22 November 2002
Members of the Commons' Public Accounts Committee dismissed the Department of Transport's suggestion that National Air Traffic Services' financial difficulties were due solely to the huge downturn in air traffic since the September 11 terrorist attacks.
Although they acknowledged that the subsequent fear of terrorism had played a key part in Nats' troubles, PAC members said the Treasury and the DoT had not undertaken sufficiently robust due-diligence tests on the financial model for Nats.
Committee chair Edward Leigh described the whole project as 'an appalling mess' at a Commons' hearing on November 18.
Nats was left with a heavy debt burden – around £730m – following its part-privatisation after the consortium of airlines that won the contract borrowed heavily from banks to fund their commitments. Nats also approached the government for a £30m emergency loan in February when the downturn in flight traffic kicked in.
MPs blasted government departments for failing to use a public sector comparator when tendering the contract. Drawing on a report by the National Audit Office, the PAC said ministers and senior mandarins also failed to take account of two previous major downturns in air traffic – the oil crises of 1973 and 1979.
But Rachel Lomax, permanent secretary to the DoT, defended the government. 'Everything we could throw against the bids was thought up. The truth… is that in the circumstances of the time, the world looked a safer place,' she said.
PFnov2002
