17 August 2002

Why ministers insisted on partly privatising air traffic control

By Barrie Clement Transport Editor

The Government's critics have always maintained that the sale of shares in Britain's air traffic
control organisation was a "privatisation too far".

Unions argued that such a strategy could impair safety, others that a critical element of the nation's infrastructure should by definition remain in the public sector. A high degree of co-operation is required between controllers and military personnel in emergencies.

But the Government insisted that the billions of pounds of investment needed to improve the creaking air traffic control system would be furnished only by a substantial contribution from the private sector.

Under the influence of a more business-like approach, National Air Traffic Services (Nats) could also expand its revenue-earning activities overseas.

Most important, from the point of view of the Chancellor, Gordon Brown, much of the financial burden would be removed from the public accounts.

There has been little sign of extra investment since the sale of 46 per cent of the shares to seven airlines last summer. Indeed Nats has decided to suspend the construction of a new control centre at Prestwick, Strathclyde while the organisation reviews its £1bn investment programme.

Meanwhile this summer the electronic systems that govern flights over Britain are struggling to cope with traffic gradually recovering from the trauma of 11 September.

Earlier this year equipment at Nats' West Drayton centre crashed twice in two weeks amid accusations that it was in desperate need of replacement.

Mr Brown's contention that public debt would be reduced through the part-privatisation is also under question. In particular there is considerable scepticism about his assertion that the sale would transfer risk to the private sector.

That scepticism grew after a confidential warning earlier this year that Nats' banks would force the company into administration unless the Government increased its support. That resulted in an emergency state loan of £30m. It also elicited a promise that if the airports
operator BAA took £50m of equity in the company, the state would match the figure. Ministers are desperate to ensure that no more taxpayers' money will be used to bail out the ailing system.

That is why the Department for Transport is "leaning" on Doug Andrew, director of economic regulation at the Civil Aviation Authority, to allow Nats to charge airlines more for handling their flights. Mr Andrew is said by senior industry sources to be unhappy at what he sees as government attempts to undermine his independence.

A report from the National Audit Office (NAO) last month predicted the Government would have no choice other than to use more taxpayers' money to prop up the partly privatised company.

The NAO report said the Government should have heeded warnings that the financial structure envisaged for Nats was unlikely to be sufficiently robust to withstand any severe shock. The Government pressed ahead with the sale weeks before 11 September.