My local airport is Manchester airport—I should declare an interest because, like every other citizen of Greater Manchester, I am effectively a shareholder in the airport because it is owned by the 10 metropolitan boroughs—and it is not only located in the area, but rooted in the community. Of course, Manchester airport wants to make profits and to have as many routes as possible, and, of course, it sees itself as fundamental to the economic growth and health of the region, but it also wants to be as good a neighbour as possible.

The airport operator plans for the whole airport, and it has to deal with the airport’s neighbours and take account of environmental concerns. It has to consider how to get passengers and workers to and from the airport, it has to invest in transport infrastructure and improvements to the terminals, and it has to provide a good service to passengers and airlines. Basically, it has to take a strategic overview of all airport operations and implement them practically.

Now imagine a situation in which the airport is split and another operator takes over the running of a terminal. There is an immediate decrease in capacity. Currently, an airport such as Manchester carries some headroom across the airport as a whole. Where necessary, flights can be transferred to any of the three terminals, so excess capacity is as small as it needs to be. If a terminal is transferred, each operator would have to build in headroom, thus immediately decreasing overall available capacity.

There are also economies of scale; the benefit of one efficient operation would diminish and, as my hon. Friend the Member for Blackley and Broughton said, the transactional costs would increase enormously. Manchester Airports Group is effective because it can negotiate with suppliers and other interested parties to get good deals. Good contracts with companies such as Smiths Group, SSP and Compass Group and with brands such as Costa and Burger King would disappear, meaning that the airport would be less financially secure and there would be higher charges for passengers. If we want to increase the employment opportunities for accountants and solicitors, this is the way to go. A great deal of time and money would be wasted in legal agreements between the two operators. Bean counters would have a fine time working out how things such as car parking fees should be allocated.

What would happen if one of the operators did not want to invest in general improvements? Manchester airport recently made a large investment in the airport railway station and it is about to invest £50 million in bringing Metrolink to the airport. What if another operator is in competition at the airport and it does not want to invest? The airport cannot say that only those passengers travelling from terminals 1 and 2 can catch the Metrolink and everybody travelling to terminal 3 has to walk.

Competition is not good for its own sake; it is good only if it brings improvement to the whole operation—for passengers, freight, the environment and the community. It does not matter that I have two buses to choose from if I cannot afford to catch either. The bodged privatisation of rail should be an example of what not to do—ever rising prices and no real competition. It does not matter who runs Atherton station; I have the choice of only one station and only one sort of train, and that is common across the whole rail network. It is rare for any of us to have any real choice between operators and routes.

There is a never-ending cycle of blame on the railways. Whose fault is it that the train is late? Network Rail? The operator? Who owes whom money? We do not need to bring that same sort of competition into the air industry. There is competition of a different nature, so we do not need to reduce it down to what I see as ridiculous airport terminal competition.

The clauses that potentially enforce the transfer would not improve our airports. Transfer is not wanted, it would not benefit anybody and we do not need the “What ifs?” The clauses should go or, at the very least, apply only to regulated airports. The amendments I tabled were not selected, but I hope that the Minister will omit the clauses. If that is not done at this stage, I will certainly table amendments again on Report.