House of Lords - Explanatory Note
House of Lords
Session 1999-2000
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Transport Bill


These notes refer to the Transport Bill
as brought from the House of Commons on 12th May 2000 [HL Bill 64]

Transport Bill



1. These explanatory notes relate to the Transport Bill as brought from the House of Commons on 12th May 2000. They have been prepared by the Department of the Environment, Transport and the Regions in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill, and have not been endorsed by Parliament.

2. The Notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.


3. The Bill contains measures to create a more integrated transport system and provide for a public-private partnership for National Air Traffic Services Ltd ("NATS"). The Bill aims to improve local passenger transport services, and reduce road congestion and pollution. The use of railways will be promoted through the Strategic Rail Authority.

Air Traffic Services

4. The provisions will enable the Government to establish a public-private partnership with a strategic partner from the private sector to deliver air traffic services provided by NATS.

5. The Bill allows for the transfer of the ownership of the company which now provides en route air traffic services (NATS) from the Civil Aviation Authority ("the CAA") to the ownership of the Secretary of State, the strategic partner and NATS employees. In doing so it will make possible a clear separation between the regulation of safety, which will remain the responsibility of the CAA, and the provision of the services.

6. The CAA will remain the single regulator for aviation with responsibility for safety regulation, economic regulation and air navigation. Air navigation is concerned, inter alia, with the effective use of airspace by commercial, military and leisure users.

7. The Secretary of State for the Environment, Transport and the Regions ("the Secretary of State") will have powers to issue directions to a licence holder in the interests of national security or international relations and in times of war or great national emergency. Provision is also made for a special administration regime in the event of a breach of one of the duties in clause 8 or of a licence condition by a licensed provider, and in the event of its insolvency.

8. Clause 3 will make it an offence for a person to provide air traffic services (as defined in clause 90) unless he is authorised to do so by an exemption or by a licence granted either by the Secretary of State or by the CAA with the consent of the Secretary of State.

9. It is the Government's intention to grant a licence for the provision of "en route" air traffic services, that is to say instructions provided to aircraft, to guide them and to maintain safe separation from other aircraft, after they have left the control of the airport from which they have departed and prior to their coming under the control of their destination airport. The Government intends to grant exemptions to providers of airport air traffic control services.

Local Transport

10. The Bill defines authorities which are to be local transport authorities and imposes a duty on those authorities to prepare and publish a local transport plan setting out their policies for the promotion of safe, integrated, efficient and economic transport facilities in their area, and to develop a bus strategy for carrying out their bus functions.

11. The Bill provides for a statutory form of "Quality Partnerships schemes" between bus operators and local transport authorities in the interests of promoting quality public transport, helping limit traffic congestion and improving air quality. The Bill will enable local transport authorities to require bus operators to co-operate in the provision of joint ticketing, and will place a duty on local transport authorities to secure the provision of bus passenger information in their area. Local authorities will have the power (subject to the Secretary of State's consent) to enter into "Quality Contracts schemes", whereby they specify bus services in a particular area and let contracts for their provision to bus operators.

12. The Bill introduces a national concessionary fare. All elderly people will have the right to half-price local bus fares having obtained from their local authority a free bus pass. The Bill also gives a more flexible power for the traffic commissioners to impose a financial penalty on bus operators who run unreliably, and it makes various other financial provisions.

Road User Charging and Workplace Parking Levy

13. The Bill enables local traffic authorities outside London to introduce road user charges and workplace parking levies to help tackle congestion in towns and cities, and requires spending of revenues on measures for improving local transport. It also allows for joint schemes, including ones involving London authorities. It also enables the Secretary of State, and the National Assembly for Wales, to introduce charges on trunk roads complementary to a local authority charging scheme, at the request of the local authority. The Secretary of State and the National Assembly for Wales will also have the power to charge on trunk road bridges and tunnels of at least 600 metres in length.


14. The Bill establishes the Strategic Rail Authority ("the Authority") and abolishes the Office of the Director of Passenger Rail Franchising and the British Railways Board. Provision is made for the transfer to the Authority of the functions, rights and liabilities of the Franchising Director and the residual functions, rights and liabilities of the British Railways Board (including responsibility for the British Transport Police). The Bill sets out the objectives and functions of the Authority. The Bill also makes provision for the better regulation of the railway industry.


15. The aim of the Bill is to give effect to the Government's strategy for an integrated transport policy set out in the White Paper "A New Deal for Transport: Better for Everyone" (Cm 3950) published in July 1998. The White Paper also set out the principal reasons for a public-private partnership for air traffic services.

16. Subsequent consultation and policy documents included "A Public Private Partnership for National Air Traffic Services Ltd (NATS)", which was published in October 1998. The Government's response to the consultation exercise was published on 27 July 1999. "A New Deal for the Railways" (Cm 4024) was published in July 1998. "From Workhorse to Thoroughbred: A better role for bus travel" was published in March 1999. "Breaking the Logjam: The Government's consultation paper on fighting traffic congestion and pollution through road user and workplace parking charges" was published in December 1998.


17. The Bill consists of five parts:

Part I - Air Traffic

Part II - Local Transport

Part III - Road User Charging and Workplace Parking Levy

Part IV - Railways

Part V - Miscellaneous and Supplementary.



18. The Air Traffic provisions are in six Chapters. These are:

Chapter I - Air Traffic Services

Chapter II - Transfer Schemes

Chapter III - Air Navigation

Chapter IV - Charges for Air Traffic Services

Chapter V - Competition

Chapter VI - Miscellaneous and General.


19. Currently en route air traffic services, and air traffic services at some airports, are provided by NATS, a company which is wholly owned by the CAA. The air traffic provisions in this Bill will enable NATS to be transferred to a company owned partly by the public sector, partly by the private sector and partly by NATS employees. This new company will continue to provide the services currently provided by NATS. En route services will be provided under a licence issued by the Secretary of State, and will be subject to statutory economic regulation by the CAA. All air traffic services, whether provided by NATS or other providers will remain subject to statutory safety regulation by the CAA, who will also have responsibility for airspace policy

Clauses 1 and 2: General Duties

20. Clauses 1 and 2 set out the general duties of the Secretary of State and the CAA. The Secretary of State must exercise his functions under Chapter I in the manner thought best calculated to achieve the purposes set out in subsection (1). The purposes include furthering the interests of airlines, their passengers and freight customers, and airports, including furthering those interests through promoting competition, where appropriate. Clause 2 imposes similar obligations on the CAA. In clause 2, subsection (5) disapplies section 4 of the Civil Aviation Act 1982 ("the 1982 Act") when the CAA is performing its functions under Chapter I. Section 4 of the 1982 Act makes it the duty of the CAA to perform its functions in a manner best calculated to achieve objectives which relate to air transport services and users. This duty is not limited to functions under the 1982 Act and, if not disapplied, would apply to functions under this Bill.

Clause 3: Restrictions on providing services

21. Clause 3 makes it an offence for a person to provide air traffic services in respect of a managed area unless he is authorised to do so by a licence or an exemption. "Air traffic services" means:

  • providing instructions, information or advice with a view to preventing aircraft colliding with other aircraft or with other obstructions;

  • providing instructions, information or advice with a view to securing safe and efficient flying;

  • managing the flow of air traffic with a view to ensuring the most efficient use of airspace;

  • providing facilities for communicating with aircraft and for the navigation and surveillance of aircraft; and

  • notifying organisations of aircraft needing search and rescue facilities and assisting organisations to provide such facilities.

22. "Managed areas" are the United Kingdom and any area which is outside the United Kingdom but in respect of which the United Kingdom has undertaken under international arrangements to provide air traffic services.

23. Air traffic services provided by or on behalf of the armed forces are not to require an exemption or a licence. Nor are air traffic services provided by the CAA in pursuance of directions under clause 63(1).

Clause 4: Exemptions

24. Clause 4 allows the Secretary of State to grant an exemption enabling a person to provide air traffic services. It is proposed to grant exemptions to persons who are not en route air traffic service providers (e.g. companies which provide airport air traffic control).

Clauses 5 to 7: Licences

25. Clauses 5 to 7 make provision for the grant of a licence to provide air traffic services. The purpose of the licence will be to enable the CAA to carry out economic regulation of the licensed activities. A licence may be granted by the Secretary of State after consultation with the CAA, or by the CAA with the consent of the Secretary of State. It is envisaged that the initial licence will be granted by the Secretary of State. Clause 5 makes provision for the content of licences including what a licence may be granted for, as well as to whom it may be granted and the period it may remain in force. Clause 6 deals with procedures for the application, grant and refusal of licences. Clause 7 deals with provisions which may be included in a licence, including provisions for the payment of fees. A provision of a licence may be identified as a condition (see clause 37(6)) in which case that provision can be modified and it can be enforced (clauses 10 to 16 and 17 to 22).

Clause 8: Duties of licence holders

26. Clause 8 imposes general duties on a licence holder to ensure that a safe, efficient and co-ordinated system for the provision of the air traffic services authorised in his licence is provided, maintained and developed for the future and that the demand for authorised air traffic services in his licensed area is met. Clause 9 provides that no legal proceedings may be brought for a failure by a licence holder to perform a duty imposed by clause 8 or a condition of a licence. This provision does not however affect a right of action in respect of an act or omission which takes place in the course of the provision of air traffic services and neither does it affect the enforcement mechanisms specifically provided in the Bill.

Clauses 10 to 16: Modification of licences

27. Clauses 10 to 16 deal with circumstances where the conditions of licences may be modified. Various circumstances, including system developments and new technology may require or result in marked changes in the way in which air traffic services are provided, and there may be circumstances where licences need to be modified to reflect this. Clause 10 allows the CAA to modify the conditions of the licence with the agreement of the licence holder, and allows the Secretary of State to veto any such modification. Clauses 11 and 12 allow the CAA to refer to the Competition Commission matters relating to the provision of air traffic services by a licence holder which operate against the public interest. The Commission is required to investigate and report on whether modifications to the conditions of the licence are necessary. Clause 13 requires that where the Commission's report concludes that any matter specified in the reference operates, or is likely to operate, against the public interest and specifies modifications to the conditions of the licence, the CAA must make such modifications as it thinks are needed. Clause 14 gives the Commission powers to direct the CAA not to make licence modifications proposed by the CAA in response to the Commission's recommendations where the Commission considers that those modifications would not provide an appropriate remedy. Clause 15 sets out the procedure for the Commission to propose modifications of its own. Clause 16 also allows the Secretary of State to modify the conditions of the licence to such extent as he thinks is necessary or expedient when he is, by order, exercising certain powers under the Fair Trading Act 1973 relating to monopolies and mergers.

Clauses 17 to 22: Enforcement

28. These clauses require the CAA to make orders that will be binding on a licence holder where the licence holder is contravening, or is likely to contravene, a duty under clause 8 or a licence condition. Clause 17 requires the CAA, subject to the exceptions in clause 18, to make a provisional order when it appears to it that there is or is likely to be a contravention of a duty under clause 8 or a licence condition, and to make a final order, or to confirm a provisional order, where it is satisfied that there is or is likely to be a contravention of a duty under clause 8 or a licence condition. Clause 18 gives the CAA a discretion to make or confirm a provisional order or confirm a final order if it thinks appropriate in certain circumstances. Clause 19 sets out the procedural requirements to be observed before making a final order or confirming a provisional order. If the licence holder wishes to question the validity of a final or provisional order relating to it, it may do so under Clause 20. Clause 21 requires any licence holder to which a final or provisional order relates to comply with it. This duty to comply with the order is owed to any person who may be affected by a contravention of the order and breach of the duty is actionable by him.

29. Clause 22 provides the CAA with a power to obtain information in cases where it appears to the CAA that a licence holder may have contravened, may be contravening, or is likely to contravene a licence condition.

Clauses 23 to 30 and Schedules 1, 2 and 3: Administration orders etc

30. Clauses 23 to 30 and Schedules 1, 2 and 3 are concerned with the powers available and procedures to be followed where the continuity of a licence holder's air traffic services may be at risk. (In these clauses and Schedules, a licence holder is referred to as a licence company.) Continuity of the services may be at risk as a result of a licence holder failing to comply with a condition of its licence or a clause 8 duty, or becoming insolvent or otherwise being in a position where a winding up order would normally be made. Clause 23 provides licence holders with certain protections as follows:

  • they may not be wound up voluntarily;

  • no administration order made under Part II of the Insolvency Act may be made against them; and

  • no step may be taken by any person to take control over the property of a licence company without first giving 14 days' notice to the Secretary of State and the CAA.

31. Clause 24 provides that if an application is made to a court for a winding up order in respect of a licence holder, the court must not make a winding up order or appoint a provisional liquidator. If, however, the court is satisfied that, but for this provision, it would be appropriate to make a winding up order, it must make an air traffic administration order instead. In those circumstances the Secretary of State and the CAA may nominate the person to manage the company whilst the order is in effect. Clause 25 lists circumstances under which a court may make an air traffic administration order following an application by the Secretary of State or, with the consent of the Secretary of State, by the CAA. In summary these are:

  • that the company is, or is likely to be, unable to pay its debts;

  • that, if it were not for clause 24, it would be just and equitable for the licence holder to be wound up;

  • that there has been, or is likely to be, a serious contravention by the licence holder of a clause 8 duty;

  • that a final or provisional order has been made, which has not been challenged by the licence holder, and there has been or is likely to be a serious contravention of the order.

32. Clause 26 describes the purpose and effect of an air traffic administration order. The main effect of the order is that whilst it is in force a person appointed by the court will manage the licence holder's affairs, business and property in a manner which protects the interests of its members and creditors and for the achievement of the following two purposes:

  • to transfer as a going concern so much of its undertaking as is necessary to ensure the licensed activities are properly carried out (transfers of the undertaking may either be to a single company, or in parts to more than one company); and

  • to ensure, pending such a transfer, the continuity of the licensed activities.

33. Clause 27 and Schedule 1 apply various provisions of the Insolvency Act 1986 relating to administration orders to air traffic administration orders with certain modifications. Schedule 2 deals with the making of transfer schemes following the making of an air traffic administration order.

34. The Government may need to support the provision of services during the period in which an air traffic administration order is in force. Clauses 28 and 29 provide a power and set out the procedures for the Secretary of State to make such grants, loans or other financial arrangements as he considers appropriate in respect of a company which is subject to an air traffic administration order.

35. Clause 30 and Schedule 3 apply the air traffic administration provisions to Northern Ireland.

Clauses 31 and 32: Investigations and register

36. Clause 31 requires the CAA to investigate alleged or apprehended contraventions of licence conditions where these are reported to it by interested third parties (so long as the report does not appear to be frivolous or vexatious). Clause 32 provides for a public register to be compiled and maintained by the CAA. The register will contain copies of all licences and related matters listed in subsection 35(3), and will be available for public inspection. Clause 32(5) and 32(6) provide for material to be excluded from the register if, in the opinion of the CAA, it would prejudicially affect a person's interests or if the Secretary of State instructs the CAA not to enter information, because, in his opinion, it would be against the public interest or any person's commercial interests to enter it in the register.

Clauses 33 and 34 and Schedules 4 and 5: Land and statutory undertakers

37. Clause 33 gives effect to Schedule 4 which amends the 1982 Act to give licence holders powers in relation to land when they are carrying out activities authorised by their licences. Clause 34 introduces Schedule 5 which provides that licence holders are to be treated as statutory undertakers for certain purposes.

Clause 35: Directions in interests of national security etc

38. Clause 35 gives the Secretary of State powers to issue directions to licence holders (either individually or generally) of a general character in the interests of national security or in the interests of encouraging or maintaining the UK's relations with another country or territory. The Secretary of State may also give a licence holder a specific direction in the interests of national security or a direction in connection with fulfilling an international obligation laid on the United Kingdom. Failure to comply with a direction is an offence. The penalties for committing an offence under this clause range from a fine not exceeding the statutory maximum on summary conviction to a fine or imprisonment on conviction on indictment.

Clause 36: Directions relating to the environment

39. Clause 36 allows the Secretary of State to give directions relating to the environment. The power of direction is an extension of section 6(2)(f) and section 78(6) of the 1982 Act as they currently operate. Directions currently given to the CAA are taken to extend to NATS. Post public-private partnership it is to be possible for NATS to be a direct recipient of environmental directions, together with other licence holders as well as persons authorised by exemption to provide civil air traffic services. Persons authorised by exemption will include owners or operators of aerodromes and other companies, including NATS, which provide air traffic services on their behalf. It is considered that all air traffic service providers should be susceptible to direction since provision of such services affects the environment regardless of who is the provider.


Clauses 38 and 39: Introduction

40. Transfer schemes are the means by which shares in the current air traffic services provider will be transferred out of the CAA's ownership and into Crown ownership, in readiness for partial sale. The transfer of ownership is the means by which the objective of separating the CAA's regulatory functions from the provision of services is achieved. The transfer scheme provisions also allow the corporate structure of the air traffic service provider's business to be reorganised in light of the new licensing regime and the proposed public-private partnership.

41. Clause 38 deals with the meaning of a transfer scheme, and describes the parties between whom transfers can be made. Clause 39 contains supplementary provisions detailing what a transfer scheme may do.

Clauses 40 and 41: CAA's schemes

42. Transfer schemes can be made by either the CAA or the Secretary of State. Clauses 40 and 41 provide the Secretary of State with powers to approve and to control the content and timetable of transfer schemes made by the CAA.

Clauses 42 and 43: Secretary of State's schemes

43. Clause 42 provides a power for the Secretary of State to make a transfer scheme where either the CAA fails to make a scheme, or the Secretary of State does not agree with the CAA's proposals. Where the Secretary of State does make a scheme, clause 43 gives him the power to direct interested bodies (listed in subsections (2)(a) to (d)) to provide such information as he may require.

Clauses 44 and 45: Accounting provisions

44. Clause 44 deals with certain accounting and valuation matters with regard to transfer schemes. Its principal purpose is to specify rules to determine the value of any asset or liability transferred to a company under a scheme, for the purposes of the opening accounts of that company. Clause 45 defines certain terms used in clause 44.

Clauses 46 to 48: Ownership of transferee companies

45. Clause 46 applies where property, rights or liabilities are transferred by a transfer scheme and permits the Secretary of State to require certain companies receiving the property to issue securities to any person listed in clause 46(5). The securities must be issued at such times and on such terms as the Secretary of State directs. Clause 47 allows the Treasury (or the Secretary of State with the Treasury's consent) to acquire securities of a transferee company falling within clause 47(1) and to acquire options to acquire or dispose of those securities.

46. Clause 48 requires the Secretary of State not to dispose of more than 51% of the shares in the designated company, and to ensure that the Crown's holding in the company is not diluted below 25%. The Crown must also not dispose of any of its shares unless it is satisfied that plans are in place which will ensure the completion of certain major projects.

47. The clause also requires the Crown to hold a special share in the designated company which is to be provided for in the company's articles of association. The Crown must not alter the special share arrangements without the consent of Parliament. The provisions of this clause can only be amended or repealed by order with the approval of Parliament (see Clause 95(6)).

Clauses 49 to 53: Transferee companies: other provisions

48. Clause 49 enables the Secretary of State, with the Treasury's approval, to make loans from the National Loans Fund to transferee companies listed in clause 49(3), while they are still owned by the CAA or the Crown. Loan repayments and accrued interest must be paid into the National Loans Fund (see clause 250(3)). The Secretary of State must produce an account to the Comptroller and Auditor General of sums issued and received, and how he has disposed of them. Clause 50 provides a power for the Treasury or the Secretary of State to guarantee the discharge of any financial obligation of a transferee provided that the guarantee is given when the transferee is a company falling within those listed under clause 50(3). Clause 51 provides a power for the Secretary of State, with the approval of the Treasury, to make grants to a transferee falling within subsection (3), of such amounts, at such times and in such a manner as he sees fit. These provisions will allow the Secretary of State to offer such a transferee a range of financial assistance while it is in public ownership.

49. Clause 52 has the effect of disapplying certain provisions in the Trustee Investments Act 1961, which restrict a trustee's ability to invest in certain securities where dividends have not been paid in the five years prior to the proposed investment. The purpose of disapplying these provisions is to ensure that if any shares of a transferee company listed in subsection (2) are included in the Official List of The Stock Exchange, they are not subject to the investment restrictions imposed by the Trustee Investments Act 1961.

50. Clause 53 provides that for the purposes of specified sections of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986, Ministers of the Crown, Northern Ireland Ministers, their nominees and Northern Ireland Departments are not to be regarded as shadow directors of certain transferees or of any company associated with such transferee at a time when the condition set out in clause 53(3) is satisfied.

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