Newman CAA Review

The CAA fulfils a critical role as the UK's independent aviation safety regulator, and we recommend that it should continue to do so. Whilst some other aviation regulators are a part of government, we recommend that CAA should continue in its current legal form.

The relationship between the CAA and the DfT, the new responsibilities of the CAA for emerging technologies, space travel and sustainability, as well as the ability to implement some of the recommendations from this review, will be best enabled by updating the CAA framework document. Work on this is in hand, and it is recommended that the clearance process for a new framework document – supported by the DfT and the CAA – is started by no later than 30 September 2023 so that it can ideally be fully operational by no later than 31 March 2024. The new framework document should be made readily available to all stakeholders, as well as the general public, on both the CAA's and the DfT's websites.

The CAA should be required to comply with Managing public money. Given the CAA's status as a public corporation it is recognised that there may need to be certain exemptions to managing public money (MPM). These should be agreed by both the DfT and the CAA and should be reviewed on an annual basis. The requirement to comply with MPM should be included in the new framework document, which should also retain the obligation to comply with the UK corporate governance code (formerly known as the combined code). Ideally, MPM should be in place by the start of the next financial year, which should be possible if the framework document has been agreed and is fully operational by 31 March 2024.

The respective roles and responsibilities of the CAA and DfT across all areas of non-statutory responsibility, including on airspace modernisation, sustainability and emerging technology should be clearly defined in the new framework document. Work is in hand to address this, on both a formal and informal basis, and this should be formalised in the new framework document.

The DfT's, and the government's, over-arching objectives for the CAA, taking into account the priority of its' statutory functions, should be clearly stated in the new framework document. We note that the governing document for the Civil Aviation Safety Authority (CASA), the Australian aviation regulator, sets out its objectives which include: to continue to focus on aviation safety as the highest priority; to consider the economic and cost impact on individuals, businesses and the community in the development and finalisation of new or amended regulatory changes; to take a pragmatic, practical and proportionate approach to regulation as it applies to different industry sectors having regard to risk. We recommend that this, or something similar, be included in the new framework document.

The DfT should clearly set out how it will monitor the CAA's delivery of its non-statutory functions and what information the CAA needs to provide the DfT to enable it to do so. This should be included in the new framework document which should also set out what information the CAA needs to give the DfT to ensure the DfT has visibility of how the CAA delivers its statutory obligations, whilst ensuring this does not impact on the independence of the CAA in delivering its' statutory functions.

The CAA should clearly demonstrate it is fulfilling its role to enable and facilitate growth. In order to enable this, it is recommended that the new framework agreement acknowledges that making decisions on regulatory matters with greater speed and with greater clarity will help remove possible barriers to growth. It should also confirm the CAA's obligation to consider the economic effect of new and existing regulations and their impact on growth.

The CAA's obligation to inform the DfT when the CAA is undertaking international work, including work done by CAA International (CAAi) should be included in the new framework document. CAAi is a subsidiary of the CAA. It offers commercial services to countries and others. It is a social enterprise and its profits are reinvested into the CAA's work.

The CAA should be clear as to the information it requires from its customers to make all regulatory decisions and should also be clear about the timetable for submission of information and decision making. These details should be set out on the CAA's website for all significant regulatory processes by 30 September 2023 and for all other routine processes by 30 June 2024.

The CAA's performance dashboard should be updated to ensure that it provides a clear view and greater transparency of the CAA's performance to the Board and the DfT. Consideration should also be given to publishing performance statistics on the CAA's website. The form and content of an updated performance dashboard should be agreed with the CAA Board and the DfT by 30 September 2023.

The CAA should improve its current mechanisms for engagement with stakeholders to ensure that there are opportunities for engagement on strategic priorities including policy, guidance and process changes. This should include consultation with stakeholders to help the CAA determine the appropriate level and form of engagement with different groups of stakeholders. The CAA should ensure that feedback is given to show how decisions have been informed by this engagement. Consideration should be given as to whether the finance advisory committee could be more effectively used as part of this engagement strategy. The CAA should report to DfT on progress in this regard in early 2024.

The board should improve its level of engagement with the aviation industry to increase their and the CAA's visibility within the sector. In particular, there should be a programme for the NEDs to engage with specific stakeholders to increase internal and external visibility. The board is already taking steps to implement this recommendation. The CAA should report on its engagement activities in its annual report.

The CAA's new consumer strategy should be approved by the board by 30 September 2023 and should be shared with the DfT and, ideally, published on the CAA's website. Work has already started on this. This strategy should include a commitment to invite the Chair of the CAA's consumer panel to a minimum of 2 board meetings per year, and for that person to be sighted on all board agendas to enable them to indicate items that are likely to be particularly relevant to consumers.

One of the NEDs should engage on a regular basis with the Chair of the CAA's consumer panel. Consideration should be given to direct NED engagement with the chair of other advisory panels and committees (for example, sustainability, finance).

The CAA should update its website, considering the views of stakeholder groups, including CAA customers and aviation consumers, to improve user experience and enable all stakeholders to more easily navigate, access and understand information, relevant guidance and policies. We recommend that the board approves a timetable for the updating of the CAA's website by the end of this year. If possible, short-term improvements, particularly easier navigation, should be implemented as a matter of urgency. The timetable for the implementation of the updated website should be agreed with DfT.

The CAA should finalise, and then implement, its efficiency and reinvestment plan. This includes a significant upgrade in the CAA's IT and ability to deliver services online. The principles of the efficiency and reinvestment plan, including the acceleration of the upgrading of the CAA's IT systems and processes, have been endorsed by the CAA's board and appear to be robust and appropriately challenging. The plan sets out how the CAA will achieve a 5% reduction in like-for-like costs over a 3-year period to both reinvest in the CAA's customer service and modernisation plan and also deliver CPIH-1% changes in the CAA's statutory charges for the period of the Plan. Following detailed consideration, the board concluded that any further reduction in costs would damage the CAA and the services it provides and we concur with this conclusion. The CAA should report to the DfT on a regular basis, not less than quarterly, on progress in finalising the efficiency and reinvestment plan. The plan, including an implementation timetable, should be finalised as soon as possible and by no later than 31 March 2024. The plan should be implemented over a 3-year period starting on 1 April 2024.

The timetable and milestones for the efficiency and reinvestment plan should be agreed with the department by no later than 31 March 2024. The delivery of the plan should be subject to DfT oversight, the precise terms of which need to be agreed by the department and the CAA, also by no later than 31 March 2024. The detailed implementation plan should incorporate the CAA's existing people strategy, and how it will ensure it has the necessary capability and capacity, as well as how the CAA will deal with its estate.

The current review of the CAA's scheme of charges needs to be concluded as soon as possible in order to reduce its complexity and make it easier to understand and administer. The scheme of charges needs to consider how provision for investing in the maintenance and upgrading of systems can be included. The review should be completed in time to enable the required consultation with CAA customers in 2024 to 2025 and for changes to be implemented as part of the CAA's efficiency and reinvestment plan. The CAA's scheme of charges should continue to adopt the 'user pays' principle.

The skill requirements of the board should be reviewed to reflect the changing needs of the organisation and inform NED appointment decisions. As a minimum, in addition to the existing range of skills, the board should include NEDs with significant experience of working in a consumer-facing business and experience in the delivery of significant process transformation programmes. This should be done as part of the consideration of the renewal of NED board terms and the recruitment of new NEDs as required. The board skills matrix should be updated to include both these skills.

Subject to Cabinet Office guidance, either the Secretary of State should appoint a Deputy Chair (typically this would be one of the NEDs on the Board), or the Senior NED should have an outward-facing role as well as the current internal role. The CAA should continue to be fully supported in its efforts to ensure continuity of senior management and its board.

Contingent on the CAA optimising the use of its current consumer protection powers, and demonstrating that it is doing so, Ministerial consideration should be given to providing the CAA with additional powers to more effectively regulate (in the interest of consumers) where it considers that an aviation related business has breached consumer rights law: to make directions to remedy such infringements or stop them from happening in the future; to impose financial penalties, where appropriate.

The CAA should work alongside providers of new and emerging technology in developing regulation, recognising that these regulations need to evolve alongside the development of the new technologies and this needs to be an even more collaborative relationship than is the case in more traditional regulation. The CAA needs to explain to these providers how the recent restructuring of its regulatory team will facilitate this.

The CAA should engage with DfT to ensure that the CAA's risk appetite for new activities (for example, emerging technologies) is consistent with the delivery of government policy as far as possible whilst recognising the CAA's independent statutory responsibility for safety.

The process for conducting economic regulation should be reviewed when the current Heathrow review (known as H7) is concluded. Given the short timescale before the commencement of Heathrow review 8 (H8), it is recommended that this review should be of the process, governance and 'mechanics' on a basis to be agreed between the CAA and the DfT. As the H7 decision is currently the subject of an appeal, it is inappropriate to make specific recommendations about the current process. However, we recommend that the review should include 'lessons learned' from all the CAA's regulatory activity, and not just H7. In addition, the department, taking into account the views of the CAA and other interested parties, should consider whether a wider review of the basis, scale and scope of all the CAA's economic regulatory activity is required.