Select Committee on Constitution Minutes of Evidence


Memorandum by the Civil Aviation Authority

INTRODUCTION

  1.  The Civil Aviation Authority (CAA) is responsible for the regulation of civil aviation in the United Kingdom and has specific responsibility for aviation safety, airspace policy, consumer protection and economic regulation.

BACKGROUND

 (1)   What are the legal bases for regulators; what are the nature of their powers and how do they exercise them; how could their powers be revoked; from where do they obtain their financial and administrative support?

CAA Powers

  2.  The constitution of the CAA is set out in Section 2 of the Civil Aviation Act 1982 ("the 1982 Act"). The 1982 Act is a consolidating statute which replaced the Civil Aviation Act 1971 which established the CAA on 1 April 1972. The CAA took on a number of aviation[13] functions previously carried out by Central Government and by certain independent Boards including the Air Registration Board and the Airline Transport Licensing Board.

  3.  The CAA's functions are set out in primary legislation. The main provisions are:

    —  Section 3 1982 Act—licensing of air transport, licensing the provision of accommodation in aircraft (air travel organisers' licensing), the provision of air navigation services, the operation of aerodromes and the provision of assistance and information together with such safety regulatory functions as are conferred on the CAA by Air Navigations Orders;

    —  Part IV Airports Act 1986—economic regulation of airports;

    —  Part I Transport Act 2000—regulation of air traffic services (other than safety).

  4.  Detailed regulatory provisions are contained in secondary legislation made by the Secretary of State, for example the Air Navigation Order 2000 (safety regulation) and the Civil Aviation (Air Travel Organisers' Licensing) Regulations 1995 (regulation of tour operators selling in the UK). A number of these provisions implement the UK's obligations under European law, for example the Licensing of Air Carriers Regulations 1992 implement Council Regulation (EEC) 2407/92. CAA's airspace policy functions stem from Directions given to it by the Secretary of State under Section 66 of the Transport Act 2000.

Exercise of powers

  5.  The manner in which the CAA exercises its powers is governed by statute. Section 4 of the 1982 Act sets general objectives for the CAA. These general objectives are disapplied and replaced by specific duties for the economic regulation of airports (Section 39(2) Airports Act 1986) and for the regulation of air traffic service providers (Section 2 Transport Act 2000).

Revocation of powers

  6.  CAA's powers can only be revoked by primary legislation or in circumstances governed by Section 2(2) of the European Communities Act 1972.

Financial and administrative support

  7.  Sections 8 to 15 of the 1982 Act contain financial provisions in relation to the CAA. The CAA, after consultation with the Secretary of State, may make schemes for determining the charges that are to be paid to it in respect of the performance of its statutory functions. In addition, the CAA obtains a slice of the UK's share of income from the Eurocontrol charging arrangements for air navigation services in respect of its airspace policy functions. Section 10 gives power to the CAA to borrow money from the Secretary of State or with his consent from the Commissioner of the European Communities or the European Investment Bank. Section 12 empowers the Secretary of State to make grants and loans to the CAA.

  8.  Schedule 1 of the 1982 Act contains provisions enabling the CAA to employ staff, pay pensions and to negotiate with Trade Union organisations. The CAA provides its own administrative support.

 (2)   By whom and how is the continuing need for regulators measured; how is their role changed or ended?

Continuing need for CAA

  9.  The United Kingdom is bound by International Treaty with Organisations such as the International Civil Aviation Organisation (ICAO), the Joint Aviation Authorities (JAA) and the EC to meet specific aviation standards and obligations. As the UK's aviation regulator, the CAA fulfils the UK's commitment to meeting the regulatory standards and obligations laid down by those Organisations.

Changing role of CAA

  10.  The CAA was established in 1972 as both a regulatory and a service provider. Changes to the CAA's regulatory functions would require amendment to or revocation of the appropriate primary or secondary legislation. The CAA's aerodromes in the Highlands and Islands of Scotland were hived down to a subsidiary company, Highlands and Islands Airport Ltd, which was transferred to the Secretary of State for Scotland in 1995. The CAA's Strategic Business Units were disposed of to the private sector in 1996. The air traffic services provider, National Air Traffic Services Limited, was the subject of a Public Private Partnership under the Transport Act 2000. Coincident with this, the Directorate of Airspace Policy changed from being a joint civil/military organisation to an integral part of the CAA, with military staff seconded from the MoD.

 (3)   Who are the members of regulatory bodies; how are they appointed; are they adequately representative; do Nolan principles operate?

CAA Members and their appointment

  11.  Section 2 of the 1982 Act as amended by Section 72 of the Airports Act 1986 provides that the CAA shall consist of not less than six nor more than 16 members. Members are appointed by the Secretary of State for Transport. The Secretary of State may appoint one Member to be Chairman and not more than two Members to be Deputy Chairman. Currently the CAA has a Chairman and 10 other Members, five of whom are full time executives and five are part time non-executives. One executive Member is nominated by the Secretary of State to perform certain air navigation functions on behalf of the CAA. One non-executive Member is nominated by the Secretary of State for national security purposes.

  12.  Apart from the national security nominee who is an MoD serving officer, all Member appointments to the CAA are publicly advertised in accordance with Nolan principles.

 (4)   What are regulators set up to achieve; to what extent do regulators achieve their purposes without adverse consequences; how is their effectiveness assessed?

Purpose of CAA

  13.  The CAA's general objectives are set by the 1982 Act which requires the CAA to perform its functions in the manner it considers best calculated "to secure that British airlines provide services which satisfy all substantial categories of public demand . . ., at the lowest possible charge consistent with a high standard of safety in operating the services and an economic return to efficient operators on the sums invested in providing the services and with securing the sound development of the civil air transport industry in the UK; and to further the reasonable interests of users of air transport services". Objectives specific to the CAA's regulatory functions are set out in section 68(1) of the 1982 Act, Section 39(2) of the Airports Act 1986 and Sections 2, 70 and 87 of the Transport Act 2000.

  14.  The CAA actively reviews all new regulation to judge the impact on and benefits to the industry. The CAA recognises the balance that needs to be struck between its regulatory objectives and the impact that regulatory changes have on those it regulates.

Assessment of effectiveness

  15.  On a general level, the Secretary of State for Transport, in consultation where appropriate with the Secretary of State for Defence, will agree overall priorities and objectives each year with the CAA and will monitor performance of the CAA in relation to agreed objectives. For specific elements of the CAA's responsibilities, methods of assessment vary. For example, the Safety Regulation Group is subject to regular audit under the ICAO Safety Oversight Programme and the Joint Air Navigation Services Council, established by the Air Navigation Directions, oversees the joint and integrated nature of civil/military air traffic service provision in the UK. The CAA's economic regulation of airports processes were investigated in 2001 by the Better Regulation Task Force and were found to be satisfactory.

 (5)   To what extent are regulators both prosecutors and juries on an issue; what rights of appeal are there against decisions made by regulators?

Rights of appeal against CAA decisions

  16.  In the case of safety regulatory decisions taken for the purposes of the Air Navigation Order, Regulation 6 of the CAA Regulations 1991, as amended, provides that if an official of the CAA proposes to refuse an application for the grant of a licence or certificate, the person concerned has the right to request that the case be reviewed by a Member of the CAA appointed by the Secretary of State. Similarly, if an official of the CAA proposes to revoke, suspend or vary a certificate or licence otherwise than on the application of the holder, the person concerned has the right to request that the case be decided by a Member of the CAA appointed by the Secretary of State. For these purposes a panel of two Members is formed and that panel must act as a quasi judicial tribunal. If the CAA's decision is that a person is not a fit person to hold a personnel licence, the Air Navigation Order provides a right of appeal to the County Court of the Sheriff Court in Scotland.

  17.  Similar provisions apply to the regulation of tour operators selling in the UK. The Civil Aviation (Air Travel Organisers' Licensing) Regulations provide that any decision to refuse or revoke a licence must be made by a Member of the CAA. If it is decided that a person is not a fit person to hold a licence, there is a right of appeal to the County Court or the Sheriff Court in Scotland.

  18.  In the case of the CAA's functions relating to Air Transport Licences and Route Licences, Regulation 27 of the CAA Regulations 1991, as amended, provides for a right of appeal to the Secretary of State. In respect of its powers to revoke an Operating Licence, Regulation 19 of The Licensing of Air Carriers Regulations 1992 also allows an appeal to the Secretary of State.

  19.  In the case of regulation of air traffic service providers under Part I of the Transport Act 2000, Section 14 of that Act makes provision for the CAA to make a reference to the Competition Commission requiring the Commission to investigate and report on whether any matters which are specified in the reference and which relate to the provision of air traffic services by or on behalf of a licence holder, operate against the public interest or may be expected to do so. The CAA has a similar power to make a reference to the Competition Commission when exercising its competition functions under Chapter V of Part I of the Transport Act 2000.

  20.  All decisions of the CAA are subject to judicial review by the high Courts in London and Belfast and the Court of Session in Edinburgh. Since 1999, the CAA has been subject to the jurisdiction of the Parliamentary Commissioner for Administration.

ACCOUNTABILITY

 (6)   How are regulators held to account by Parliament; what other accountability do regulators have to auditors, Government departments or other public bodies?

  21.  While the CAA's functions are conferred by Act of Parliament, it is sponsored by the Department for Transport and the Secretary of State is accountable to Parliament for the CAA's proper discharge of its duties.

  22.  Section 15(1) of the 1982 Act requires the CAA to keep proper accounts and proper records in relation to the accounts. The CAA (Auditing of Accounts) Order 1984, which modifies Section 15(1) and (2), provides that the Secretary of State shall appoint annually independent auditors to audit the CAA's accounts. The CAA is required to submit its statement of accounts together with a copy of any report of the auditors to the Secretary of State who shall lay them before each House of Parliament.

  23.  Section 7(3) of the 1982 Act provides that the CAA shall be a tribunal for certain purposes and that its working and constitutions are to be kept under review and reported on by the Council on Tribunals.

  24.  The Air Travel Insolvency Protection and Advisory Committee (ATIPAC) advises on financial protection arrangements for air travellers and, in its annual report to the Secretary of State for Transport, gives an account of the workings of the Air Travel Organisers' Licence (ATOL) scheme over the previous year.

 (7)   How are regulators accountable to those whom they regulate; what is the impact of regulation on the economy; how transparent are their methods of working?

Accountability to regulatees

  25.  Industry pays for regulation and the CAA's activities and costs are subject to constant scrutiny by regulatees. There should be no doubt that the unique method of funding aviation regulation in the UK is a key factor in the CAA's continued drive for efficiency and cost effectiveness.

  26.  As previously stated, the CAA's duties and responsibilities are largely set out in legislation. The CAA works within the principles of the Better Regulation Guide and a number of fora exist to ensure that regular dialogue takes place with industry. Examples include the Airworthiness Requirements Board (ARB), the Operations Advisory Committee (OAC), ATIPAC, the National Air Traffic Management Advisory Committee (NATMAC) and the Safety Regulation Finance Advisory Committee (SRFAC). They all meet on a regular basis and exchange views on new and existing regulatory and financial issues.

Impact on the economy

  27.  The UK airline industry is the leader in Europe and the success of UK aviation has played and continues to play an important role in the UK economy. The South East airport infrastructure contributes significantly to London's position as a world city, bringing both economic and social benefits to London and the UK as a whole. The UK has a mature and responsible aviation industry that is both innovative and in possession of a strong safety culture. The CAA contributes widely to this through its safety oversight of the industry, coherent policy on economic and airspace issues, and protection of the public against insolvency by tour operators. Economic regulation is seen as a second best proxy for competition and provides some of the same benefits, although not to the same degree. Setting a maximum limit on prices for monopoly services reduces the ability for regulated firms to earn excess profits and fixing such maximum prices ex ante for a fixed period (eg five years) gives regulated companies an incentive to improve efficiency.

  28.  The CAA has a duty to recover its costs from those it regulates and this places a financial burden on the aviation industry that is not mirrored in most other countries. However, the very high safety standards that are set and achieved by the CAA in partnership with industry have enabled UK aviation to mature and flourish. Similarly, the public's confidence that advance payments made to tour operators are safe has assisted the development of the tour operation industry.

Transparency of working

  29.  The CAA operates an open and fair regulatory regime and makes every effort to be transparent in all its dealings. The CAA aims to produce material, including technical papers, that is written in a way that can be generally understood by those not necessarily possessing a high degree of technical expertise. Its practice is to publish material widely, making use of the internet whenever possible. Material published includes consultation papers, responses to consultation (where confidentiality is not an issue), policy decisions and reasons for reaching decisions, safety related technical information and guidance material for applicants for licences, certificates etc. The CAA holds seminars, workshops and safety promotion evenings and regular meetings with major stakeholders and representative organisations.

  30.  The CAA works within a number of charters, including the Airspace Charter and the codes of practice for Safety Regulation and Consumer Protection. It abides by the principles of the Better Regulation Task Force and produces Regulatory Impact Assessments and Environmental Statements as required by the Department for Transport.

 (8)   How are regulators accountable to the public other than through Parliament; what opportunities do the public have to express particular concerns to regulators; how do regulatory bodies relate to their associated consumer watch-dogs?

  31.  It is open to both the aviation industry and the public to approach the CAA with their concerns and the CAA will address these where it has the necessary powers to do so. The CAA publishes on the internet guidance on the nature of its regulatory powers and how complaints can be made to it, including details of individual points of contact.

  32.  The Air Transport Users Council (AUC) is the consumer watchdog for the airline industry. The Council acts as the independent representative of air passengers and complements and assists the CAA in its duties to further the reasonable interests of such passengers. The functions of the AUC are funded by the CAA and the CAA undertakes to respect the AUC's freedom to propose changes in its Term of Reference, determine policies and establish priorities in the performance of its functions within the framework of agreed operational and financial objectives.

 (9)   How effective is public consultation by regulators; what opportunities do the public have to contribute; to what extent do the public make use of those opportunities?

  33.  For the most part, the aviation industry is the CAA's "public" and consultation on both regulatory and financial issues takes place extensively with individual companies and with representative organisations. The CAA consults widely both on its general regulatory policies and on specific proposals and frequently exceeds the minimum legal requirements to consult. It also advises a large number of interested parties when it issues consultation papers giving information on their subject matter and where they may be located. For major consultations, such as on a periodic price review, the CAA will also issue a press release and provide briefings. Those who respond are generally those with the most immediate interest in the outcome (airports, NATS, airlines and their representative organisations) although other groups do actively participate where issues are narrowly defined. The CAA often conducts a two stage process—a written consultation followed by hearings with industry participants.

  34.  The CAA also initiates public consultations when considering changes in the legal framework, for example with respect to the terms of air travel organisers' licences or changes in licensing policies. The consultations are promulgated through press notices issued to the general media, and although interest tends to be concentrated in the trade press, there is usually some coverage in the consumer pages of other newspapers.

  35.  The CAA regularly reviews the effectiveness of its consultation processes and considers them to be sound. They are reviewed internally but do involve stakeholders and may be benchmarked against external sources.

 (10)   To what extent do the needs or concerns of the public guide the work of regulators; are regulators instruments of Government or representatives of the public?

  36.  The CAA is a statutory body and has to operate within the relevant legislation. It has been given objectives relating to the interests of those who use airports and air traffic services on the one hand and to the interests of the regulated companies on the other. The CAA has to give the appropriate weight to each of its objectives. However, the CAA has an overriding duty to maintain safety, which is of principal concern to the travelling public.

 (11)   How independent are regulators of Government; what factors do or might compromise their independence?

  37.  The CAA's decision making process is independent of Government and Government respects that independence. The CAA was set up following the Edwards Report into British Air Transport in the 70s and an advantage noted by Edwards was that the CAA Chairman would be able to speak on and for civil aviation with greater freedom than civil servants. The CAA must exercise its functions in accordance with the general objectives and particular duties set out in the statutes which confer those functions. The CAA has agreed a Sponsorship Statement with the Department for Transport, its sponsoring department. The statement sets out frameworks for policy, structure, planning and financial matters, external accountability, monitoring and review matters. The Sponsorship Statement recognises that while the Department for Transport may issue guidance to the CAA on general and specific areas of Government policy, that guidance will take full account of the CAA's statutory duties and must not conflict with these.

  38.  Section 2(4) of the 1982 Act provides that the CAA is not to be regarded as a servant or agent of the Crown or as enjoying any status, privilege or immunity of the Crown. For administrative purposes the CAA is classified by the Machinery of Government and Standards Group, Cabinet Office as a Public Co-operation. In the national accounts the CAA is classified as a Public Corporation in the public sector.

  39.  The Secretary of State has power in Section 6 of the 1982 Act to give Directions to the CAA in the interests of national security, international relations and environmental matters. Section 66 of the Transport Act 2000 empowers the Secretary of State to give Directions to the CAA imposing duties or conferring powers on it with regard to air navigation. Section 92 of that Act empowers the Secretary of State to give Directions indicating considerations to which the CAA is to have particular regard in deciding whether an dhow to exercise its functions under Part I of the Transport Act 2000. Section 93 empowers the Secretary of State to give Directions to the CAA and others in any time of actual or imminent hostilities or of severe international tension or of great national emergency.

Sir Roy McNulty, CBE

Chairman,

Civil Aviation Authority

28 March 2003


13   Where reference is made to aviation in this memorandum, this should be read as covering the full range of activities within the CAA's remit, including air travel. Back


 
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