Mr Osborne
61. Can I turn to the answer you gave to the Chairman earlier about, to quote, the judgment now between a not for profit solution and the PPP would be more finely balanced with hindsight. Would you elaborate on that?
(Ms Lomax) There are two relevant points. One is that the NAVCANADA model, at the time when it was being cited as something that we should look to in structuring the future for NATS, was relatively recently introduced. It came in in 1996. It was difficult to use that. It was not a tested model. In practice, it turned out rather well. The second thing is that the strategic partner in the PPP is the Airline Group which has said that it wants to operate on a not for profit basis and it will not be looking to take dividends.
62. It is doing a good job of operating on a not for profit basis at the moment.
(Ms Lomax) I think that is very similar to most people in the aviation sector, is it not?
63. Your view is that it is now a more finely balanced decision between a not for profit organisation and a PPP; whereas at the time this legislation was going through Parliament it was amongst the most controversial legislation of the last Parliament. There was an enormous row about whether a not for profit solution would be better.
You are now in effect saying that, with hindsight, you are not sure; maybe it would not; whereas the statements from ministers at the time were that the case for the PPP was overwhelming.
(Ms Lomax) The PPP is there. A lot of work has gone into it. It has been very carefully thought through. I was asked to say how could we therefore be going ahead with Network Rail which is a not for profit structure and I have indicated that people's minds are not closed on it. It was not a theological thing.
64. My colleague says it seemed like it at the time. If you read this Report, paragraph 1.7, page 12, the very last bit of the paragraph says, "The Department worked on the understanding that in the United Kingdom the particular structure of NAVCANADA would not result in NATS' expenditure being classified to the private sector and would not therefore provide the freedom to invest that was required." In other words, a not for profit NATS would appear on the Treasury's books. I am right in saying that Network Rail does not appear on the Treasury's books?
(Ms Lomax) If I could read the next sentence: "However, any definitive view would be subject to detailed assessment of the body's control and risk transfer arrangements." The same is true of Network Rail.
65. Once you had a detailed chat with the Treasury, you were able to put Network Rail off the Treasury's books.
(Ms Lomax) The decision to classify Network Rail the way it is does reflect a particular position that has been put forward about the control of Network Rail.
66. There does not seem to be a great deal of difference in principle between a not for profit operator of an air traffic control system and a not for profit operator of a railway system. The principle of the government's relationship with a not for profit organisation is there.
(Ms Lomax) One significant difference is that Network Rail is in receipt of a large amount of public subsidy; whereas NATS is not.
67. Relatively speaking, it is receiving quite a lot of soft Government loans, is it not?
(Ms Lomax) Is it? What soft Government loans? It is not in receipt of any soft Government loans.
68. It got 30 million earlier this year.
(Ms Lomax) Are we talking about Network Rail or NATS?
69. NATS. Was it not bailed out in March? (Ms Lomax) No, not at all.
(Mr Everitt) In March a 60 million facility was put in place on commercial terms, subscribed 50/50 by the banks and the Government. That was designed to be working capital. It expired and was repayable by the end of September. We did not have to draw on it. Had we had to draw on it, it was on straight commercial terms.
70. Why did you need the Government as a partner? Why not go to the banks for the whole amount?
(Mr Everitt) That was the arrangement that was put in place between the Government as shareholder and the banks as funders. It was done on strict commercial terms because the banks would not do it in any other way.