HL Deb 26 October 2000 vol 618 cc501-604

4.26 p.m.

Report received.

Clause 1 [Secretary of State's general duty]:

The Minister of State, Department of the Environment, Transport and the Regions (Lord Macdonald of Tradeston) moved Amendment No. 1: Page 1, line 10, at beginning insert— ("(A1) The Secretary of State must exercise his functions under this Chapter so as to maintain a high standard of safety in the provision of air traffic services; and that duty is to have priority over the application of subsections (1) to (4).").

The noble Lord said: My Lords, these amendments all relate to safety. Noble Lords will recall the eloquent arguments put forward in Committee by the noble Lords, Lord Brett, Lord Clinton-Davis and Lord Hoyle, as well as by the noble Baroness, Lady Thomas, and others. As a result, I agreed to consider again the case for putting additional reassurance on the face of the Bill about the leading role of safety.

These amendments do precisely that. Their effect will be to oblige the Secretary of State, the CAA and the Competition Commission, when exercising their functions under the Bill, to ensure that a high standard of safety is maintained before taking into account any other consideration.

Let me make it clear what "maintaining a high standard of safety" will mean in practice. It means that when the Secretary of State, the CAA and the commission exercise their functions, they must consider the safety standards in place at the time and ensure that those standards will not be reduced as a result of their exercising those functions.

This means that safety levels cannot be compromised, even if they are above the statutory minimum, as is the case in some areas of NATS' operations. I know that the latter point was a matter of concern for noble Lords, and I hope that this clear commitment to safety above all other factors in the Bill provides them with the reassurance that they sought. I hope that it will also reassure noble Lords that we are as concerned as they are to ensure that NATS will continue to strive for the highest standards of safety, rather than simply settling for the minimum.

I listened to noble Lords in Committee and agreed that safety should clearly be the first priority in this part of the Bill. These amendments put that beyond any doubt and I commend them to the House. I beg to move.

Baroness Thomas of Walliswood

My Lords, let me say from these Benches how much we welcome the government amendments. I spoke to our amendments in Committee and specifically asked the Minister whether he could put a safety amendment at the front of the Bill. That is what he has managed to do. We are grateful for this improvement in the Bill as it stands.

4.30 p.m.

Lord Brett

My Lords, I echo the gratitude to my noble friend the Minister for proposing these amendments. They go a long way to meeting the objectives of the amendments tabled in Committee. Speaking for the Government on Second Reading, my noble friend Lord Whitty said: Safety in our regime will be paramount".—[Official Report, 5/6/00; col. 1026.] We have sought both in Committee and in discussions outside the Chamber to establish how we get that "paramount" assurance into the Bill. Alas, we understand that that word is not a legally acceptable parliamentary term, but we accept that the wording of this amendment does in fact mean the same thing. We are grateful for the assurance given by my noble friend the Minster. I should like to express my appreciation and that of my colleagues for the way in which my noble friend has taken the matter on board. It will be a matter of some reassurance to those in the industry, especially the staff.

Lord Clinton-Davis

My Lords, as one of those who raised the issue in this place, I, too, am obliged to the Minister for referring to me and to the noble Lord, Lord Hoyle. However, as the Minister knows, I wish that the Government had come to another conclusion. But having regard to what are the parameters of the Government's thoughts on the matter, I accept that the noble Lord has done all that he can in relation to the issue of safety. It is only right and proper that the issue of safety, which is a concern of the public, is recognised. That is what the amendment will achieve and what the Bill, as drafted, did not properly address.

Like the noble Lord who preceded me, I am grateful for the changes that the Government have made. It is an example of the Minister listening. I do not think that he listened with both ears open, but one-and-three-quarters is better than none. That being the case, I thank the Minister for the concession that he has made. However, that is not to say that we are entirely satisfied about the remainder of the Bill.

Lord Monson

My Lords, I was not present during most of the Committee stage, so it is possible that my point may already have been addressed. Can the Minister tell the House whether the word "safety" for the purposes of these amendments relates not only to the obvious need to protect passengers, crew and those on the ground from accidents, but also to protecting passengers from the risks to their health—and, sometimes, their lives—arising from excessive crowding and inadequate oxygen and humidity in passenger cabins? Is it not a disgrace that airlines are still permitted to provide a seat pitch of as little as 26 inches in economy class? No adult should be expected to fly in such dangerously crowded conditions. Indeed, I submit that 29 inches for short flights, 31 inches for medium-length flights and 34 inches for long-distance flights should be the absolute minimum.

Lord Hoyle

I do not believe that the noble Lord's point is covered under this Bill. However, it is a matter that we ought to consider and perhaps we may do so at another time. I, too, join other noble Lords in paying tribute to my noble friend the Minister for the way that he has dealt with the matter of safety. We should have preferred to see the word "paramount" included in this provision; indeed, my noble friend the Minister used it in Committee. Nevertheless, he has gone as far as he possibly can. I, for one, am satisfied that safety, as it says in the amendment, will have priority over other measures. That is most important. I cannot stress too strongly how much we appreciated not only my noble friend's courtesy in receiving us but also the way in which he acted on this matter.

Lord Brabazon of Tara

My Lords, noble Lords on this side of the House welcome the fact that the Minister has put forward such amendments today. When I spoke on the issue in Committee, I said that safety was the raison d'être—the entire reason—for National Air Traffic Services. Therefore, it is extremely welcome to have measures on the face of the Bill which, as the Minister said, put a duty not only on the Secretary of State but also on the Civil Aviation Authority and the Competition Commission.

Lord Macdonald of Tradeston

My Lords, I am grateful for the supportive words we have received for this amendment. I apologise for having used the word "paramount", which I know some noble Lords wish to see employed here. It is rather arcane. Although it has been used elsewhere—for example, in Section 1 of the Children Act 1989—it was brought to my attention that the context was different. Indeed, the parliamentary draftsman says that the word is used in that legislation for the section that describes the single objective that is to guide the court in deciding what to do when making an order relating to the future of a child. Therefore, it would not be appropriate here. However, I am assured that maintaining a high standard of safety in the way phrased in the amendment will achieve all the purposes sought by noble Lords.

I should tell the noble Lord, Lord Monson, who raised the point about conditions inside aircraft, that that is, as has been suggested, more a matter for the CAA and perhaps better dealt with at some other time. Noble Lords should be assured that a consultative document dealing with all those issues is due to be issued from my department in the very near future. That will allow noble Lords to address such points at a future date.

On Question, amendment agreed to.

Lord Brabazon of Tara moved Amendment No. 2: Page1, line 17, at end insert— ("( )to prevent or minimise noise, vibration, pollution (including light pollution), disturbance or environmental damage of any nature;").

The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 29 to 33, which deal in general with environmental matters. Clause 1 obliges the Secretary of State to exercise his functions under Chapter 1 in the manner best calculated to promote the purposes set out in Clause 1(1). Those purposes do not include protection of those affected by the adverse environmental consequences of air traffic.

My amendment adds to those purposes the prevention or minimisation of noise, vibration, pollution, disturbance and environmental damage. That is partly recognised by Clause 39 of the Bill, which gives the Secretary of State power to give directions on such environmental matters. But as the Bill now stands, he could not exercise that power if it were to conflict in any way with the duties set out in Clause 1. This will limit unnecessarily the Secretary of State's ability to act on environmental matters. The duties set out in Clause 1(1) should therefore include consideration of such environmental issues to ensure that they can be given proper weight.

When I moved a similar amendment in Committee, the Government's response was to fall back on the provisions in Clause 39. I submit that that is a weak response and one that lacks logic. Clause 39 gives the Secretary of State the power to make directions on environmental matters, but because of Clause 1 that power cannot be exercised unless it promotes the interests set out in subsection (1)(a); namely, those of owners and operators of aircraft and airports, air travellers and transporters, financing by licence holders and their efficiency and economy.

Because environmental factors largely affect people living near airports and under flight paths, rather than owners and operators of aircraft and the other interested parties that I have just mentioned, an exercise of the Secretary of State's powers under Clause 39 may conflict with the interests set out in subsection (1)(a). If the Secretary of State attempts to issue directions under Clause 39, he may find himself the victim of judicial review on the basis that he "must", under Clause (1)(a), give priority to owners and operators of aircraft and airports, and so on.

I believe that the Government's refusal to take this simple point on board—and their late insertion of Clause 39 into the Bill—suggests that their commitment to environmental issues is more apparent than real; indeed, it is not as strong as it should be.

I turn now to the other three amendments in this group which all relate to Clause 39. This clause enables the Secretary of State to give directions relating to the environment. The amendments would make such directions subject to approval by Parliament. We welcome the addition of these powers because they recognise the importance of ensuring that damage to the environment is minimised. However, the powers are extremely wide ranging and the best way to exercise them may be disputed or prove controversial. Issues of this importance are matters into which Parliament as a whole should be allowed an input.

The Government argued again in Committee that environmental directions have been used sparingly in the past and that the Secretary of State must have the flexibility to take a wider view on when environmental matters should take priority over financial expediency.

It may become necessary and, indeed, desirable, with the expansion of air traffic, to use environmental directions more in the future. Having to come to Parliament before using directions does not impair the Secretary of State's flexibility; it just makes its proposed exercise subject to proper democratic scrutiny. The balance between environmental considerations and financial benefits is precisely the kind of issue which could be controversial and is worthy of debate.

As regards the final three amendments in the group, the Government said in Committee that general directions will be made, on which there is no need to consult, and that the appropriate time to consult will be when general directions are translated into particular details. Surely this is the wrong way round. If the Government have given general directions which will be binding on all licence holders, why will they need to give particular directions to individual licence holders? Even if particular directions are needed, it is the general directions which are likely to be more far-ranging and relate to points of principle. It is even more important to consult properly on such points of principle as, if directions incorporating points of principle are misconceived, consultation on particular directions implementing the general directions will not provide any remedy. This would make even the limited consultation exercise envisaged in the Bill something of a sham. I beg to move.

4.45 p.m.

Lord Macdonald of Tradeston

My Lords, this group of amendments concerns environmental issues. The first amendment seeks to add an environmental limb to the Secretary of State's duty under Chapter I, the primary purpose of which is to introduce a system of economic regulation into the provision of air traffic services.

The duties of the Secretary of State, as set out in Clause 1, deal with concepts such as efficiency, economy and the financing of activities, and "en-route" air traffic services will be regulated through an operating licence which is in itself an economic construct. Furthermore, Chapter I, which should be read in its entirety, is totally in line with the Government's sustainable development strategy. The environmental pillar is delivered in Clause 39 which provides for the Secretary of State to give directions in relation to environmental matters not only to the licence holder, or holders, but also to persons authorised by exemptions to provide air traffic services. To exercise properly those powers the Secretary of State has to consider the giving of directions to be necessary or expedient to present or deal with issues such as noise. The considerations under Clause 39 are not dissimilar to those proposed by the amendment.

The next five amendments would impose prerequisites to the exercise of the power to give directions. The first would require the Secretary of State to get the approval of Parliament before giving directions under Clause 39. This is a significant departure from the present position, under Sections 6(2)(f) and 72(2) of the Civil Aviation Act 1982, which this clause largely replaces in respect of air traffic service providers. The procedure envisaged here would, I think, be the affirmative resolution procedure involving debates in both Houses.

We see no need or justification for this. The power to give environmental directions is long established. In the past, Parliament has been content to leave these matters for the Secretary of State to deal with, not least because he must have the flexibility to take a wide view. One example would be if the provider wished to remove a navigational aid that had residual environmental monitoring benefits. The provisions of this Bill have not altered that position. I suggest again that it would place an unnecessary burden on Parliament if these matters had to be referred to both Houses of Parliament. I would add that the Secretary of State would simply not be able to act in an unreasonable manner. If he were to act in such a fashion, he would be rightly open to judicial challenge.

The remaining amendments concern the provision requiring the Secretary of State to consult before giving a direction under this clause. As presently drafted, the Bill provides that the Secretary of State must consult a licence holder or authorised person regarding a direction to do or not to do a particular thing. The amendments proposed by noble Lords opposite try to ensure that licence holders or authorised persons in the plural are consulted where they are affected by a proposed direction. The fact of the matter is that we simply do not envisage issuing such a specific direction to more than one licence holder or authorised person. If such a situation did in the future arise, we would expect to issue separate directions and therefore any licence holder or authorised person would indeed be consulted. I hope that I have made clear why we regard the amendments as unnecessary. In the circumstances I invite the noble Lord to withdraw the amendment.

Lord Brabazon of Tara

My Lords, I am grateful to the noble Lord for the detailed explanation he has given for not wishing to accept the amendments. I am not entirely convinced that it would not be better to have parliamentary approval in some form or another, not necessarily perhaps by affirmative resolution procedure, as I proposed in one of the amendments. I am also grateful for his comments on consultation and on directions to individual licence holders. Having said that, I shall obviously need to read with care in Hansard what the noble Lord said. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Macdonald of Tradeston moved Amendments Nos. 3 to 6: Page 1, leave out lines 18 to 20. Page 1, line 21, leave out from beginning to ("interests") in line 24 and insert ("The only interests to be considered under subsection (1)(a) are"). Page 2, line 3, leave out from ("must") to ("as") in line 4 and insert ("apply them in the manner he thinks is reasonable having regard to them"). Page 2, line 5, at end insert— ("(4A) The Secretary of State must exercise his functions under this Chapter so as to impose on licence holders the minimum restrictions which are consistent with the exercise of those functions.").

The noble Lord said: My Lords, I spoke to Amendments Nos. 3 to 11 with Amendment No. 1. I beg to move Amendments Nos. 3 to 6.

On Question, amendments agreed to.

Clause 2 [CAA's general duty]:

Lord Macdonald of Tradeston moved Amendments Nos. 7 to 11: Page 2, line 8, at beginning insert— ("(A1) The CAA must exercise its functions under this Chapter so as to maintain a high standard of safety in the provision of air traffic services; and that duty is to have priority over the application of subsections (1) to (4)."). Page 2, leave out lines 22 to 24. Page 2, line 25, leave out from beginning to ("interests") in line 28 and insert ("The only interests to be considered under subsection (1)(a) are"). Page 2, line 35, leave out from beginning to ("as") in line 36 and insert ("apply them in the manner it thinks is reasonable having regard to them"). Page 2, line 36, at end insert— ("(4A) The CAA must exercise its functions under this Chapter so as to impose on licence holders the minimum restrictions which are consistent with the exercise of those functions.").

On Question, amendments agreed to.

Clause 3 [Restrictions on providing services]:

[Amendment No. 12 not moved.]

Clause 4 [Exemptions]:

[Amendment No. 13 not moved.]

Clause 5 [Licences: general]:

[Amendment No. 14 not moved.]

Baroness Thomas of Walliswood moved Amendment No. 15: Page 4, line 8, leave out from beginning to second ("the") in line 11 and insert ("a not for profit company, formed and registered as a company limited by guarantee under the Companies Act 1985 or").

The noble Baroness said: My Lords, the purpose of the amendments in this group is the transfer of National Air Traffic Services to a not-for-profit trust in substitution for the Government's proposal of its transfer to a public/private partnership. The principal amendment in the group is Amendment No. 35. This clearly defines the company as one that issues no shares and pays no dividends to its members.

Amendment No. 35, together with Amendment No. 36, also requires that this transfer shall not take place until it has been approved by a resolution of both Houses.

Amendments Nos. 38 to 40, 44 and 45 are consequential. Amendments Nos. 41 and 42 provide for the Secretary of State to be able to modify a scheme before it is laid before Parliament. Amendments Nos. 47 and 48 omit certain sections of Clauses 47 and 48 which are incompatible with our amendments. Amendments Nos. 49, 50, 56 and 63 omit respectively Clauses 49, 50, 51 and 55. Amendment No. 64 adds to Clause 56. Amendments Nos. 68, 69, 71 and 72 amend later clauses accordingly. Finally, Amendments Nos. 58, 59 and 62 amend Clauses 52, 53 and 54 to enable the Secretary of State to make loans to, guarantee the discharge of the financial obligations of, and make grants to a not for profit company to which NATS has been transferred. I have spoken briefly because I dealt with the amendments at greater length in Committee.

During the long passage of the Bill through both Houses we have become, as it were, the standard bearers for an approach to the future character of our National Air Traffic Services which has support far beyond these Benches. Without looking too far backwards I remind the House that the trust model was the option favoured by the Select Committee and by many Members in another place. The advantages of the model are its relative immunity to takeover, the construction of a trust board which would reflect both public and stakeholder interests—airline companies and employees, which are so important—and the ability of the board to raise funds at lower rates of interest.

Today I want to look forward and discuss those arguments which have developed since Committee stage. First, the Minister was very dismissive of NavCanada's ability to satisfy the requirements for reducing operational costs, increasing investment and greater accountability. NavCanada is, of course, the model for what we are putting forward today.

Since Committee stage we have had a report from the noble Lord, Lord Brett, on his visit to Canada which clearly refutes these doubts. NavCanada has substantially reduced its operating costs and increased its investment programme in the past two years, as the 1999 annual report shows. The Canadian Government are entirely satisfied that its economic and safety regulatory regime is adequate to maintain the public interest in safety as well as the financial energy of the trust. Moreover, the airlines seem satisfied with their powers to influence decisions which affect their costs. In other words, a satisfactory balance has been struck between public and private interests.

Secondly, in Committee the Minister made much of the opportunities that would be available to NATS as a PPP to play a part in the air traffic control market of other countries. Yet now we see that the bidders for this PPP include not only foreign-owned suppliers to the air traffic control industry, which must create a conflict of interest, but also several major, national publicly-owned air traffic control organisations. In other words, the PPP will create a market in our air traffic services while protecting those of other countries—Ireland, Germany and Iceland are all bidders—which are all publicly owned.

I am mindful that we are at Report stage and that there are other speakers well able to expand on the points on which I have deliberately touched in general terms. I urge the Government most sincerely and fervently to reconsider their proposals for a PPP even at this late stage. It would be of benefit to them and to the future conduct of air traffic services in this country. I beg to move.

Lord Brett

My Lords, I thank the noble Baroness, Lady Thomas of Walliswood, in moving this amendment, for drawing attention to my visit to Canada. I went there because I did not recognise the NavCanada model, which I thought I knew, from the Government's response to the Select Committee report in another place. What I sought to do through interviews with representatives of airlines, with NavCanada itself, with Transport Canada, the sponsoring ministry originating the trust, and with the controllers and engineers, was to understand their experience. I was reassured that my understanding was not awry and that investment had increased to 400 million Canadian dollars. Operating costs had been reduced by 24 million dollars per annum. There were also reduced charges to the airlines of about 225 million dollars per annum. There was also an increase in training of about 200 air traffic control staff.

I also asked how the decision was reached. Originally, there was wide consultation, looking at six models. That was short-listed to three, and finally they decided on the trust model. They had looked at the equivalent of a PPP—they called it a mixed company—but rejected it. The PPP that they sought would have delivered much the same results as those sought here. But they decided that they could do better via a trust model. That has been successful in achieving its ends. It is not as unaccountable as was suggested in another place. It seems to be a model which has enjoyed success and the confidence of the staff and pilots of the Canadian skies and the public at large.

I also discovered that the Canadians had been very concerned about conflicts of interest. We are looking at a new situation. We now know that the number of bidders for the NATS strategic partnership has been reduced from eight to four. As the noble Baroness said, they all have potential conflicts of interest. It is possible that the DTER will have responsibility for ensuring that those conflicts are removed. The list of four could be reduced to a lower number in a matter of weeks or days. Therefore, I echo what the noble Baroness said. Perhaps even at this late stage the Minister would consider a non-profit-making trust model.

I made my report available to all Members of your Lordships' House who had participated at Committee stage. I also made it available to the Minister. A number of noble Lords kindly commented on the report. I understand entirely why my noble friend the Minister has been unable to do so because of the many other pressures on his time, particularly at the present time. Whatever the outcome of this discussion, I hope that the Government will be prepared to look again at a model which I believe will give enhanced confidence to the four groups—I call them the four "P"s—that we have to satisfy. They are the public, the pilots, the practitioners and the various parliaments. During the 10 months of this ongoing debate none of the four "P"s has been entirely satisfied. It is not too late to look again at a model which will ensure that greater confidence is gained more quickly rather than continuing with the Government's present plan.

Lord Clinton-Davis

My Lords, I speak on behalf of the British Airline Pilots Association, of which I am the president. I have made full disclosure to the House. Any statement that I make in relation to other amendments are dependent on that.

At the very outset my noble friend Lord Brett said that he had visited Canada and seen for himself the operation of the scheme. He is right or wrong. It is incumbent on the Minister today to satisfy the House that the Canadian scheme has no application in this country. He has not done that so far. I am not sure about it.

My noble friend the Minister has a duty to provide rather more than that. He has to show that his officials, preferably himself, have been to Canada and repeated the experiment that my noble friend Lord Brett has undertaken. So far the Minister has not done that. He has that duty because this House is concerned about air traffic control. The noble Baroness, Lady Thomas of Walliswood, moved the amendment on the basis that many people are concerned about the issue. That is the case and I speak on behalf of them today. It is not simply the pilots, but a great many people who are concerned about safety.

Bearing in mind that the Minister has not been to Canada himself, he has a duty to inform the House why he is so opposed to the scheme. He may be right.

He has to inform the House, not on the basis of what civil servants have advised him, but on what basis he has determined that the Canadian experiment has no relevance to what we are considering today. I do not think that he can.

5 p.m.

Lord Haskel

My Lords, I am somewhat cautious about copying schemes from other countries. After all, other countries have different cultures and circumstances. Those schemes can be adapted but, if we have schemes in this country with which we are familiar, they should take priority in our consideration.

I quite like public/private partnerships. We are operating them in other parts of the economy: in health, in hospitals; and in construction with housing. It is a formula which has been developed in this country. It gives us access to private sector finance in a way that is acceptable. We have also developed ways of regulating public/private partnerships.

I am a little concerned about not-for-profit companies. Over many years in business I have learnt that profit is a great incentive to efficiency, effectiveness and to meeting the needs of customers. I hope that the Minister will give some consideration to these matters. I am not entirely sold on the copying of the formula from Canada.

Lord Hoyle

My Lords, I rise to speak because if I had not done so my noble friend Lord Haskel would have forced me to my feet. I respect him as a business person but I was somewhat amazed at his remarks today. As regards air traffic control, there is concern about one issue—safety. For the life of me I cannot understand how safety is enhanced by profit determination: that there must be profits and safety must suffer because of that. I ask my noble friend to think again. We are talking in this instance about safety.

Lord Haskel

My Lords, does my noble friend agree that safety is not entirely the prerogative of the public sector? Safety is also very important, and is maintained, in the private sector.

Lord Hoyle

My Lords, it is indeed. But my noble friend will agree that there are many cowboy firms in the private sector. The public sector is at least accountable with regard to the standards which should be acceptable to all of us. It is ironic that these remarks are made at a time when we have seen the failure of privatisation on the railways. We have heard of the damaged track which has cost lives. Can my noble friend imagine what would happen if aircraft began to fall from the skies following our determination on this issue? Safety is uppermost in the minds of the public.

I ask the Minister to reflect on that point when he replies. We should at least think carefully before we go down the path advocated in particular with regard to the bidders. All are flawed. All have a conflict of interest. I refer, for instance, to the airlines. I am attracted more to the airlines bid than to the others—and the airlines bid is not conceived on the basis of profit. Safety of customers is paramount in the minds of the airlines. As regards efficiency, they are interested in reducing the costs charged to them. But in relation to the consortium, foreign airlines flying in might think that preference would be given—

Lord Hughes of Woodside

My Lords, if my noble friend will forgive me, perhaps I may intervene. I seem to be missing part of the argument. I thought that airlines were private companies.

Lord Hoyle

My Lords, we are referring to an airline consortium which includes a public sector in the Irish Government's control. I am saying that it is a no-profit trust model. I think that would be of concern to my noble friend Lord Hughes of Woodside. I shall be surprised if he does not believe that safety should be paramount and that profit should not be one of the major consideration in any trust set up. That is what I sought to say in relation to the airlines. But there is a public sector partner and it seems strange to me that we are going outside for public sector partners—to New Zealand, and with regard to the airlines to Ireland—and yet are taking our air traffic controls out of the public sector.

I cannot believe that Lockheed Martin is a serious consideration. Not only is there conflict of interest because it is a manufacturer; it is also responsible for the new air traffic centre at Swanwick being delayed for six years. What will it bring to the table?

The same consideration applies to Raytheon. There is a conflict of interest because it is a supplier of equipment. Even worse, if it came in what about Lockheed Martin's system which should have been operating at Swanwick? It is planned for Scotland. There would be obvious conflict of interest there. Lockheed Martin would not allow Raytheon to use its data and would not supply it. Raytheon would have to bring in its own system which would further delay the advances made.

Serco has a small amount of operational knowledge; it deals only with small airports. It has withdrawn from Liverpool airport. I should like to know why Serco is being considered.

Perhaps I may refer to what has been said. We all owe a debt of gratitude to my noble friend Lord Brett for going to Canada to see what was happening on the ground rather than accepting what the Civil Service told us. It is often better to see for one's self what is occurring. Before his departure it was said that the airlines bear full financial risk without being in a position to manage that risk. On examination, the airlines exert substantial influence in the NavCanada model. They have five directors on the board. They believe that improved safety and investment performance has resulted. The bondholders are taking the risk, not the airlines.

Lord Clinton-Davis

My Lords, perhaps I should have made this point myself. Perhaps my noble friend will explain why a former Labour government of approximately five years and three months did not take any action in this regard. Is it not a fact that that Labour government considered that NATS performed well? Is there any evidence that NATS has failed to perform up to standard in the 20 years since that Labour government ceased to be in office?

Lord Hoyle

My Lords, as my noble friend will understand, it is for the Minister to reply. Like my noble friend I am puzzled because I had thought that the safety standards set by NATS are second to none not only in this country but throughout the world.

It was also said that NavCanada is not responsible to anyone. Again that statement is not true because the Canadian Government have a great deal of control over it. There is a right to call it in; there is a right to check it. If one considers what has happened in relation to the NavCanada model, not only has safety improved but efficiency has improved and costs to the airlines reduced. New air traffic controllers have been recruited and are being trained.

A lot of that relevant information would not be before us if my noble friend Lord Brett had not undertaken his mission to Canada. My noble friend the Minister has said that safety should be uppermost. Why put the whole thing at risk by going forward with any of the four bidders, all of which are flawed in one way or another? Surely it is time to consider again setting up a trust model. I accept that it does not have to follow the Canadian model exactly, but it should be a non-profit-making trust. That would mean that safety was paramount. That is why I ask my noble friend to give the matter more thought.

Lord Roll of Ipsden

My Lords, I shall not detain the House by repeating the many excellent arguments that have already been made for the amendment. I simply remind the Government of a very good American saying, usually attributed to Harry Truman: "If it ain't broke, don't fix it".

Lord Smith of Clifton

My Lords, in speaking to Amendments Nos. 34 and 35 and the associated amendments, I return to an important point that I made in Committee, because I have not yet had an adequate answer from the Government. I refer to the relative costs of the proposed PPP scheme and the public trust scheme that we advocate.

The Secretary of State has estimated that NATS will require £1.3 billion of investment over the next 10 years. As I have previously pointed out, the cheapest way would be for the Chancellor to fund that. Since he has declined that option, the next best way is to form a public trust along the lines of NavCanada to raise the necessary funds on the money market. Given its guaranteed income flow, it would attract the highest security rating and could thus borrow at the cheapest rates. Lower interest rates would mean lower costs to the airlines and passengers alike, as NavCanada has achieved.

That would be much cheaper than selling half the equity shares in a privatised NATS, as the Government intend. Why are the Government hell bent on pursuing such an expensive method? Why should the public be fleeced in that way?

Unprecedentedly, the National Audit Office has initiated a detailed examination of the Government's proposed PPP for the London Underground. The NAO is particularly examining its value for money relative to other options and its safety implications. If prior NAO scrutiny is deemed necessary for the Government's plans for part-privatisation of the London Underground, why are the Government not submitting similar plans for the part-privatisation of NATS? It would be just as appropriate and just as crucial on cost and safety grounds.

I hope that the Minister will be able to give a considered response to that important question. We believe on all counts that the public trust proposal for air traffic control remains the best option, as the noble Lord, Lord Brett, has demonstrated.

Baroness Gibson of Market Rasen

My Lords, I had not intended to speak in the debate, but when words such as "trust", "profit" and "safety" were used, I felt that I should. Until 30th September, I was a health and safety commissioner. We often looked at reports of cases in which health and safety had been endangered. Time after time, profit was the reason for safety precautions being cut. The admirable idea of a not-for-profit trust should be accepted.

5.15 p.m.

Earl Russell

My Lords, can the Minister cite one case in which the private sector has delivered safety without the benefit of competition?

Lord Elder

My Lords, I fear that there are still some doubts about the ability of the private sector to be involved in any process that has safety at its heart. That fundamental fear is tainting some of the views that have been expressed. I do not accept that the private sector is incompatible with the provision of safety, so I do not approach the issue feeling that there is a need to exclude the private sector from the equation or to constrain its impact.

The Bill faces up to the need to add first-class project management skills to the real operational expertise of NATS. That has consequences.

I have not had the benefit of a trip to Canada—or at least, not to look at air traffic systems. I have three brief points to make about what we have heard. First, the situation in Canada is very stable. There has been a lot of investment and the situation is being managed. We need enormous new investment. I do not believe that it is appropriate to raise such sums without some equity.

Secondly, the Canadians do not have the considerable problem of congestion that exists in European and UK air space.

Lord Hoyle

My Lords, I am sorry to interrupt, but will my noble friend look at the record of NATS?

Whenever it has asked for a loan from the Treasury, it has always repaid it with interest. It is a profitable company. There is no reason that the Treasury could not put up the money. NATS would repay it. We all know that we are awash with money at the moment.

Lord Elder

My Lords, if we added up all the things that people say that we could spend money on because we are awash with it, we would soon be in the position that we were in under the previous administration, when borrowing was going up sharply and we were far from awash with money. That is not a sensible basis on which to proceed.

Canada is not a congested country and does not have to face up to the difficulties that we have. The proposed structure for the board of a trust is similar to the current structure at the BBC. Over the past 20 or 25 years, that structure has not had sufficient sharpness or dynamism to enable the BBC to deal with sharp competitive intrusion into its market. It is all very well for managing something—in the case of the BBC, managing the decline in its control over world broadcasting—

Lord Brett

My Lords, will my noble friend explain where the competition is in air traffic control? It is a natural monopoly of the air over our country. I do not accept the analogy with the BBC's competition from independent or satellite television.

Lord Elder

My Lords, the issue is how to get a sharp, competitive body that will have to deal with the massive restructuring that there will be in European air space in the next few years. We are not dealing with a stable or unchanging situation. If we were and there were no possibility of restructuring, I would probably support the proposal, but it would not provide a sufficiently sharp or commercially focused unit that would be able to deal with the restructuring that there will undoubtedly be in Europe. In those circumstances, NATS will certainly lose out. For those reasons, I hope that the amendment will not be accepted.

Lord Brabazon of Tara

My Lords, it might be help if I briefly set out the views of the Conservative Party on the amendments. I am most grateful to the noble Baroness, Lady Thomas, for having explained them so ably. As has been said, we also owe a tremendous debt of gratitude to the noble Lord, Lord Brett, for having visited Canada—I gather at his own expense, as he said on the radio this morning—and for bringing back a report which I found so interesting. I look forward to hearing the Minister's reply to some of the points where clearly a difference of opinion exists between what the noble Lord, Lord Brett, found in Canada and what we were advised the last time this issue was debated in your Lordships' House.

I am not sure whether the Canadian trust model is the best one. Therefore, if the noble Baroness, Lady Thomas, decides to divide the House on this issue, I do not feel able either to support or to vote against the amendment. I believe that that will be music to the ears of a number of noble Lords opposite, not least because on the previous occasion the noble Lord, Lord Hoyle, among others, said that it would be entirely opportunistic for noble Lords on this side of the House to support an amendment when it was quite well known—

Lord Hoyle

My Lords, I said that it would be a marriage made in Hell.

Lord Brabazon of Tara

My Lords, I have the noble Lord's quotation somewhere but I did not intend to extract it at this point. He may well have said that. However, I agree with him about some of the points that he made in relation to the conflict of interest among the bidders for this process. I shall not give a commentary on the four groups involved, but I consider that the noble Lord put forward some well made points.

I believe that it was the noble Lord, Lord Clinton-Davis, who said that a raft of people is concerned about this issue. He is right about that. I also agree with the noble Lord, Lord Haskel, that profits are not always bad. I submit that not a single person in aviation could say that British Airways is any less safe since it was privatised and since it has looked, sometimes elusively, for the profit motive.

Lord Brett

My Lords, I am grateful to the noble Lord for giving way. I accept the profitability of British Airways. But is it not curious that the profit-making British Airways is a main mover in a not-for-profit consortium? Obviously it does not view profit as part of air traffic control.

Lord Brabazon of Tara

Yes, my Lords, I agree with that. I said that I did not consider it right to comment on individual groups or to list my favourite bidder, but the noble Lord's point is well known. I agree with the noble Earl, Lord Russell, who said that competition was involved. That is an interesting point. I hope that that clarifies the position from this side of the House.

Lord Macdonald of Tradeston

My Lords, new Clause 35 and its associated amendments seek to restrict the strategic partner to a not-for-profit company. The new clause would also require the Secretary of State to satisfy himself that the company includes representatives of employees and users of aviation, air travel, air navigation and related services.

I assume that one purpose of the new clause is to establish that profit will not be put before safety. However, perhaps I may assure noble Lords that whatever type of strategic partner we select, whatever its nationality and whoever it is, profits will never be put before safety. I believe that that was made clear in the first amendment that we discussed today, which was so warmly welcomed.

This PPP will not jeopardise safety; rather, it is designed to enhance the safety regime for air traffic control. Safety regulation will stay firmly in the public sector in a reformed CAA. The robust public sector regulatory regime will ensure that whatever the status or ownership arrangements for NATS, the company will remain one of the safest air traffic service providers in the world. In short, I do not accept the profit before safety argument and nor should other noble Lords.

Let there be no doubt that we take safety extremely seriously, as we demonstrated earlier today. The additional amendments that we tabled reflect our fundamental and overriding commitment to safety. In any event, I stress again to your Lordships and to my noble friend Lord Hoyle that there is absolutely nothing in this legislation or, indeed, elsewhere that would prevent a viable not-for-profit company from becoming our strategic partner. If such a company can pass all the eligibility criteria, can otherwise be made compatible with our proposals for the PPP, such as shareholdings, and puts forward a good bid, then a not-for-profit group could be the right partner for the Government.

However, in order for us to take a view on that, and for a not-for-profit group to prove that it offers the best future for NATS, there needs to be a competitive process which allows a rational assessment of all the bids that we receive. A not-for-profit bid needs to stand up and be assessed alongside other bids. Limiting the selection criteria to a not-for-profit group would knock out potential candidates who at the end of the day might be better partners.

The second change which the new clause would bring about would be to require the involvement of representatives of employees and users of aviation in the ownership of the company. It is certainly entirely right o assert that such people have a crucial interest in the future of NATS. That is why we devised the innovative stakeholder council. Although not part of the decision-making structure of the company, it will certainly be an influential body whose views will carry considerable weight. In addition, apart from their participation in the council, the employees of NATS will have a 5 per cent stake in our PPP.

The proposed amendment suggests that some noble Lords believe that a trust model such as NavCanada is appropriate for NATS. I say to the noble Lord, Lord Clinton-Davis, that I do not believe I shall feel the need to go to Canada to examine it carefully. I am grateful to the noble Lord, Lord Brett, for the perseverance that he showed in bringing the Canadian experience to our attention. However, I listened, too, to my noble friend Lord Haskel and note the business experience that he brings to bear when he says that the NavCanada experience may well suit Canadian circumstances but we do not believe that it provides the best solution for air traffic control in the United Kingdom.

A key rationale behind the PPP model is the improvement of NATS project management expertise, along with access to private sector finance, so that NATS can invest successfully in the right technology to meet growing demand safely. We do not believe that NavCanada would meet those needs. In the NavCanada model the airlines clearly have a great interest to ensure that the company is operated commercially. However, in the absence of equity participants, the airlines would bear the financial risk as users of the service. If, for example, an investment project overran its budget through mismanagement, the users would pay higher user charges. Under the PPP model, the economic regime and participation of equity holders mean that the airlines will not have to bear the financial risk. For example, if an investment project overran its budget through mismanagement, through the regulatory regime it would be the equity participants, who are best placed to manage the project, and not the airlines who would shoulder that risk.

Lord Clinton-Davis

My Lords, I am obliged to the noble Lord for giving way. Is he saying that British or any other airlines have opposed the Canadian experiment? The logic of that would be that together they would have announced some kind of dérnarche against the Canadian experiment, but, so far as I know, they have not done so.

Lord Macdonald of Tradeston

My Lords., airlines which have involved themselves in the not-for-profit bid clearly are prepared to take that risk. However, we are discussing how we believe that our PPP might be best founded. I should say that NavCanada itself refers to the setting up of its trust which, incidentally, was followed by a massive reorganisation over the past three years in the form of privatisation. As we have made clear time and time again, we consider complete privatisation to be unacceptable in a service which is as strategic and sensitive as air traffic control.

5.30 p.m.

Lord Brett

My Lords, I am slightly confused. The Minister is concerned about the airlines carrying the risk. But that concern is not only not shared by airlines in this country, which have gathered together to form a not-for-profit consortium, but in Canada the airlines seem to be extremely content with their model, in which the Minister suggests that they have all the risks and none of the controls. So if the airlines on both sides of the Atlantic, which are the main customers, are content, that seems to me to be something that we may want to consider further in terms of that model. The Minister seems to be suggesting that the airlines may be stupid in taking that risk, which they are not. They have found a way of doing this. It is interesting that no airline whatever seems to want to have a for-profit model.

Lord Macdonald of Tradeston

My Lords, I said earlier that I am ready to accept that airlines will be involved in a not-for-profit bid, and that will be judged on all-fours with all the other bids involved. I am simply saying that in the scope that we offer in the competitive processes of the PPP, it will be possible for other strongly founded bids to be brought forward.

My noble friend Lord Hoyle compared the PPP proposal for NATS with that for rail privatisation. There really is no similarity. The railways suffered from many years of under-investment and, by the recent admission of the party opposite, were imperfectly privatised. We are introducing a PPP precisely because we believe that it will secure the finance and management skills to maintain the position of NATS as a world leader in state-of-the-art air traffic control systems.

So it is not a privatisation as practised previously. It is a public/private partnership with a strong role for the Government.

Lord Hoyle

My Lords, I hear what my noble friend says. But is it not true that immediately afterwards the Government shareholding in the company will be diluted? Will that not bring about fresh fears? It may be very unfair, but at a time when rail safety has been put at risk because of privatisation, will not this measure be seen as a partial privatisation by the public? If any accident did occur, however unfair it may be, we should stand condemned if we go down this road.

Lord Macdonald of Tradeston

My Lords, I believe that it is misleading of my noble friend to imply that we intend instantly to dilute the Government's share. We have said that if the company in due course decides to raise more money, and in that way wishes to go out into the marketplace, then we should be prepared to see the Government's share go down from the original 49 per cent. But that would in no way undermine the controls that were exercised on the company. There would simply be a dilution of the share in what might perhaps be a much more valuable company in due course.

If we thought for one moment that there was any read across from the tragic events on the railways last week to our policy for NATS and the PPP, then we should not be asking your Lordships' House to press ahead with that policy. I assure your Lordships that there is no connection between the two.

The noble Earl, Lord Russell, asked whether the private sector has delivered safety without the benefit of competition, presumably at any time or at any place. I should have preferred more notice of that question but I should have thought that in de facto terms, if you take the British Airports Authority, which is a de facto monopoly in many areas, that has been run with conspicuous safety since its privatisation.

As regards the contribution of the noble Lord, Lord Smith of Clifton, the PPP will benefit from a very solid credit rating and will be well able to finance its business in a cost-effective manner. Of course, it comes with other benefits which I have described. I cannot speak for the National Audit Office's work programme but I believe firmly that we can demonstrate that value will be produced by this PPP for the public. I have no doubt that the NAO will make its views known in due course.

I turn now to some of the issues raised by my noble friend Lord Brett. There are some similarities between NavCanada and the PPP. Both clearly provide for a measure of stakeholder scrutiny. The PPP model provides for a good measure of stakeholder scrutiny; for example, through the stakeholder council, about which I spoke earlier, and through the employee shareholding. But because capital is at risk, the scrutiny of shareholders can act more powerfully than that of stakeholders.

The Government therefore believe that shareholder participation will be particularly effective in helping NATS to improve its performance in terms of safety, meeting customer demand and efficiency. Shareholders will also be more inclined to have a view as to the wider interests of the business than might some stakeholders.

In addition, the PPP accountability framework will have a number of features in common with the NavCanada model—government-appointed directors, consultation on charges, safety regulation by a public sector authority and government emergency powers of direction.

But the PPP will benefit also from a direct line of accountability to the owners of the business—the strategic partners, the employees and the government—and that accountability to the owners of the business strengthens the incentives to meet customer needs and improve the performance of the business.

Nor do we believe that the trust or NavCanada model would provide a platform to bring in a committed, world-class strategic partner to inject complementary expertise into NATS' operational skills or that it would provide sufficiently strong incentives to improve its performance.

The final area of doubt relates to the ability of that trust model to compete effectively in what we believe will be a liberalised world market for air traffic control. A trust set-up would lack the motivation, initiative, skills or credibility to compete effectively and thus would deny the United Kingdom a key role in an expanding world market.

Lord Brett

My Lords, if one looks at the four proposed strategic partners, two are major equipment suppliers, one is a management company with some considerable experience of managing swimming baths and light railways. Two of them have an international approach. Would it not be the case that if one of the multinationals were chosen to be the strategic partner and it then formed a partnership in Holland or in another part of the world, it would have precisely the same relationship with that country that it had with NATS in the PPP here? Therefore, it would not see as a priority the expansion of the British interest. We have seen that with dam construction and similar major projects, consortia are created within countries. That would include the strategic partner but it would not include the British Government or the other partners within the PPP. That is my view.

Lord Macdonald of Tradeston

My Lords, I hear what my noble friend says. I do not want to say anything which would in any way prejudice any of the parties which might put themselves forward to compete for the role of strategic partner in NATS. I stress again that among the companies which have come forward there clearly is complementary expertise which we believe would strengthen the company which we are moving to create.

The proposed new clause and its associated amendments are unnecessary and we invite noble Lords to withdraw them. The purpose of the proposed new Clause 36 is to require Parliament to approve a made transfer scheme before it can be put into effect, after a draft has already been approved under new Clause 35.

It also requires the Secretary of State to produce a progress report on the development of NATS' facilities before any secondary legislation can be considered. This new clause and its associated amendments would result in an extremely time-consuming and cumbersome mechanism Proposed schemes will be subject to consultation with those concerned.

They will be designed to achieve the complete separation of regulation from service provision. Double parliamentary approval for each scheme is entirely unprecedented and could jeopardise the PPP timetable.

The requirement for the Secretary of State to produce a report on the development of the facilities connected with National Air Traffic Services is also entirely unnecessary. I assume that that has been inserted in order to place on the face of the legislation some commitment to the Prestwick centre. That commitment will be contained in the strategic partnership agreement and will also be a licence condition. In addition, the Government accepted an amendment in another place which will reinforce these commitments on the face of the legislation. The amendment is now Clause 51(3) of the Bill.

The main purpose of Clause 56 is to ensure that the Secretary of State and the Treasury are not regarded as shadow directors of NATS and its new subsidiaries for the purpose of certain provisions of the Companies Act 1985. The purpose of Amendment No. 66 is to remove that protection.

Shadow directors are persons who have not been appointed to the office of director of a company but who are treated by the Companies Act as de facto directors. The obligations imposed by the Companies Act on shadow directors fall broadly into two categories — those which are intended to reveal to the public the persons who are directing the company from behind the scenes, and those which are intended to protect shareholders from directors taking financial advantage of the company.

As the Secretary of State's interest in NATS and its subsidiaries will be public knowledge, the provisions of the Companies Act are not necessary in the context of the PPP. Removing Clause 56 would expose the Secretary of State to administrative inconvenience in complying with the Companies Act without any corresponding public benefit.

In any event, there is precedent for a provision of this nature. Similar provisions are to be found in the Commonwealth Development Corporation Act 1999 and other legislation dealing with government assets.

I have dealt at length with a number of proposals for new clauses and for other amendments to the Bill. For the reasons I have given, I urge noble Lords to reject all the amendments proposed.

Lord Prior

My Lords, before the Minister sits down, perhaps I may ask him to reflect on two points. First, bearing in mind the announcement about BSE today, and all that has been said, can he be certain in his own mind that the advice he has been receiving is what he wishes to do? This is a major issue of safety. He has to be absolutely certain about his own views on the subject and not perhaps pay too much attention to the expert advice he might be given.

Secondly, will the Minister always remember that what originates from the Treasury—I think that the Treasury has quite a lot to do with this—-is not always correct?

Lord Macdonald of Tradeston

My Lords, given his experience both in government and business, I listen to the noble Lord, Lord Prior, with great respect. As I said earlier, we are going forward in the belief that the investment of £1.3 billion, which we believe will be unlocked over the next 10 years, will create a higher and safer platform of technology which will enable air traffic services in the United Kingdom to continue to lead the world in safety, and, indeed, where possible, to export that expertise in safety, not only to Europe but around the world.

Baroness Thomas of Walliswood

My Lords, I thank the Minister for his reply. I pay tribute to the large number of speeches in support of our amendment from all sides of the House and, on occasion, from unexpected quarters. We have been debating this amendment for 57 minutes. I shall resist the temptation to rehearse the arguments. I believe that the number of people who spoke on our behalf and on our side of the argument fully justifies my testing the opinion of the House.

5.45 p.m.

On Question, Whether the said amendment (No. 15) shall be agreed to?

Their Lordships divided: Contents, 59; Not-Contents, 94.

Division No. 1
Addington, L. Dholakia, L.
Allenby of Megiddo, V. Ezra, L.
Avebury, L. Falkland, V.
Barker, B. Geraint, L.
Bradshaw, L. Goodhart, L.
Brougham and Vaux, L. Greaves, L.
Campbell of Alloway, L. Hamwee, B.
Clark of Kempston, L. Harris of Greenwich, L
Clement-Jones, L. Harris of Richmond, B
Holme of Cheltenham, L. Roll of Ipsden, L.
Jacobs, L. Roper, L.
Linklater of Butterstone, B. Russell, E.
Mackie of Benshie, L. Sandberg, L.
MacLaurin of Knebworth, L. Scott of Needham Market, B.
McNally, L. Sharman, L.
Maddock, B. Sharp of Guiklford, B.
Mar and Kellie, E. Shore of Stepney, L.
Methuen, L. Shutt of Greetland, L.
Miller of Chilthorne Domer, B. Smith of Clifton, L. [Teller]
Mowbray and Stourton, L. Swinfen, L.
Murton of Lindisfarne, L. Taverne, L.
Naseby, L. Thomas of Walliswood, B.[Teller]
Newby, L.
Northover, B. Thomson of Monifieth, L.
Oakeshott of Seagrove Bay, L. Tordoff, L.
Phillips of Sudbury, L. Trefgarne, L.
Razzall, L. Walmsley, B.
Redesdale, L. Weatherill, L.
Rennard, L. Wigoder, L.
Rodgers of Quarry Bank, L. Williams of Crosby, B.
Acton, L. Hunt of Chesterton, L.
Ahmed, L. Hunt of Kings Heath, L.
Alli, L. Irvine of Lairg, L. (Lord Chancellor)
Amos, B.
Andrews, B. Islwyn, L.
Archer of Sandwell, L. Janner of Braunstone, L.
Ashley of Stoke, L. Jay of Paddington, B.(Lord Privy Seal)
Ashton of Upholland, B.
Bach, L. Kennedy of The Shaws, B.
Bassam of Brighton, L. Kirkhill, L.
Bernstein of Craigweil, L. Lipsey, L.
Billingham, B. Lofthouse of Pontefract, L.
Blackstone, B. Longford, E.
Borrie, L. Macdonald of Tradeston, L.
Bragg, L. McIntosh of Haringey, L. [Teller]
Brennan, L.
Brooks of Tremorfa, L. McIntosh of Hudnall, B.
Burlison, L. MacKenzie of Culkein, L.
Carter, L.[Teller] Mallalieu, B.
Cocks of Hartdiffe, L. Marsh, L.
Cohen of Pimlico, B. Massey of Darwen, B.
David, B. Molloy, L.
Davies of Coity, L. Morgan, L.
Davies of Oldham, L. Peston, L.
Desai, L. Pitkeathley, B.
Donoughue, L. Plant of Highfield, L.
Dormand of Easington, L. Ponsonby of Shulbrede, L.
Dubs, L. Prys-Davies, L.
Elder, L. Ramsay of Cartvale, B.
Falconer of Thoroton, L. Randall of St. Budeaux, L.
Farrington of Ribbleton, B. Rendell of Babergh, B.
Faulkner of Worcester, L. Sainsbury of Turville, L.
Filkin, L. Sewel, L.
Gale, B. Shepherd, L.
Goudie, B. Simon, V.
Gould of Potternewton, B. Smith of Gilmorehill, B.
Grabiner, L. Stone of Blackheath, L.
Graham of Edmonton, L. Symons of Vernham Dean, B
Greengross, B. Tomlinson, L.
Grenfell, L. Turnberg, L.
Harris of Haringey, L. Uddin, B.
Walker of Doncaster, L.
Harrison, L. Walpole, L.
Haskel, L. Warner, L.
Hayman, B. Wedderbum of Charlton, L.
Hilton of Eggardon, B. Whitaker, B.
Hollis of Heigham, B. Whitty, L.
Howells of St. Davids, B. Woolmer of Leeds, L.
Hughes of Woodside, L. Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.55 p.m.

[Amendments Nos. 16 to 18 not moved.]

Clause 8 [Duties of licence holders]:

[Amendment No. 19 not moved.]

Clause 12 [References to Competition Commission]:

[Amendment No. 20 not moved.]

Clause 17 [Commission's duty as to modifications under section 16]:

Lord Macdonald of Tradeston moved Amendment No. 21: Page 12, line 18, at beginning insert— ("(A1) The Competition Commission must exercise its functions under section 16(2) and (3) so as to maintain a high standard of safety in the provision of air traffic services; and that duty is to have priority over the application of subsections (1) to (4).").

On Question, amendment agreed to.

Lord Macdonald of Tradeston moved Amendments Nos. 22 to 26: Page 12, line 18, leave out ("Competition"). Page 12, leave out lines 33 to 35. Page 12, line 36, leave out from beginning to ("interests") in line 39 and insert ("The only interests to be considered under subsection (1)(a) are"). Page 12, line 46, leave out from ("must") to ("as") in line 1 on page 13 and insert ("apply them in the manner it thinks is reasonable having regard to them"). Page 13, line 2, at end insert— ("(5) The Commission must exercise its functions under section 16(2) and (3) so as to impose on licence holders the minimum restrictions which are consistent with the exercise of those functions.").

The noble Lord said: My Lords, I spoke to these amendments with Amendment No. 1. With the leave of the House I shall move them en bloc. I beg to move.

On Question, amendments agreed to.

Clause 27 [Air traffic administration orders]:

[Amendment No. 27 not moved.]

Clause 38 [Directions in interests of national security etc.]:

Lord Macdonald of Tradeston moved Amendment No. 28: Page 24, line 32, at end insert— ("(3A) In exercising his powers under subsections (1) to (3) the Secretary of State must have regard to the need to maintain a high standard of safety in the provision of air traffic services.").

On Question, amendment agreed to.

Clause 39 [Directions relating to the environment]:

[Amendments Nos. 29 to 33 not moved.]

Clause 41 [Meaning of transfer scheme]:

[Amendment No. 34 not moved.]

[Amendments Nos. 35 and 36 not moved.]

Clause 43 [Transfer schemes made by CAA]:

Lord Brabazon of Tara moved Amendment No. 37: Page 29, line 8, at end insert— ("( ) No direction to make a transfer scheme shall be given under subsection (1) before the first Session of the next Parliament after that in which this Act is passed.").

The noble Lord said: My Lords, in moving Amendment No. 37, I shall speak also to Amendments Nos. 43 and 46. The purpose of these amendments is to delay the coming into effect of a scheme to transfer NATS to a public/private partnership until after the next election.

It must be clear to everyone that the privatization public/private partnership as the Government prefer to call it—is highly controversial. Noble Lords will be glad to know that I do not propose to rehearse all the arguments again that we heard at Second Reading and in Committee in this House, and indeed that we heard on the last amendment on which we have just voted. Nor shall I remind the House once more of the attitude of the Labour Party when in opposition and the famous quotation from the then transport spokesman that ''our air is not for sale".

We heard this afternoon a powerful case for the Canadian trust model, as was said, a model favoured by the Transport Select Committee in another place. An amendment to that effect in another place caused the third largest rebellion so far from the Government Benches there.

In short, there seems to be more than enough controversy in the Government's proposals and such an enormous about-turn from what they were saying before the last election that we believe the electorate should have a chance to see these proposals in the Labour Party Manifesto before the next election.

There is a precedent for this kind of delay. In 1982, during the passage of the Telecommunications Bill, the then Secretary of State for Trade and Industry, now my noble friend Lord Jenkin of Roding, said, but neither the transfer of the assets and obligations to the new company nor the issue of shares to the public will take place before the next general election. We are content that the public should decide whether or not this important step should be taken". — [Official Report, Commons, 29/11/82; col. 39.] In other words, because the BT privatisation proposals had not been in the manifesto, and because it was then a controversial issue, the Conservative government of the day thought it only right and proper to put the issue before the electorate.

In his Statement on Tuesday to another place on the Hatfield derailment, the Deputy Prime Minister reminded us that in opposition in 1992 he suggested that we did the same with rail privatisation. He said: In fact, our argument was that the then Government waited to sell British Telecom until after the election, so they could have done the same with Railtrack".—[Official Report, Commons, 24/10/00; col. 151.] In other words, the idea of a delay was at that time in the mind of the now Deputy Prime Minister.

The NATS proposal is every bit as controversial as were those relating to BT and Railtrack. But the big difference is that, whereas the BT privatisation was something people would have expected from a Conservative government, the privatisation of NATS is the very last thing anyone would have expected from a Labour Government. That is all the more reason for the proposal to appear in a manifesto before being acted upon.

The Government will no doubt argue that the industry urgently needs the investment. Indeed, there is a need for investment. These amendments do not stop any of the preparations taking place, as they did not with regard to BT. But I believe that the Government plan the PPP to happen by spring next year. Everyone is expecting an election next spring, too, so the delay need be only a couple of months at most.

That is not really the point. The point is that the proposal is controversial and it should be put before the electorate in a manifesto. I beg to move.

Lord Clinton-Davis

My Lords, before the noble Lord sits down I want to ask him a question. He has argued only that the Government should do nothing precipitate at this stage. Has he considered the alternative to what the Government are suggesting because he has not mentioned one word about it? He has argued only that there should be a delay.

What are the Conservative Party arguing for? It is not for delay but that we should continue with the full privatisation of the NATS. Is that the case.

Lord Brabazon of Tara

My Lords, procedurally, the Question should be put on my amendment and I shall answer the noble Lord's points when I respond to the debate.

Lord Shore of Stepney

My Lords, with such complicated legislation, it is difficult to keep fully abreast with all the amendments before us. I must confess that when a short time ago I went into the Lobby in support of the Liberal Democrat amendment I thought that it was the only practical alternative to the thoroughly repugnant proposals in the Bill.

However, I had overlooked the excellent suggestion that is now before us. I am much in favour of the status quo; I believe that we have a wholly successful NATS which has a marvellous record of efficiency and safety. It also enjoys full public confidence. It might just be improved by the separation of the CAA as a regulatory body; one which examines it rather than being part of it. Apart from that, the status quo is excellent. Here, we have an amendment which suggests that we maintain the status quo for the next two or three years.

I find the proposal most acceptable for an additional reason which I want to mention to the House. Well within the next few months we shall have a new system for regulating air space in Europe. The common European sky proposals have been nurtured by the Commission during the past year, with all their implications for the control of British air space and of access to our airports by other nations. All of that will become plain and the implications within the new framework of a strategic partner for the United Kingdom will at last become obvious. All the bogus nonsense about being unable to finance our present virtually self-financing system will be put in the dustbin where it belongs.

Therefore, I greatly welcome the amendment. I would not wish to align myself further with the thinking of the Conservative Party on the future of NATS but I welcome the excellent opportunity to have a delaying period in which all will become plain.

Lord Clinton-Davis

My Lords, I follow my noble friend Lord Shore because I have been invited to repeat what I said in my intervention. It was, frankly, that I do not trust the Tories and I never have. And I do not trust them on this issue in particular. The Tories entertain a belief that they will win the next election. They had better disabuse their minds of that, particularly in the light of today's opinion poll.

Whatever the position of the Tories may be, I come to much the same conclusion as my noble friend Lord Shore. I believe that the Government can do nothing but benefit from a delay. They will not have an opportunity to carry out their proposals before the next general election. It may be May, September or October, but they have no reasonable chance of carrying out their proposals.

Secondly, I do not believe that the Government have any intention of carrying out their proposals. Whatever may be said by the Minister today, the fact is that the Government go through the motions of passing the Bill, as we expected of them, but they do no more than that.

Thirdly, we should carefully test what the skies of Britain need. It may be the European approach, which my noble friend completely discounts. It may be a system which closely resembles the present NATS—I do not know. However, whatever it is, it is entirely acceptable to the Government because I believe that, whatever my noble friend says here tonight, the Government have no intention whatever of doing anything for £1,300 million over 10 years.

That being the case, why does my noble friend get so up-tight about it? There is no reason for it. I entirely dismiss the Tories from this argument because they have no chance of winning the next election. But why is my noble friend so uptight about it? It is not as though the Government somehow pin their hopes on the economic benefits of the scheme. No sensible person believes that. That being so, why does my noble friend use every opportunity in this debate to colour badly that which the opposition on this side of the House proposes?

My noble friend waxed eloquently about the situation in Canada—he may be right or wrong—but one thing we do know is that NATS has served this country well. Does my noble friend dispute that? The main point raised by my noble friend Lord Shore is that over the past 30 years NATS has served the people of this country well. Why should the Government interfere with that?

Lord Trefgarne

My Lords, I am president of the Popular Flying Association and am myself an occasional user of airspace services. Therefore, I have a personal interest in this matter in two regards. I am not opposed in principle to privatisation, but the arrangements for continued access to airspace by general aviation are not yet properly in place. While the Civil Aviation Authority is anxious to secure adequate and proper arrangements, there is some very disquieting evidence from senior officials of NATS that they will resist them. I shall deal with that in more detail at a later stage of the Bill.

In the light of those considerations, I believe that it is better to delay the implementation of these provisions, as my noble friend Lord Brabazon proposes. I should like to see these provisions postponed until after the next election. That will give us a delay of perhaps a few months and allow the views of the Civil Aviation Authority in this matter to prevail over those of NATS, which I regard as less than helpful.

Baroness Thomas of Walliswood

My Lords, we shall support these amendments should the noble Lord press them to a Division. We do so very much in the same spirit as the noble Lord, Lord Shore, enunciated at the beginning of this brief debate. We are totally against the views of the Conservative Front Bench, whose ultimate aim is the total privatisation of NATS. However, we believe that a pause would be of benefit to the Government in enabling them to think again on the subject. It will ensure that they achieve a structure for NATS which responds not only to the demands for efficiency and so on but those placed upon it by the public. I refer to the safety culture to which the noble Lord, Lord Hoyle, spoke.

Another minor but nevertheless significant consideration is that a pause will give NATS, as it is now, additional time to make progress with modernisation of its technological base and the creation of the new centre at Swanwick. That is undoubtedly needed to meet the timetable of 2002, which is already six years late. That timetable may well be disturbed during the process of the part-privatisation. For those reasons, we shall join the Conservatives today if they decide to press the matter to a Division.

6.15 p.m.

Lord Macdonald of Tradeston

My Lords, as the noble Lord, Lord Brabazon of Tara, said, these amendments are intended to defer the making or approval of any transfer schemes until the Session of Parliament following the one in which the Bill before us receives Royal Assent. As the making of transfer schemes is a prerequisite to the establishment of the NATS PPP, this would inevitably lead to delays in the PPP timetable. I am sure noble Lords appreciate that there needs to be a degree of flexibility in the timing of the proposed sale. The necessary legislation (in the form of Part I of this Bill) must be in place so that ownership of NATS can transfer to the Secretary of State, who can then proceed to effect a partial sale. This in itself has acted as a constraint on the speed with which the NATS PPP can come into effect.

I believe that the restrictions which noble Lords opposite suggest go too far. They would lead to an unreasonable delay in implementing the transfer scheme provisions, and hence the sale, and I do not believe that that would be in the best interests of the various parties involved. We need to resolve the future of NATS once and for all and put an end to the uncertainty which has been hanging over staff and management for years.

My noble friend Lord Shore referred, with unexpected optimism, to the speed with which a single European sky might be achieved. My understanding of the importance of those proposals is that they would lead to better communication in overly congested airspace in Europe so that it could be managed more effectively. The technology suggests that the dozens of national jurisdictions across Europe could be reduced to five or six. As I have said before in your Lordships' House, in that consolidation lies the opportunity for a strong British company to become a world leader in selling safety and efficiency across Europe and the world. We believe that our PPP is entirely compatible with any likely outcome of the European initiatives that are in place.

My noble friend Lord Clinton-Davis again asks about our commitment to NATS. He suggests that perhaps in some way we disparage its safety record. That is not so. I have congratulated NATS on its very good safety record. The noble Baroness, Lady Thomas of Walliswood, referred to the problems of Swanwick. She might also have referred to the problems arising from investment in Prestwick. It is clear that project management of the kind of investment that we believe is needed in this industry is not best carried out by the structures which have been in place to date.

Lord Hoyle

My Lords, I am grateful to my noble friend for giving way. I said earlier that one of the partners that had been considered was Lockheed Martin, which is more responsible than anyone for delay at Swanwick. Can my noble friend explain how, if Lockheed Martin is successful in this matter, the situation will be improved?

Lord Macdonald of Tradeston

My Lords, I do not want to enter into assertions about responsibility in this case. It is accepted by the management of NATS itself that it does not have the expertise to run these kinds of projects as they should be run and that it is years and years behind in investment. We believe that, if we look to a decade of further investment, that is best achieved with the kind of expertise to be found in the right strategic partners in the private sector. For those reasons, I ask noble Lords to support us in advancing the PPP. I invite noble Lords opposite not to press these amendments.

Lord Brabazon of Tara

My Lords, I am grateful to the Minister for his reply, although I do not believe that he takes account of what the amendment seeks to achieve. The amendment does not prevent the rest of the legislation passing into law but merely asks the Government to do exactly what we did with British Telecom in 1982; namely, to delay it until such time as it has a mandate from the people.

I am grateful to those who have spoken to and supported the amendment. In particular, I agree with the noble Lord, Lord Shore. Whatever happens as a result of this matter, the separation of the regulator (the CAA) from the operator (NATS) is a good thing, and all sides of the House are agreed on that.

The noble Lord, Lord Clinton-Davis, asked me at the beginning what we on this side of the House would do. He then went on to say that we had absolutely no chance of winning the next election. Therefore, I am not quite sure why he was so concerned about what we might or might not do. We do not yet know what the outcome will be. We do not know what shape NATS will be in after the Bill is enacted. I can assure noble Lords that our proposals for National Air Traffic Services will be clearly set out in our election manifesto. Those proposals will take into account all the debates which have taken place both in this House and elsewhere on the issue. The noble Baroness, Lady Thomas, assumes that we will go forward with privatisation of NATS. I cannot say that we will; I cannot say that we will not. But I cannot say that the matter is yet decided. The point is that our decision will clearly be set out in our manifesto.

Lord Brooke of Alverthorpe

My Lords, some of us were listening very carefully to the noble Lord. He will seek, I suspect, to divide the House. We need and require clearer guidance from the noble Lord. It is right and proper that the noble Lord should come out in the open and state where he stands.

Lord Brabazon of Tara

My Lords, as I said at the beginning of my remarks, we do not know. It depends entirely on what happens to the passage of the Bill. NATS will either go ahead with the PPP or not before the next election. We cannot possibly say at this stage what state NATS will be in at the time of the next election. That is not really the point at issue. The point at issue is that the Government should delay this PPP so that their views and proposals can be put in their manifesto before the next election. The proposals before us today were certainly not in the manifesto for the last election.

As I said in my opening remarks, no one would have believed that the Labour Party would go forward with a privatisation of this kind. I do not intend to go over all the issues of the PPP. Those were more than amply covered in the debate on the previous amendment. It would be a good idea for the Government to delay this matter until after the next election. Therefore, I seek to test the opinion of the House.

6.22 p.m.

On Question, Whether the said amendment (No. 37) shall be agreed to?

Their Lordships divided: Contents, 112; Not-Contents, 90.

Division No. 2
Ackner, L. Linklater of Butterstone, B.
Addington, L. Luke, L.
Allenby of Megiddo, V. Lyell, L.
Ampthill, L. McColl of Dulwich, L.
Anelay of St Johns, B. McNally, L.
Astor of Hever, L. Maddock, B.
Attlee, E. Marand Kellie, E.
Avebury, L. Marlesford, L.
Baker of Dorking, L. Mayhew of Twysden, L.
Barker, B. Miller of Chilthorne Domer, B
Biffen, L. Miller of Hendon, B.
Blatch, B. Montrose, D.
Boardman, L. Mowbray and Stourton, L.
Brabazon of Tara, L. Murton of Lindisfarne, L.
Bradshaw, L. Newby, L.
Bridgeman, V. Northbrook, L.
Brougham and Vaux, L. Northesk, E.
Burnham, L. [Teller] Northover, B.
Buscombe, B. Norton of Louth, L.
Byford, B. Oakeshott of Seagrove Bay, L.
Caithness, E. Park of Monmouth, B.
Chalker of Wallasey, B. Pearson of Rannoch, L.
Clark of Kempston, L. Phillips of Sudbury, L.
Clement-Jones, L. Powell of Bayswater, L.
Colwyn, L. Razzall, L.
Courtown, E. Redesdale, L.
Cranborne, V. Rennard, L.
Crickhowell, L. Renton, L.
Cumberlege, B. Roberts of Conwy, L.
Dholakia, L. Rodgers of Quarry Bank, L.
Dixon-Smith, L. Roper, L.
Elliott of Morpeth, L. Russell, E.
Ezra, L. Scott of Needham Market, B.
Falkland, V. Seccombe, B.
Ferrers, E. Sharman, L.
Forsyth of Drumlean, L. Sharp of Guildford, B.
Gardner of Parkes, B. Shaw of Northstead, L.
Geddes, L. Shore of Stepney, L.
Geraint, L. Shutt of Greetland, L.
Goodhart, L. Skidelsky, L.
Greaves, L. Smith of Clifton, L.
Hambro, L. Stevens of Ludgate, L.
Hamwee, B. Stoddart of Swindon, L.
Hanham, B. Strathclyde, L.
Harris of Greenwich, L. Swinfen, L.
Harris of Richmond, B. Taverne, L.
Henley, L.[Teller) Thomas of Walliswood, B.
Higgins, L. Tordoff, L.
Hogg, B. Trefgarne, L.
Hooper, B. Trumpington, B.
Howe, E. Vivian, L.
Hunt of Wirral, L. Waddington, L.
Jacobs, L. Walmsley, B.
Jopling, L. Weatherill, L
Kimball, L. Wilcox, B.
Kingsland, L. Williams of Crosby, B.
Acton, L. Borrie, L.
Alli, L. Bragg, L.
Amos, B. Brennan, L.
Andrews, B. Brooke of Alverthorpe, L
Archer of Sandwell, L. Brooks of Tremorfa, L.
Ashley of Stoke, L. Burlison, L.
Ashton of Upholland, B. Carter, L.[Teller]
Bach, L. Cocks of Hartcliffe, L.
Bassam of Brighton, L. Cohen of Pimlico, B.
Bernstein of Craigweil, L. David, B.
Billingham, B. Davies of Coity, L.
Blackstone, B. Davies of Oldham, L.
Desai, L. McIntosh of Hudnall, B.
Donoughue, L. MacKenzie of Culkein, L.
Dormand of Easington, L. Mallalieu, B.
Dubs, L. Marsh, L.
Elder, L. Massey of Darwen, B.
Falconer of Thoroton, L. Morgan, L.
Farrington of Ribbleton, B. Nicol, B.
Faulkner of Worcester, L. Peston, L.
Filkin, L. Pitkeathley, B.
Gale, B. Plant of Highfield, L.
Goudie, B. Prys-Davies, L.
Gould of Potternewton, B. Ramsay of Cartvale, B.
Grabiner, L. Randall of St. Budeaux, L.
Graham of Edmonton, L. Rendell of Babergh, B.
Greengross, B. Renwick of Clifton, L.
Grenfell, L. Sainsbury of Turville, L.
Harris of Haringey, L. Sawyer, L.
Harrison, L. Sewel, L.
Haskel, L. Shepherd, L.
Hilton of Eggardon, B. Simon, V.
Hollis of Heigham, B. Simpson of Dunkeld, L.
Howells of St. Davids, B. Stone of Blackheath, L.
Hughes of Woodside, L. Symons of Vernham Dean, B.
Hunt of Kings Heath, L. Taylor of Blackburn, L.
Irvine of Lairg, L. (Lord Chancellor) Tomlinson, L.
Turnberg, L.
Islwyn, L. Walker of Doncaster, L.
Janner of Braunstone, L. Warner, L.
Kennedy of The Shaws, B. Warwick of Undercliffe, B.
Kirkhill, L. Whitaker, B.
Lipsey, L. Whitty, L.
Macdonald of Tradeston, L. Williams of Elvel, L.
McIntosh of Haringey, L. [Teller] Woolmer of Leeds, L.
Young of Old Scone, B.

Resolved in the affirmative, and amendment agreed to accordingly.

6.32 p.m.

Clause 44 [Effect of scheme made by CAA]:

[Amendments Nos. 38 to 42 not moved.]

Lord Brabazon of Tara moved Amendment No. 43: Page 29, line 28, at end insert— ("( ) No approval of a transfer scheme shall be made under subsection (2) before the first Session of the next Parliament after that in which this Act is passed.").

On Question, amendment agreed to.

Clause 45 [Transfer schemes made by Secretary of State]:

[Amendments Nos. 44 and 45 not moved.]

Lord Brabazon of Tara moved Amendment No. 46: Page 29, line 41, at end insert—

("( ) No transfer scheme shall be made under subsection (2) before the first Session of the next Parliament after that in which this Act is passed.").

On Question, amendment agreed to.

Clause 47 [Accounting provisions]:

[Amendment No. 47 not moved.]

Clause 48 [Accounting provisions: interpretation]:

[Amendment No. 48 not moved.]

Clause 49 [Issue of securities]:

[Amendment No. 49 not moved.]

Clause 50 [Government investment in securities]:

[Amendment No. 50 not moved.]

Clause 51 [Crown shareholding]:

The Deputy Speaker (Lord Murton of Lindisfarne)

My Lords, in calling Amendment No. 51, I should point out that if it is agreed to, I cannot call Amendment No. 52 owing to pre-emption.

Lord Brabazon of Tara moved Amendment No. 51: Page 34, line 1, leave out subsections (4) and (5).

The noble Lord said: My Lords, in moving this amendment, I wish to speak also to Amendments Nos. 52, 54, 55, 61 and 65 to 67.

These amendments are similar to the ones we moved in Committee. They concern the sale of NATS and the percentages that are to be kept by the various parties. We do not see the logic of including the 49 per cent limit when that can be diluted down as far as 25 per cent. We find that a little difficult. In Committee we suggested that 26 per cent would make more sense as it would at least give the Government the right to block any measure that required a special resolution. The Minister disagreed with that premise. My understanding is that a 25 per cent holding does not enable a shareholder to stop the passing of a special resolution but that a 26 per cent holding does. I should like some clarification from the Minister on that point.

We are also concerned that a disposal should be by means of competitive tender. The identity, competence, honesty and reliability of the private partner are vital to the effective performance of air traffic services, yet the Bill gives the Government carte blanche as to how the partner is selected, a process that could give rise to accusations of cronyism and abuse if the procedure is not transparent and open. That is the purpose of Amendment No. 52.

Amendment No. 54 concerns the designated company's articles of association. There is little point in having rights attached in the articles of association to the golden share unless they include the right to object to any change in those articles. A 25 per cent shareholding would not itself enable the Government to prevent a change in the articles of association without the power to do so being included in the articles of association.

Other amendments in this group are along similar lines. Similar amendments were moved by me at the Committee stage. I do not propose at this stage to go into the detail of all the amendments. Suffice it to say, I shall be interested to hear what the Government have to say to some of the points I have made. I beg to move.

Lord Macdonald of Tradeston

My Lords, Amendment No. 51 would have the effect of removing the obligation of the Secretary of State to hold at least 25 per cent of the ordinary share capital in the designated company and not to dispose of more than 51 per cent. That would remove the Government's current obligation to proceed by establishing a public/private partnership and would instead pave the way for full privatisation. The Government remain convinced that the outright privatisation of NATS to which the previous government were committed would be a mistake.

The Government have considered at great length the other options for the future of air traffic control and the issue has been debated at length. We remain convinced that a public/private partnership is the appropriate solution. Our aim is to facilitate the development of a major British-based company, successfully going out and working in air traffic control in the UK and in countries around the world, and delivering safety for those countries and for the airlines which serve them.

It is the Government's view that the PPP will provide a secure vehicle for the major investment programme—estimated by current management to be in the region of more than £1 billion over the next 10 years—which everyone agrees is essential. That investment will secure the two-centre strategy for NATS. The PPP will achieve that and the Government's interests will be protected by a wide range of measures so that the Government, as a major shareholder, will have to give their consent for any significant actions by the strategic partner. The Government will have the right to appoint a number of non-executive directors to the board of NATS and retain a special share in the company. These partnership arrangements will ensure that the Government can continue to protect the taxpayer's financial interest as a minority investor in NATS and that NATS continues to act in the public interest.

The noble Lord asked about 25 per cent as a blocking share. But what matters here are the terms of the strategic partnership agreement. That document, which governs the relationship with the strategic partner, remains fully effective with 25 per cent. We believe that the PPP will give NATS the freedom it needs in the private sector to invest in the latest systems and safety equipment and to develop the business.

Noble Lords have expressed concerns that the PPP will compromise safety. I hope that they will accept that we have listened to those concerns by tabling the amendments which we debated at the start of today's proceedings. However, perhaps I may stress again that we shall have robust powers through the Bill, through the licensing regime and through the strategic partnership agreement.

As regards Amendment No. 52, Clause 51(4) seeks to ensure that the Crown cannot sell shares in NATS where to do so would result in the Crown holding less than a 49 per cent stake. Amendment No. 52 seeks to impose a further restriction on the Crown selling its shares in NATS by requiring it so to do only by way of competitive tender.

This amendment adds nothing to the protections that are already in place. The Government have always made it plain that they intend, as part of the PPP, to sell down the Crown's stake in NATS to 49 per cent (and it will do so by competitive tender). But I need to make it clear that this does not simply mean selling to the highest bidder. The strategic partner will be selected with a number of criteria in mind, covering safety, national security, management capability and commitment, financial credibility and capacity, quality of strategic planning and satisfactory solutions to any real or potential conflicts of interest. This being so, for so long as Clause 51(4) is in force, the Government will not be able to sell any further shares in NATS, whether by competitive tender or by any other process, and whether to a strategic partner or to anyone else. For that reason, I invite noble Lords to withdraw the amendment.

Amendments Nos. 54 and 65 seek to create a statutory requirement to prevent any change in the designated company's articles of association. I can assure your Lordships that these amendments are unnecessary. It is and always has been the intention of the Government that the PPP company's articles of association will be subject to protection to prevent changes to the key rights, such as the special share. Once enshrined in the articles of association, the special share cannot be removed or changed. Draft articles of association have been laid before this House. If noble Lords care to consult them, they will find that they do include this right. In the circumstances, there is no need to make legislative provision and I invite noble Lords opposite to withdraw these amendments.

Amendment No. 55 seeks to remove the right of the Secretary of State to amend or repeal Clause 51 by order. I can understand the concern of noble Lords that, on the face of it, these powers may seem rather wide-ranging. However, I believe that I can assure noble Lords that adequate safeguards have been put in place. Under the provisions of Clause 102(6) an order under this clause cannot be made without the approval of both Houses of Parliament; in other words, the affirmative resolution procedure will apply.

I should also like to draw the attention of noble Lords to the deliberations of the Select Committee on Delegated Powers and Deregulation. In its report on the Bill, the committee commented that it did not regard this power as inappropriate and saw the affirmative procedure as providing appropriate control over its use.

I should additionally mention that subsection (12) of Clause 51 is not without precedent. A similar provision has been made in Section 18 of the Commonwealth Development Corporation Act 1999, dealing with matters relating to the minimum Crown shareholding. That section contains a power enabling the Secretary of State to amend or repeal it by order, and again the affirmative resolution procedure will apply.

I hope that noble Lords opposite will accept that proper safeguards have been put in place as regards the use of these powers and I invite them to withdraw the amendment.

Amendment No. 61 tabled by the noble Lord builds on one he tabled during our earlier consideration of the Bill. I appreciate the noble Lord's wish to ensure that Parliament is kept fully informed about sums paid out and received under this guarantee.

The amendment suggests that the Secretary of State must disclose the reasons for the default on repayment of sums paid out under the guarantee where he knows the reasons for default, unless he is not permitted so to do because of a duty of confidentiality. Although the Government might be aware of the reasons for the default, there could be circumstances where disclosure could prejudice the Government's ability to recover moneys paid out under guarantee, even where there is not an explicit duty of confidentiality.

The second part of the amendment requires the Government to outline to Parliament any steps they take to recover the sums in question. Again, to reveal such a course of action could place at risk the Government's strategy for recovering the moneys—even if they were under an explicit duty of confidentiality. There may, for example, be a number of competing claims for funds of the company. For the Government to reveal the action they are taking could compromise commercially confidential negotiations and give other creditors an advantage.

I can assure the noble Lord that, in resisting this amendment, I am in fact seeking to protect the interests of the Exchequer rather than wishing to be less open with Parliament. The clause already sets out requirements for the Secretary of State or the Treasury to lay statements before Parliament when the guarantee is given, when payments are made under the guarantee, and if the default occurs on repayment. Should such a default occur, the noble Lord would of course be able to probe Ministers of the day through the usual parliamentary processes.

I hope that this will offer the noble Lord comfort on the matter and that, in the circumstances, he will agree that it is appropriate not to make the suggested amendment. I therefore invite the noble Lord to withdraw his amendment.

Noble Lords opposite tabled Amendment No. 67 at Committee stage. Obviously, the explanation that I gave last time in defence of retaining subsection (4) of Clause 57 was not sufficient, so I shall make another attempt at it.

The subsection is essentially a protective measure. The direction to which it relates is one which requires the CAA to release NATS from debts which the latter owes to the CAA, in readiness for the establishment of the PPP. Once NATS is classified to the private sector it will not be able to borrow from public sources. However, it is not the intention that the Government will simply write off these debts. NATS' current debt to the National Loans Fund—approximately £300 million—can be dealt with in a number of ways. A likely course of action will be for NATS to take out a commercial loan at the time that the PPP is effected, which would be used to repay its debt to the National Loans Fund. Therefore the private sector and not the Government would be responsible for the debt. The precise mechanism will be decided nearer the time of the PPP, in conjunction with the strategic partner.

However, in complying with this direction, the CAA could be said to be acting in contravention of other duties placed upon it. It might be argued that the CAA was not furthering the interests of its users by releasing NATS from its debt, even though it was acting in accordance with a direction given to it by the Secretary of State. The CAA would then be placed in an intolerable position; the subsection is designed to prevent that from happening.

I must make it clear to noble Lords, as I did last time, that this subsection is not a means by which important matters such as safety can be circumvented. It is simply to prevent the CAA from being subjected to frivolous and vexatious claims. I hope that noble Lords opposite will accept this explanation and withdraw their amendment accordingly.

6.45 p.m.

Lord Brabazon of Tara

My Lords, I am grateful for the Minister's detailed response to the amendments. I am hound to say that they comprise rather too big a group. I should probably not have agreed to such a large grouping.

The Minister's opening remarks almost took the form of a Second Reading speech and were a commercial for the PPP proposal. The noble Lord need not worry so far as I am concerned. I am well aware of the need for investment in this sector and I am well aware of the absolute paramount need for safety. As I said earlier, we are grateful for the government amendments moved at the beginning of our deliberations.

As regards the detail of some of the amendments, I shall need to read most carefully what has been said by the noble Lord. However, I am bound to say that I remain puzzled by the argument over a 49 per cent stake and a 25 per cent stake. If it is proposed that the government holding should be reduced to 25 per cent, why mention 49 per cent in the first place?

So far as concerns the golden share—or the special share—I am sure that I shall come back to this at Third Reading. Since the Committee stage, we have heard a judgment in regard to the BAA situation. The whole status of golden shares in privatised companies is in some doubt. I do not intend to take up further time on these issues. As I said, I shall read carefully what the Minister said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 52 to 56 not moved.]

Lord Lea of Crondall moved Amendment No. 57: Before Clause 52, insert the following new clause—

  2. cc545-57
  4. cc557-74
  5. National Health Service 8,851 words
  6. cc574-82
  7. Transport Bill 4,301 words
  8. cc582-9
  10. cc589-604
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