71. Are you considering now a not for profit solution? Have you decided that now you have the PPP, come hell or high water, you are going to stick with it or are you considering another major change?
(Ms Lomax) No, we are certainly not thinking of another major change. There is no need to at the moment and having gone to so much time, trouble, parliamentary time and money to construct the PPP it would be a very serious decision indeed to abandon it.
72. Have you contingency planning in place in case, for example, revenues do not pick up and the downturn is more prolonged than you anticipate?
(Ms Lomax) The structure of the PPP and the economic regulatory framework within which it is operating does provide for recourse if NATS gets into difficulties. For example, there is in the NATS licence a condition which provides for an exceptional user contribution in circumstances which could not have been foreseen. Prices could be raised. In the legislation, as you no doubt recall, there is provision for air administration on the same lines as rail. There is a wide range of things which could be done if NATS got into serious difficulties, but that is not where we are at the moment. We are negotiating a restructuring which will put us on a firm footing even in these difficult circumstances.
73. You are not doing any planning for those possible outcomes?
(Ms Lomax) We have plans against almost everything in the Department.
74. Some plans are more worked up than others.
(Ms Lomax) At the moment, we have reasonable grounds for supposing that a composite solution will be in place shortly.
75. One of the major cases for a PPP originally was that in the public sector NATS would not be able to get hold of the money needed to invest in new equipment, new capital and so on. I think Mr Everitt was saying that you were rather proud that your capital spending was 64 million last year.
(Mr Everitt) That is right.
76. What were you hoping to spend in a pre September 11 world?
(Mr Everitt) Not a great deal more than that. The big issue would have been the speed with which we could move on the Scottish centre. We had already made decisions prior to September 11 that we needed to review that project. As I explained to the Chairman, we have spent this year examining what our best options are and particularly how we can collaborate more closely with key partners in Europe. I think we are making good progress on that, so I would be surprised if it would have been a great deal more.
77. In paragraph two of this report on page one, the summary page, it says, "In 1997 NATS estimated that it required some £100 million of further capital investment every year for the next decade to increase air traffic control capacity to meet future traffic growth." Originally, back in 1997, you were looking for £100 million in capital investment a year and this year you are on half of that, are you?
(Mr Everitt) Yes. It is a broad order number obviously, £100 million a year. Part of my job is to make sure that we spend money wisely and effectively. We have taken this year to really work through what our best options are on the capital programme.
78. Could I ask you about one of those capital projects which I am sure you are very familiar with, which is the software system at West Drayton? Am I right in saying that this software was designed, if that is the right word, in 1975?
(Mr Everitt) One has to be careful. I think software is developed. "Written" is the right word. It is written in a language, as I understand it-I am not a technician-which dates from that time. It is our flight data processing and is a very similar system to that currently in use in the United States, so we are not alone in that.
79. It says in this report that you will be using elements of that software until 2011. Given the fact that it has completely crashed twice this year, have you brought forward plans to replace the software so that we do not have further crashes with possible catastrophic consequences?
(Mr Everitt) Firstly, the hardware is modern. It is the software where we have the issues and we have resolved satisfactorily now the issues that we experienced earlier on this year. Part of the capital plan is a sequential move away from the existing flight data processing that we have, but it will take time to do. This has been an extremely difficult issue for both our colleagues in America to address and for NATS itself to address, because the whole system is in effect driven by the software. We have a group of internal experts who understand it broadly and we bring in external advice on how we maintain it. Swanwick brought in a new dimension which I could go into, but I know time is limited, and we had to address that dimension which is basically sequencing the Swanwick software with the West Drayton software. We have learned a lot in the past nine months, but it does remain one of our vulnerabilities. This is a very complex system that we are trying to operate. The capital plan will address it but we will not finally be through dependence on that software probably until 2011-12. We will reduce it over time.
Angela Eagle
80. Mr Glicksman, I seem to recall when the Government first came to power in 1997 there was a left over from the previous Government and that was an assumption of a 500 million capital receipt for the sale of NATS which was put into the departmental totals. Is that true?
(Mr Glicksman) Yes, that is correct.