11. You and the banks, I should have said, are finding 60 million?
(Ms Lomax) Neither are users. The £60 million that you are talking about was a temporary facility that was put in place earlier this year which ran out at the end of September and has not been used. What is being worked up at the moment is a more lasting solution which the CAA and NATS are actively discussing. The CAA put out a consultation paper in the middle of October which has been out to consultation until last week. We are expecting a decision from them in a few weeks' time. The principle that they have adopted is that all parties- users, the Government and the banks-should be making a contribution to a lasting solution.
12. Mr Everitt, obviously you have a very good safety record. I do not think there has ever been a fatality in the UK because of a failure in air traffic control. Will this good performance be sustainable in the future given your difficulties in investing?
(Mr Everitt) Yes. I am determined it will be sustained and indeed improved. Our performance this year in terms of risk bearing air proxies is similar, perhaps slightly better than last year, although they have not been all fully assessed by the Airprox Board, which was in single figures. I am determined to improve on that. This is our absolute priority. That is what we are here for and whatever the financial situation we are determined to work on our safety record.
13. That is fine as far as it goes but you are also required, are you not, in your job to increase capacity? Because of the financial difficulties you find yourself under, you have not been able to do that at present. To what extent are you now being constrained in what you might have hoped to achieve over the next decade? When there is an upturn, we are going to find there will be severe delays because you simply have not the resources to put the investment in.
(Mr Everitt) We have Swanwick and we have brought Swanwick into use very successfully in January. That is one of the principal drivers of our future capacity. The way we will increase capacity over the near term is to increase the number of sectors. Airspace is broken up into sectors, which enables us to distribute the work amongst a greater number of controllers. We are doing a major resectorisation which we anticipate coming on stream in March, which will give us additional capacity in the North Sea which is one of the big pinch points we have at the moment. It will also meet some military needs. We have not stopped growing capacity. We will also grow capacity through the Swanwick system as we bring additional controllers in. Where we have paused-and I stress "paused"- is in investment in our future sensor systems, but we have used this year to really think through the risks and the opportunities and how we might collaborate on future sensor systems. I am confident that once we are through this refinancing following the CAA's decision we can get on with some of these projects.
14. We know from paragraph 3.11 of this report that the project to increase air traffic capacity could take several years to implement. Are you telling us that the lack of investment that we are now seeing and the difficulties out there will not lead to a risk of demand exceeding capacity?
(Mr Everitt) I am reasonably confident that that is the case, as long as we can get these issues resolved in the next few months. We will have better projects. One of the things the PPP was set up for was to improve the project process within NATS and we have used this year to really think through what we can do and how we can manage the risk of these very, very complex projects more effectively. We have used this year well. What we now need is the composite solution to be put in place so that we can continue to move forward. I would stress that we spent, in the last financial year, £64 million on capital. This year, we will spend about 50 million, so we have not just stopped spending. We have just been careful how we use our money, given that we have had to live within our cash flow now for nearly 15 months.
Mr Williams
15. I want to establish to what extent the Treasury was in the driving seat. I ask this because the supplementary briefing we had just before the meeting updating us from the NAO makes the point that the Department and the Treasury decided to address the problem through a PPP. It says that the Department and the Treasury dismissed the option of a not for profit company. How much alternative did you really have as a Department? Was there any option on the table other than a PPP?
(Ms Lomax) It is not a question that I think I can answer. It goes to the question of discussions that were going on between ministers and departments which, even if I had been party to them, I would not want to reveal. On a major, controversial issue like this involving the ownership of a safety critical industry like NATS, I would be most surprised if the Department just did it off its own bat. It really does need to be agreed with the Treasury.
16. So that this is not taken out of my time, on a point of order, Chairman, I make the point that we have just had a witness who was not the Permanent Secretary at the time saying that she cannot answer because she was not there at the time. At an earlier meeting, I did ask that we have at this meeting the Permanent Secretary who was there for four relevant years. We do not have him here so I would hope that subsequently, at the end of this meeting-it is not your fault, Permanent Secretary-we can address this problem of us not being able to get answers because we have the wrong witnesses. That is not to in any way undermine the respect we have for the current witness. Looking through the report, I seem to miss a public sector comparator. Was there a public sector comparator?
(Ms Lomax) The way I see this-
17. Was there or was there not? We either have a comparator or we do not have a comparator. For all the others, we have had a comparator. It could be a fault on my part but I have not seen one in here and you have not seen one either, have you? (Ms Lomax) No, I have not seen one.
18. In that case, it is not for you to answer because we can now go to the Treasury. Why are we in the situation where there is not a meaningful public sector comparator?
(Mr Colman) For many years, privatisations took place without any form of public sector comparators.
19. I am asking why there is not one in this case. This is particularly sensitive, being a highly political trail in advance. There was considerable criticism of the possibility of going this route. Why did you not protect the back of the Department and the Treasury by having a public sector comparator or did you not dare do it?
(Mr Glicksman) I have not seen a public sector comparator. I cannot answer your question directly.
(Ms Lomax) I do not think I would expect to see a public sector comparator in a case like this. You see them for PFI deals but I have never seen one for a privatisation. This was a share sale of 51% of the shares. It was a major policy decision and it went through the Houses of Parliament. The trouble about PFIs is that they do not have that sort of political scrutiny.
20. You did not have one and I have established that quite clearly. This was all about obtaining a one billion investment and you have been talking of 60 million last year and 50 million this year. You still have a very long way to go. The consortium paid 65 or 50 million? It is 46% of the business. If you look at table 11 the 65 million is made up of 50 million equity from the Airline Group and an additional loan. A loan to whom from the Airline Group and who was to pay it back? That made the 15 million to make it up to 65. What did they pay? 50 million or 65 million?
(Ms Lomax) They paid £50 million for an equity stake and then there was a £15 million loan from British Airways.