One of the first acts of New Labour when it came to power in 1997 was to propose a part privatisation of the National Air Traffic Service (NATS). This was to be achieved by using a
"Public Private Partnership" (PPP).
The scheme was presided over by Transport Secretary Stephen Byers, a career politician, Blair "crony" and ex-teacher of law (i.e he had never had a real, productive job). In 2009, Byers was subsequently was fingered for claiming £125,000 in second home allowances for a property owned by his partner, where he lived rent free, making him a parasite to the British tax payer.
The perceived benefits of privatising the service never came about. This is
Professor Elliot Sclar writing in 2003:
Privatisation
advocates point to cases of air traffic control privatisation in
other countries to highlight the potential value of privatisation for the United
States (U.S.).
However,
an independent review of three prominent international
privatisations,
Australia,
Canada, and Great Britain demonstrate the dangers of privatisation
and the
inability
of private air traffic controller (ATC) monopolies to effectively
deliver positive
results
in any of the three criteria that prompt privatisation consideration:
reducing
cost,
increasing the speed of modernisation, or stabilising funding.
Further, the case
reviews
demonstrate that privatised air traffic control systems tend to
impose greater
costs
on users, are prone to technological failure as well as disruptive
labour disputes,
and
privatizers ultimately rely on government backing, to costly effect.
In Canada, the
privatised
system has led to massive increases in user fees for passengers, and dangerous
understaffing in towers. In Australia, excessive demands on
controllers have led
to
a series of strikes, while failures with new technologies led to
actual radar blackouts
and
major traffic disruptions. In the United Kingdom, the newly
privatised National
Air
Traffic System (NATS) has been forced to go to the government for
financial
bailouts
valued to date at two thirds of the original sale price, while
technological failures
have led to multiple system shutdowns and operational irregularities.
This article shows the real reason NATS was privatised: to put more money in bankers pockets whilst saddling the people of the UK with more debt:
Our
air was not for sale: it has been given away
Before
the 1997 General Election, Andrew Smith, who is now Gordon Brown’s right hand
man in the Treasury, famously laid down the party line at a Labour conference
with the slogan: “Our air is not for sale”.
He was of course pledging that the Labour Party would resist
Conservative plans to privatise the National Air Traffic Service (NATS).
In
the run up to the election the pledge was dropped and the part-privatisation of
NATS became Labour policy. It was one
of those issues chosen to demonstrate to middle England that Labour was New
Labour. But we should be grateful that
only half our air was for sale.
A threat to safety?
If ever there was a business that
should not be run for profit it is NATS – because running it for profit is a
threat to safety standards.
When the Bill to partially
privatise NATS was going through the House of Commons, time and time again John
Prescott cited the good safety record of British Airways since privatisation as
a supposed counter-argument to this. The analogy does not hold
water. British Airways is operating in
competition with other airlines whereas by its nature NATS is, and always will
be, a monopoly provider of air traffic control services to airlines. British Airways is under commercial pressure
to maintain a good safety record since failure to do so will cause air
travellers to desert it for its commercial rivals.
With a privatised NATS, the commercial pressure is in the
opposite direction: providing a safer service (by installing new systems or
employing extra people to operate them) costs money and therefore lowers
profit. And since NATS is a monopoly
provider of air traffic control services, airlines have nowhere else to go for
safer services.
Airlines as partner
Despite
resistance from a solid body of Labour backbenchers and from the House of
Lords, the Bill went through Parliament in November 2000, and on 27 March 2001
the Government announced that it had chosen the “Airline Group” as its partner
for NATS.
As
its name implies, the Airline Group is a consortium of seven airlines: British
Airways, British Midland, Virgin, Britannia, Monarch, EasyJet and
Airtours. Under the arrangement, the
Airline Group acquired 46% of the shares of NATS (but with rights giving it
voting control), the Government retained 49% and 5% was put into an employee
trust.
It
was no accident that the Government chose a group of airlines to take control
of NATS – since they are consumers of NATS services, they have an interest in
seeing that the services are safe. With
that choice, the argument about threats to safety arising from
part-privatisation died away. The
Government had successfully put the issue to bed in advance of the General
Election.
Little
was said at the time about the stark conflict of interest between NATS and the
airlines who now control it but are also its customers, NATS having an interest
in pushing charges up and the airlines having an interest in keeping them down.
Deal done and dusted?
The
impression was given last March that the deal was done and dusted, that the
state was to receive about £800m from the Airline Group for their 46%
stake. But this wasn’t so. Months later the Airline Group was still
haggling about the price. On 9 July,
the Guardian reported the Airline Group was arguing that the price was too
high, that a 25% reduction to £600m was nearer the mark. The reason given for this request was the
reduction in air traffic in the early part of last year (mainly because of foot
and mouth disease in Britain but also because of the slowdown in the US
economy).
NATS’
troubles did not begin on 11 September (nor did the airlines’ troubles). However, like British Airways, which relies
heavily on transatlantic traffic, NATS has been badly hit by the fallout from
11 September, because it gets around 40% of its revenues from transatlantic
traffic.
£750m millstone
The
Government seems to have received £800m from the sell off. But the Airline Group paid only £50m of it
and, by an extraordinary arrangement, the remaining £750m was paid by NATS
itself out of a of £1.46bn loan taken out by NATS from 4 banks (Abbey National,
Barclays, HBOS & Bank of America).
In other words, the Airline Group got a controlling interest in NATS for
a mere £50m and NATS was saddled with an extra debt of £750m, which NATS – not
the Airline Group – is responsible for servicing and repaying. And if NATS defaults, the banks could
acquire the controlling interest in it.
Had
the controlling interest in NATS been sold off for £800m cash paid by the
Airline Group, or some other buyer, out of its own resources, the Government
would have got its money and NATS would not have a £750m millstone around its
neck. Nor would it have this millstone
if it had been left in the public sector.
Why
did the Government allow such an extraordinary arrangement, which has a direct
bearing on NATS’ present troubles? It’s
impossible to say whether this arrangement was part of the original deal with
the Airline Group announced on 27 March last year by John Prescott, or whether
it was worked up in the following months in response to the airlines’ demand
for a better deal and was a product of the new Byers’ era.
What
can be said for certain is that there were buyers around who were prepared to
pay money up front out of their own resources for a controlling interest in
NATS and, had one of them been chosen by the Government, NATS would now have
£750m less borrowings to service and repay.
The
inescapable conclusion from this is that the Government was desperate to have
the airlines involved in NATS in order to put the issue of safety to bed, so
desperate that the airlines were given a controlling interest for a pittance
and NATS was turned into a basket case by saddling it with an extra £750m of
debt.
Stephen
Byers has another little problem on his hands – and it’s not a minor personnel
problem.
Labour & Trade Union Review
March 2002
To date, the UK is the only country in Europe with a part privatised Air Traffic Control service.
