Written Statement: Update on the development of aviation Public Service Obligations (PSOs)

Following my Written Statement in May 2018, outlining my intention to introduce a network of new strategically important Public Service Obligation (PSO) air services from Wales to other parts of the UK, I would like to provide an update on the latest position.

In preparation for exiting the EU in March 2019, Wales has been taking a range of pro-active measures to mitigate the impact of Brexit on the Welsh economy. 80% of Welsh businesses’ trade is with the rest of the UK. As well as acting to strengthen the Union of the UK in difficult times, improved access to domestic air services to and from Cardiff with all parts of the UK will enhance economic development and opportunity, strengthening the local economy in Wales and contributing to a more prosperous Great Britain.

As set out in the Economic Action Plan, enhancing connectivity within Wales, with the rest of the UK and internationally is key to the development of Wales’ economy. 

We are already developing proposals for the key highway gateways to Wales in both the south east and the north east of the country. 

Unfortunately Wales has been the poor relation of the UK’s rail investment in recent years, as although we are home to around 11% of track miles and 5% of the population, we have received less than 2% of the investment in rail improvements in recent years.  Cardiff was recently identified as having the poorest rail connectivity of any of the UK’s core cities – again as the result of decisions made by the Department for Transport.  This situation is about to become considerably worse with the advent of HS2.  The DfT’s own forecasts indicate that HS2 will cause £200m of annual economic damage to the economy of south Wales.

Enhancing air connectivity could begin to re-balance some of the issues caused by the challenges in the rail sector.  Even then though, Wales has been short-changed.  The recent refusal by UK Government to allow a derogation of NASP security regulations at Anglesey Airport, despite previously allowing this at other UK airports, along with the UK Government’s continued opposition to the devolution of Air Passenger Duty to Wales to mirror the settlements for Scotland and Northern Ireland have held us back from enhancing air connectivity to develop our economy.

To try to overcome the barriers that the UK Government has erected to stunt the growth of the Welsh economy in the rail and aviation space, in March this year my officials submitted to the EC and DfT, a suite of business cases clearly demonstrating the economic case to support a number of new PSO routes.  Independent aviation specialists predict that these routes will produce a Gross Value Added of approximately £10.14m which is of significant value to Wales.

However, despite providing clear evidence to support the introduction of these new routes, the UK Government continues to block progress of these proposals, noting that progress is being held back because of a proposed new DfT aviation strategy.  In the meantime the existing strategy, courtesy of the EU, continues to function.  The Welsh Government sees no clear rationale for holding back the Welsh economy on such a flimsy basis.

All that is required of the UK Government is to pass our application on to the EC for consideration against the current agreed criteria.

UK Ministers have said that they are keen to support this initiative, although it is being delayed whilst a Green Paper is developed for a new UK Aviation Strategy.  It has been made clear that no progress will be made on the Welsh PSO proposal until a new UK Aviation Policy is in place next year, but after it has been passed in law, a considerable programme of work will still remain to put it into practice.  It seems clear that the process of Green Paper, White Paper, Legislation (at a time when Brexit will dominate legislative capacity), development of new evaluation criteria and a DfT evaluation of our proposals is likely to be time consuming.  We have no reason to believe that this process will be complete within the next three years.

Effectively this will be 4 years since we initially submitted our business cases.  This kind of inefficiency is both unlikely to go unnoticed, and will unnecessarily hold back the economy of Wales at a time of significant economic uncertainty.

In light of this, and for the benefit of all of the UK, I have written again to Baroness Sugg, Minister for Aviation to urge her to reconsider her position and fast-track the PSO proposals to the EU for decision before the UK’s departure.