HC Deb 13 July 1999 vol 335 cc314-20

Motion made, and Question proposed, That this House do now adjourn.—[Jane Kennedy.]

1.25 am
Dr. Desmond Turner (Brighton, Kemptown)

NATS has considerable problems, but those problems are in no way a reflection on the highly professional body of people who operate the service. They provide a wonderful service, which is highly regarded internationally and has a good safety record, and are doing so under difficult conditions; they are struggling with outdated equipment and an ever-increasing burden, while managing the most dense air traffic in the world.

Those are real problems, and they are compounded by the delay in the completion of the new air traffic control centre at Swanwick and in financing the replacement of other outdated equipment that is needed for control centres.

There are perceived problems also—I call them perceived because they are, in a sense, artificial. They are financial problems and problems of governance. The principal problem is the restriction of Treasury rules on making available the capital needed urgently for investment in the system. That is creating great difficulties for the service.

There is no question of the service being in financial difficulty, and its financial performance is extremely good. It does not cost the taxpayer a cent. In fact, in 1997 it made an operating profit of £70 million—so it actually provides an income stream to the Government. However, it does not have the capacity to invest, and that is a serious problem. The volume of traffic is mounting and the chances of breakdown in the system are increasing; investment is needed urgently.

This ought to be a matter of grave concern for the Government, and I believe that it is. It is noteworthy that, in the weekend opinion polls, the Government were well ahead on every aspect tested except transport, where only a minority thought that the Government were doing a good job. I find that sad, knowing the amount of effort that this party and this Government are putting into transport and the importance that we attach to it. It is vital that we get such issues right.

The Government have come up with one suggested solution for the problem, in a consultation paper which suggested a public-private partnership. I find the use of the words "public-private partnership" semantically puzzling in this context, because it would involve the sale of 51 per cent. of the service. That is not a partnership: it is selling control of the service.

I suggest that the Government consider alternative propositions that have been put forward. The principal one is for a publicly owned corporation. The Government have set a precedent with last week's statement on the future of the Post Office.

I shall now undertake a somewhat simplistic exercise by running two propositions past a few tests and seeing how they measure up. When we consider privatisation, we should note that there is no other example in the world that I have been able to discover of an air traffic control system that is operated on a private, for-profit basis. It would be unique.

It is true that privatisation would provide a windfall income for the Government to reinvest in other transport projects. However, the income would probably fall far short of the real asset value of the air traffic control system. Set against the fact that the Government would lose the income stream that they currently enjoy from the ATCS, that suggests that privatisation would be neutral in financial terms.

The most important criterion has to be safety, because that is the ethos of the entire service. Nothing else matters.

Laura Moffatt (Crawley)

I thank my hon. Friend for introducing the issue of safety. Does he agree that airports such as Gatwick, which has 27 million passengers a year—projected to rise to 40 million—need to be assured that we have the safest system in the world? Privatisation may not be the way to give them that assurance.

Dr. Turner

I could not agree more with my hon. Friend. Gatwick will have 40 million passengers a year. I have lost count of the numbers at Heathrow, but its figure is double Gatwick's. The system is already on the edge at times. Privatisation will not help it to deal with those problems and will not give the public confidence in the safety of the system.

Mr. Martin Salter (Reading, West)

Is my hon. Friend aware of the leaked memo from the Civil Aviation Authority's privatisation unit, which made it clear that whole or partial privatisation involved a substantial risk of a trade-off between profit and safety considerations? Does he agree that it is almost inherent in the proposals that the drive for profits and dividends could be a compromising factor in the all-important issue of aircraft and air traffic safety?

Dr. Turner

I thank my hon. Friend for that intervention, because I was just coming to that point and he has made it for me. The income of the ATCS is, essentially, fixed for years ahead, so the only way in which dividends can be found is by cutting costs. However it is done—by reducing staff or some other means—cutting costs could only compromise safety. Safety would no longer be the service's guiding ethos because commercial considerations would play a significant part, and they do not increase safety.

The potential for generating accidents in an air traffic control service is worth pondering. Two fully laden jumbo jets colliding over a densely populated area of London would cause horrendous carnage. Any suggestion that such an accident resulted from a failure of an air traffic control system under privatised governance would lead to very serious questions being asked of the Government who had imposed that governance. I urge the Government to think very carefully before taking such a step, as safety has to be paramount.

We all know that the proposed new airport at Swanwick is way behind schedule. If the system were put into private ownership, there might be a temptation to commission Swanwick prematurely. That facility is behind schedule at present in part because National Air Traffic Services will not commission it until it is 100 per cent. confident of its safe operation. A commercial enterprise could be tempted, for reasons of public relations or of cutting costs, to bring it into operation before it was completely ready and safe.

Ms Sandra Osborne (Ayr)

Is my hon. Friend aware that the proposed new Scottish centre at Prestwick in my constituency has already been delayed for a number of years? It is possible that private interests would cause the new centre's operational capacity to be changed and thus cost many jobs.

Dr. Turner

I am aware of those difficulties, which make up another specific element of the problems faced by the service.

The regulation that would be required is another factor against privatisation. Railtrack provides a truly dreadful example of how poorly regulation works. The company is under severe criticism for failing to invest adequately in track maintenance and for its poor safety record. Meanwhile, its profits and dividends have increased.

What about the criteria of value and fairness for passengers? Privatisation would not lead to greater safety for passengers, nor any cheaper flights, but it would disadvantage them by compromising their safety. Passengers would not feel too good about that.

Finally, there are international considerations to take into account. Air traffic control is not limited to national boundaries. It has to operate in collaboration with the other European systems, all of which are in public control. A private operation would be in conflict with them.

None of the negative factors that I have described would apply to a public corporation, which would offer many positive advantages. The public will know that safety is a public system's only ethos, and will therefore have greater faith in it. They will know that they are getting best value. There will be no need for a separate regulator, and no problem with international collaboration. On those simple criteria, the only possible conclusion is that a public corporation wins hands down.

The Government have shown their willingness to adopt such a policy for the Post Office—probably because they realise how much we love the Post Office—by giving it its commercial freedom through the agency of a publicly owned corporation. That is marvellous, but much as we love the Post Office, we all love our own skins better and would feel more confident of their safety if they were in public rather than private hands.

I speak on behalf of air traffic controllers, many hon. Members, and the vast majority of the travelling public in appealing to the Minister to look to a publicly owned corporation rather than towards privatisation.

1.41 am
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson)

I congratulate my hon. Friend the Member for Brighton, Kemptown (Dr. Turner) on obtaining this debate and on choosing such a vital topic.

Air traffic control is profoundly important. One of our key international obligations under the Chicago convention is to ensure the provision of air navigation services in national airspace. National air traffic control is a strategic activity with implications for the economy, security and public safety. Not only must it be done, but it must be done better than well.

When the Government came into office in 1997, National Air Traffic Services' front-line staff were—they still are—doing a first-class job of moving traffic around safely and expeditiously. NATS's management was doing its level best on a furious catching-up job to compensate for underinvestment a decade earlier. However, the new en route centre at Swanwick was already late, and the proposed new Scottish centre at Prestwick seemed to be in jeopardy.

It was apparent that Government financing procedures and the need to keep a tight rein on public expenditure were likely to pose problems for the delivery of NATS's investment requirements. NATS's customers were demanding high levels of investment in order to increase capacity and minimise delays but that charges should be kept as low as possible. NATS needed certainty of access to investment funding and sought greater management and commercial freedom to develop the business. The national interest required a safe and efficient air traffic control system that could underpin the national economy and meet the nation's security needs without prejudice to the United Kingdom's international relationships and other commitments.

We clearly needed to look at how NATS was financed and managed, but we also had to take account of NATS's desire for freedom to expand in the longer term into European and worldwide air traffic control markets. NATS's technical expertise and ability to manage traffic went a long way towards making that aspiration realistic, but development clearly requires more than opportunity, commitment and excellence, and more than guaranteed access to capital to undertake major investment; it requires world-class financial, project and commercial management.

We wanted a solution that would let us maintain and build on the excellent record of aviation safety in the UK; ensure that NATS had adequate funding for investment; provide NATS with commercial freedom and the skills to make best use of it; continue to meet the needs of commercial, military and leisure users in peacetime; and, where necessary, protect national security.

The status quo was not a runner. Allowing borrowing freedom within the public sector—the independent publicly owned corporation which my hon. Friend mentioned—would meet the funding need, but not much more. A non-profit-making entity, be it public or private sector, would again meet some of the need, but not all. We looked again at the model originally proposed by the previous Administration—the so-called "privatised contractor"—and concluded that they were, for once in their life, right not to pursue that course.

However, we thought it right to examine a public-private partnership, which could secure a genuine partnership between public and private sectors to deliver a safe, modern and efficient air traffic control system for the future. The proposal on which we consulted envisaged a continuing role for the Government through a 49 per cent. shareholding, a stake of up to 5 per cent. of the shares for NATS's staff, and a 46 per cent. private sector shareholding. It was designed to free NATS from the constraints of public ownership and allow important investment and management decisions to be taken on commercial grounds, so the new company would be able to invest for the future to improve capacity and service standards, which would benefit the travelling public and the national economy.

Economic regulation would provide the right structure of incentives and disciplines to maximise efficiency and ensure more transparency in charges, which would benefit air users. It would separate regulation from service provision, and the Government's retained shareholding would bring financial benefits to the taxpayer, through the payment of dividends, plus the assurance that NATS would continue to act in the public interest.

Therefore, the proposed public-private partnership offers a range of benefits to NATS, its staff, airspace users and the taxpayer. We understand the concerns expressed by NATS's staff. The prospect of change is always unnerving and the future of NATS has been in question for too long now. Staff have voiced concerns over safety and again, understandably, over their pension rights and job security.

We have assured all employees that we are considering advice from our financial advisers on the options for the proposed employee shareholding. We announced on 14 June key principles for ensuring that the private finance initiative and PPP will secure fair treatment of the pensions of public servants transferring to public sector employees. The Government want employees' existing contractual terms and conditions of employment to be maintained, and welcome the commitment of the Civil Aviation Authority and NATS's management to full and proper consultation with the work force.

Mr. John McDonnell (Hayes and Harlington)

Air traffic control West Drayton is in my constituency. What factors or arguments have been brought into play since a Labour Front Bencher at a Labour party conference stood up and said that we would not "sell the air"? If it is the spurious argument about introducing commercial management to make the system more effective and competitive in the international market, surely we have learned the lessons from Railtrack about how commercial management can undermine not only a service but safety.

Ms Jackson

I am grateful to my hon. Friend for touching on that issue, as did my hon. Friends the Members for Crawley (Laura Moffatt), for Reading, West (Mr. Salter) and for Ayr (Ms Osborne) because that is the issue that was rightly at the forefront of people's minds.

Our safety standards are some of the most stringent in the world. Our skies are safe despite the fact that air traffic is increasing by about 7 per cent. a year. In the main, that is a tribute to the CAA, which sets and monitors those standards and to NATS, whose ability to move traffic safely and expeditiously is arguably the highest in the world.

NATS is subject to testing safety targets set by the Government and continues to meet those targets, and we are totally committed to maintaining and improving the United Kingdom's safety standards. Indeed, in view of the relentless rise in traffic levels, which is expected to continue in the foreseeable future, actual safety levels must increase. That is the overriding priority of our aviation policy, and I can tell my hon. Friends who have raised concerns about that issue that this Government would not have contemplated institutional change if we had thought that safety might be jeopardised.

NATS's staff and some hon. Members have argued that a private sector NATS would put profits before safety. My hon. Friend the Member for Kemptown made that point forcefully. It is our view that it would not. The safety culture within NATS is very strong at all levels and the Government, the regulator and NATS together would ensure that that remained the case.

One of the benefits of the PPP would be to ensure the separation of safety regulation from the provision of ATC services. That is something that airspace users would welcome and which the Environment, Transport and Regional Affairs Committee and the former Monopolies and Mergers Commission have been recommending for some years. It would make a major contribution to NATS's ability to deliver our ATC projects both now and in the future, enabling us to continue to handle safely the increase in flights that we expect. Correctly structured—and it would be—it would give NATS greater access to private capital for investment and the skills to use that capital to best effect.

NATS would be the first to admit that mistakes were made with Swanwick. However, I hope that my hon. Friend the Member for Kemptown will be reassured to know that the centre is now on schedule to enter operation by spring 2002. Technical transfer—the point at which the system development is complete and satisfies its initial requirement—was achieved on time at the end of March. The new system is now being integrated into the rest of the UK ATC infrastructure; that should be complete by late next year. The year 2001 will be taken up with training controllers on the new systems before the centre enters operation.

Prestwick and Swanwick are the pillars of NATS's two-centre strategy. NATS's commitment to the strategy is unwavering, as is that of the Government. I trust that my hon. Friend the Member for Ayr will take comfort from the fact that NATS plans to bring the new Scottish centre into operation in the winter of 2005–06. In April this year, we approved the negotiation of a multi-phase contract for the NSC with Sky Solutions. We expect agreement on phase 1—the detailed design of the building and systems, and some software development—this summer. We are appointing external project management experts to assist NATS.

My hon. Friend the Member for Kemptown touched on the future of national air traffic control, not only on the future of NATS. He is right not to be too parochial; aviation is an international business. European air traffic levels continue to rise, and delays due to ATC causes are affecting the European ATC system at an alarming rate. The Kosovo conflict is part of the problem, even though combat activity has ceased. Capacity seems to be inadequate in some parts of Europe. Happily, the situation in the UK is much better; the UK is currently responsible for only 6 per cent. of the total delays across Europe. That is remarkable considering that traffic is at record levels in some parts of our airspace and well beyond forecast levels.

Nevertheless, the UK is part of a whole, and we suffer knock-on effects from delays elsewhere. We believe that it is in the UK's best interests to seek an overall European solution to ATC delay problems. We think that political initiatives already under way should be strengthened. We are co-operating fully with European states at ministerial, official, technical, and operational level to develop solutions through harmonising and integrating national systems, in order to maximise the available capacity in the short term, and create more capacity in the longer term. The results of co-operation over about 10 years are feeding through to capacity increase, but traffic growth is rapidly outstripping the rate at which demand can be accommodated. We need to explore new and innovative measures.

The introduction of radar after the second world war obviously vastly improved the controller's ability to retain an overall picture of his traffic and to effect safe separation between them. However, the basic principles remain: individual aircraft are separated from each other manually, and aircraft are obliged to fly predetermined routes through the skies.

The European organisation for the safety of air navigation—EUROCONTROL—of which the UK is one of the most active members, has brought together all interested aviation parties, including the military, to develop a strategy for the future of air traffic management. Entitled "ATM 2000+", it looks at the period until 2015 and approaches air traffic control in a new light. Safety will always be paramount, but we can harness new technology. New developments can enhance the dialogue between pilot and controller. They can replace voice transmissions with data transfer, take full advantage of air navigation systems for ATC use, and utilise airborne safety net systems. In the ATC system of the future, the controller will take on a more strategic role, allowing airborne routing and flight profile freedoms, thereby gaining greater overall airspace capacity. Safety levels will be enhanced, and the controller will be able to intervene where necessary to maintain proscribed separation standards.

For the future, we need an ATC system that can respond positively to rising traffic levels, improve safety levels to meet the requirements of increased volumes of traffic, and deliver a cost-effective service at a price the airlines are prepared to pay. That is the background against which we proposed a public-private partnership for NATS. What we want goes beyond financial freedom, important though that is. UK air traffic control must be a safe, effective and efficient part of the global system. We have not yet come to a conclusion on the precise future form of NATS, although we hope to do so shortly. However, the future of air traffic control is no small issue; we must be sure that we have the right answer, and we will.

Question put and agreed to.

Adjourned accordingly at five minutes to Two o'clock.