Examination of Witnesses (Questions 360-379)
SIR ROY MCNULTY AND MR DOUG ANDREW
TUESDAY 11 JUNE 2002
360. Are you seriously saying that you have not given full consideration to the role of the regulator in relation to Railtrack and have some concerns about your own intentions?
(Mr McNulty) Doug Andrew may wish to add to this but we have a good, general understanding of the role of the regulator relative to Railtrack, but what we are given is a remit by the Transport Act which lays some fairly clear duties on us, and it is those duties that we have to execute.
361. Sir Roy, you did raise these problems yourself. You were concerned about financing. You made it clear you were concerned about gearing and you are being asked have you not got in front of you an example that should give you pause?
(Mr McNulty) I was concerned about the gearing. The CAA separately were concerned about the gearing, and now that September 11 has happened and the pressures on NATS exist it is our view, as spelled out in this document, that the primary source of the solution lies, we believe, with the shareholders and the financiers, notwithstanding the fact that as regulator there are some things that we think we could address, and that is what we are consulting the airline community about at the moment.
362. Do you anticipate that BAA is going to become a strategic investor?
(Mr McNulty) I do not think we, as the regulator, have enough information to give you an answer on that. As I said earlier, we have no formal details as yet. I expect that when NATS come back to us on 21 June we will be given a good deal more information, but at the moment we have nothing other than informal information.
363. So you do not have a view on whether the Government face a dilution of its share, and that would have an implication?
(Mr McNulty) We do not have such information.
364. You do not have a view on how crucial the change in NATS' charges could be in securing BAA's involvement?
(Mr McNulty) We do not have that information as of today. Again, I would be surprised if on 21 June, when NATS give us their submissions, we do not get some information about that, if that is a factor in their discussions.
365. You are not aware of the Government being asked for any concession in return for investing in NATS?
(Mr McNulty) We are not aware of any such matter.
366. So you would not consider, for example, talking to the Government about the involvement of airports in the south east?
(Mr McNulty) In what sense, Madam Chairman?
367. In the sense of how they are going to develop in general.
(Mr McNulty) We are not aware of any such discussions.
368. Will you be prepared to give us a very detailed note after you get the answers to some of these questions? You will realise, Sir Roy, that the Committee is seeking to get information which would enable it to protect the interests of the consumer.
(Mr McNulty) We would be quite happy to provide the Committee with a note as soon as possible after we get the submissions on or around 21 June on the issues that you have raised with us.
369. Do you want to tell us how much the CAA has paid in professional fees?
(Mr McNulty) I can only get information for you as to what the CAA pays, and I do not have that figure to hand, but we can get that quite quickly. I would respectfully suggest that if you want to know what NATS is paying perhaps the quickest route would be to ask them.
370. Are you really content that, once you take away not only the costs but the present situation in relation to the financing of NATS and the pressure that is being put on them by circumstances which we all hope will never happen again but could be replicated, this has been a good deal both for the taxpayer and for the Government?
(Mr McNulty) I am certain it was a good deal for the taxpayer and the Government. I could argue that perhaps it was almost too good a deal. The one flaw, I think, is the over-gearing.
371. You are not worried that could put it into administration?
(Mr McNulty) If we do not collectively come up with a solution, it could put it into administration. It certainly is not the result that any of the parties desire.
372. People, on the whole, do not desire to be put into administration.
(Mr McNulty) I would not think so.
373. Sir Roy, you heard Mr Everitt earlier talking about the new funding package and the fact that he expected to use quite a significant proportion of that to pay off primary debt. Is it your view that if this money is brought in and used to restructure debt payments the issue you first highlighted last summer remains the case, about the inability of the business to withstand a major shock?
(Mr McNulty) I do not have enough information to give you a good answer to that, but I think our answer in general principle would be that if the end result of BAA coming in as an investorif that is what is happeningand the Government contributing, was to leave the overall financial structure unchanged, that does not seem to be a solution. However, I stress what I said earlier: we, as yet, have no formal details of what is being discussed with BAA nor on what has been or might be discussed with the Government.
374. Just on the safety issue, what is the breakdown between yourselves and the Health and Safety Executive? You say that you are happy with that safety situation. The Health and Safety Executive actually required NATS to come up with a case for dealing with the computer problems and they took almost six weeks to respond. Is that not rather dilatory on their part?
(Mr McNulty) I really could not comment. I do not know enough about the details.
375. You are responsible for safety.
(Mr McNulty) Absolutely. The breakdown between ourselves and the Health and Safety Executive is that the safety regulation group part of the CAA is NATS' safety regulator. Separately the HOSED have established a set of standards for data processing equipment, the ergonomic aspects of how operators operate that equipment and they have the right to come in and review whether or not particular pieces of IT equipment meet those standards. We have reviewed this issue of the font sizes extremely carefully (indeed, I wrote to your Chairman on this), and our view remains that notwithstanding the fact that the specifications of this equipment do not fully meet today's HOSED requirements, nonetheless we do not believe there is a significant safety issue relating to those font sizes.
376. As far as you are concerned, it does not matter how long it takes them to put it right?
(Mr McNulty) It would be even better if they could put it right quickly. We have looked at this extremely carefully but we have been satisfied that this equipment is safe to operateas indeed it has been to-date.
377. Sir Roy, you will not be surprised if I say to you that we would like a very detailed note after June 21 and, of course, the Committee do reserve the right, if necessary, to ask you to come and expand upon it since you have quite rightly informed us you have so little information today.
(Mr McNulty) We will be very pleased to provide the detailed note and it would, as ever, be a pleasure for us to return.
Chairman: I will take that entirely as a sincere comment.
378. Could I just ask something? The Committee has received a letter from Ryanair in which they talk about the fact that the CAA, in part, took the decision on the level of the setting of the new structure of fees, but that they seem to increase that by 75 million. What is your opinion of the Government interfering on that basis?
(Mr McNulty) We accept, and accepted at the time, the Government's right to make that decision.
379. So you are not independent of Government?
(Mr McNulty) We are now. At the time that NATS was being separated from the CAA, and the initial charge control structure was put in, it was always understood that the final say on the charges for the first period would be made by the Government. Thereafter, everything we do, including this review, is entirely independent of Government.
Chairman: So we are independent now but we were not independent then. Thank you very much indeed, gentlemen. Do remember to write.