Jesse Norman, Minister of State at the Department for Transport, responds to a Westminster Hall debate on public service obligation funding and Blackpool Airport.
The Minister of State, Department for Transport (Jesse Norman)
It is a delight to see you in the Chair, Mr Gray. I am also delighted to respond to the very good speech and useful interventions made by my hon. Friends the Members for Fylde (Mark Menzies), for Witney (Robert Courts) and for Blackpool South (Scott Benton). I am a man with a family background in general aviation. Many years ago, I got a private pilot licence, and my uncle designed the Britten-Norman Islander. I do not know whether Members recall the moment in the James Bond film “Spectre” when the plane is flying along and gets its wings knocked off and goes skiing. That was a Britten-Norman Islander designed by my uncle, so we have a certain amount of traction in this field, and a certain sympathy for the issues raised by my hon. Friend the Member for Fylde.
Let me be clear that within the Department for Transport we recognise the importance of Blackpool airport to the region. We also recognise it as the centre of the Blackpool airport enterprise zone, set up as a hub for business, medevac, flying schools and general aviation. I note that this is the second debate that we have had this year on this topic, or a related topic. I thank my hon. Friend the Member for Blackpool South for his earlier debate, which I note that my hon. Friend the Member for Witney responded to very ably as the Minister. There is a certain circularity here, but there is also a sense of energy and purpose that all three of my hon. Friends have rightly brought to the issue. I thank them very much for what they have said.
As my hon. Friends have been at pains to emphasise, the UK enjoys what is in many ways a world-leading competitive commercial aviation sector, with airports and airlines operating and investing to attract passengers and respond to demand. Airports themselves have a key role to play as part of the sector. Where opportunities for growth exist, local partners can come together with the industry to develop the business case for new commercial flights. My hon. Friend the Member for Fylde rightly focused on the key goals of commercial development and sustainability of the airport, levelling up, and Union integration.
It is for airports, local authorities, local enterprise partnerships, local businesses and other stakeholders to try to come together to build the case for commercial flights and work with airline partners to create new connections for their communities. Airlines will ultimately determine the routes they operate based on their own assessment of commercial viability. As my hon. Friend the Member for Fylde said, it is notable that Blackpool has a proud history of innovation in this area as well as a historically thriving tourism industry. The airport was used as recently as 15 or so years ago—perhaps even less. We need to consider the question of the commercial development of the airport in the context of the wider processes of levelling up and regeneration.
As hon. Members will know, air travel is provided almost entirely by a competitive market. There is no bespoke funding or support from Government for new routes, but there is support for domestic connectivity. The 50% reduction in domestic air passenger duty was designed to provide that support. It was part of a package of air passenger duty reforms. There was a new reduced domestic band to support regional connectivity and a new ultra-long-haul band to align air passenger duty more closely with environmental objectives. That begins from April next year.
The question of a targeted APD is very interesting. I have no doubt, speaking as a former Treasury Minister in part, that the thought of a hypothecated or targeted APD will cause severe tremors and, dare I say, nervous palpitations within the Treasury—for many understandable and obvious reasons. As Ernie Bevin once said in a different context,
“Open up that Pandora’s box, you never know what Trojan horses will jump out.”
The Minister makes a good point. The 50% APD cut was welcome, but my point is about what the Department calls open PSOs. Those are not a further Treasury subsidy, but simply the removal of APD on routes that are non-operational—where the Treasury is getting no revenue or marginal revenue. There is a business growth opportunity there. That is what I am asking him to push the Treasury on, though I appreciate it is not in his gift.
That clarification is very helpful. There is a way of thinking with open PSOs that is not just tied to APD, but I will come back to the question of PSOs in general.
We have some support for administered connectivity through domestic APD. We are continuing to explore alternative routes and are seeing whether there are other ways to address this. In the context of PSOs, I will lay a slightly different emphasis from my hon. Friend the Member for Fylde. It is important to recognise that the PSO policy as it presently is set up is designed to support not new flight—that is the question being raised by my hon. Friend the Member for Witney—but routes that have previously been operated commercially or are now at risk of being lost.
The question of new routes is somewhat different. The routes that are funded at the moment, at least across the UK, are modest. There are three public service obligations: from Londonderry/Derry to Stansted, Newquay to London Gatwick, and Dundee to London City. An additional 17 PSOs connect the highlands and islands of Scotland, which are wholly within the borders of Scotland. The administration and funding of those, by agreement with the Department for Transport, is the responsibility of the Scottish Government.
We operate within a context of existing policy. To the point about the stance of the local authority, as raised by colleagues, it is important to say that my officials have so far received no requests from the local authority to discuss the need for any PSO routes from Blackpool airport—I will leave local colleagues to decide how they want to interpret that. Of course, if there was going to be PSO support, it would have to be initiated and agreed with the local authority, and the fact that we have heard nothing from them is not helpful to the cause being promoted.
As I say, PSOs are considered in the context of commercial services that either are at risk of being lost or have recently—generally speaking, within the past two years—been lost. The loss referenced by my hon. Friend the Member for Fylde goes outside that remit and therefore does not fit within the existing policy. If and when it did apply, which would undoubtedly be part of the same process as the consideration of any new routes in the future, which I will come on to shortly, it would be through a business case, warmly and widely agreed locally, in which the local authority would play a leading role. That is very important. Hon. Friends will be aware that levelling up works effectively only when everyone is lined up in the same way. When business, the local authority, local Members of Parliament and other key stakeholders are so lined up, it can be enormously effective and successful.
As a reminder to all, eligible routes should be ones in which there are historically no viable alternative modes of travel and where it is deemed and demonstrated to be vital to the social and economic development of the region.
It is important to say that if and when a PSO is granted under the current policy, there must then be a procurement exercise to find an airline, which, in turn, needs to be a full and open tender for selection. The subsidy provided is based on the airline’s operating losses on that route, which it must submit as part of a tender bid. It is a very context-dependent decision. Of course, those things would be independently assessed, as any new approach would have to decide how, where there had not been a prior existing commercial flight, a non-distortive method of subsidy and support could be provided.
Let me pick up a couple of points relating to the Union connectivity review that were rightly raised by colleagues. As hon. Members will recall, in November 2021, Sir Peter Hendy published an independent review designed to explore how improvements to transport connectivity between Scotland, Wales, Northern Ireland and England could boost not just economic growth but access to opportunities, everyday connection and social integration. The review identified the key importance of airports and air connectivity by providing connectivity both into London and in and between peripheral regions, which gets to the points raised by colleagues today.
As hon. Members might imagine, the Government are considering our response to the Union connectivity review, and my colleague Baroness Vere leads on the issue of aviation. Our response will be Department-wide, because it is a multimodal strategic review in nature. As part of that, we are exploring further opportunities to utilise PSOs in order to support regional connectivity and the levelling-up agenda.
My officials have already been actively considering how airport slots are allocated in the UK. Now that the UK has left the EU, there is an opportunity for the Government to legislate to improve the slots system to ensure it provides the connectivity that UK passengers need. That can be expected to have knock-on effects on economic growth around the country.
Regional airports play an important role in levelling up. It is important to recognise that that is not just about the foundation of the wider UK aviation sector; it is also about the business opportunities that can be directly generated as a result of the supply chains and other enterprise engagement. Members will recall that the Government published a strategy on the future of aviation, “Flightpath to the future”, which sets out a vision for the sector over the next 10 years. It includes not just connectivity, which we have discussed, but workforce, skills, innovation and decarbonisation.
We expect a naturally low-carbon approach to the regeneration of any new airports for all the reasons my hon. Friend the Member for Fylde set out. That is a potential source of advantage if it is properly handled. It is our goal that UK domestic flights should be net zero by 2040, and airport operations, which are an important potential ancillary contributor to carbon emissions, should be zero emission by 2040. We are providing significant support for that, not just for sustainable aviation fuels but for the commercialisation of those plants and other research and development co-investment —in particular, through the Aerospace Technology Institute. Alongside that, the levelling-up agenda, jet zero and net zero provide the context within which there can be diversification, a deepening and broadening, and a very significant boost to the activity conducted in and around airports.
I want to give my hon. Friend a moment to respond—
James Gray (in the Chair)
No, you don’t. Not in a half-hour debate.
In any case, I will not abuse the privilege by speaking further. I thank my hon. Friend the Member for Fylde very much for his comments, and I thank my hon. Friends the Members for Witney and for Blackpool South for their interventions and the interest they have shown in this issue.