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CAA Funding Review: Mud sticks – and so do promises

It wasn’t just former Transport Minister Gerry Brownlee who, in 2012 (when imposing those dramatic rises), promised to reduce or remove the need for increased CAA charges in the 2015-2018 triennial review. He spoke for every minister of the day. In 2016, that still involves at least 13 ministers in the present Cabinet.

Min of Tran Simon Bridges: Muddled response

Min of Tran Simon Bridges: Muddled response

There seems to be an official reluctance to even acknowledge Mr Brownlee’s undertaking, possibly because bureaucrats and politicians wish to avoid accusations of broken promises. Current Transport Minister Simon Bridges’ muddling response, when recently faced with sharp questions in the House from NZ First’s Denis O’Rourke, was, we suspect, because he had been hoodwinked by officials who had conveniently failed to brief him about the Brownlee pledge.

If you read the CAA’s briefing papers to the incoming minister in 2014, you’ll see that its “first principles review” of future funding was already under way.

This suggests that Minister Brownlee either approved a first principles review in the expectation that charges would be held or reduced and the present hourly rate of $288 would become the 100% cost recovery rate, or officials charged off on their own. Gerry Brownlee is not known to mislead his Cabinet colleagues. He’s a minister of long standing. His expectation would be that the promise:

For the period for the next funding review (that is 2015-2018) the Civil Aviation Authority will look to decrease costs so that fees and charges reflect full cost recovery from 2015/16 and the need for further increases is reduced or removed…”

would be honoured.

Few ministers have objections to “first principle” reviews; such reviews are set in the context of the Government’s overall policy objective. In this case, the CAA apparently never told Mr Bridges that his predecessor had committed to two things:

  • Decreased costs
  • Need for further increases reduced or removed.

One can only assume that the promises were designed to get the controversial 2012 increases across the line. In other words, they were false and merely designed to comfort other ministers who were concerned that the draconian 2012 rises were unfair.

We also know that, this time round, many politicians are uncomfortable that those who can afford to pay – such as central and local government-controlled monopolies – get a free ride under the new proposals, while some of our most vulnerable operators, servicing similarly vulnerable communities, must pay up to 300-400% more.

If the present review is a “first principles review”, why weren’t these principles clearly articulated to everyone?

I was around when we went to “user pays”. The first principle of user pays is that the users have a say. As users, what say had we in the $43m of revenue the CAA claims it needs? As far as I am aware (along with everyone I have spoken to), we were merely told that $43m was what CAA wanted. Well, let me offer just a few of many money-saving thoughts:

  • The Civil Aviation Act S.72 E requires the Board to consider the most efficient and effective means of performing its functions and discharging its powers either by delegation, contracting or performing in-house. There is no evidence that the Board has ever done this. Why not?
  • The CAA undertook an expensive investigation ($250,000-plus) of an accident involving a US-registered aircraft. The Feds were not even interested and the findings were of zero benefit to the New Zealand flying public – where’s the accountability for that?
  • LTSA has a perfectly good system for registering vehicles. Why can’t we register our aircraft on the same system and at the same cost?

The second principle: All who benefit should contribute something. This means there should be no free-loaders. Under the CAA’s new proposals, this principle is destroyed. The likes of the private pilot will pro rata contribute more to financing the system than any airport, ATC and Met provider, engineering company or registered cargo agent. This is unfair and unjust.

The third principle: Where an activity can be identified and linked to a beneficiary, an hourly rate should be charged. This is not merely some flight of fancy but is enshrined in how charges must be set. There must be zero cross-subsidisation of these activities.

The fourth principle: Ability to pay. Not all companies and/or individuals have an equal ability to pay. Some businesses derive much more global credibility than others, through having a competent regulatory authority.

The fifth principle: When all activities have been allocated fairly according to the 100% cost recovery hourly rate, then – and only then – can a levy be struck. Levies cannot be based on hours because if a beneficiary can be identified, that beneficiary must pay.

One of the reasons the Ag levy is so high is because of the cost of implementing the Ag Sector profile. I put money on it that Ag operators were never told they would have to retrospectively pay for the Ag Sector profile. Levies – as with taxes – can’t be applied retrospectively without Parliament’s authorisation. This is a big NO NO.

Recent advice from the CAA says: “The Board… has now finalised its advice to the Minister of Transport. As he is now considering that advice, it is not appropriate for me to comment further…..”

This clearly shows that the Regulatory Impact Statement (a document forming part of the advice to ministers) was undertaken by officials without any transparency or consultation with industry as to the impact of the proposals. We had sought, on the industry’s behalf, an independent development of the RIS. The Chairman of the CAA didn’t even bother to respond to that letter.

We are determined to oppose any unjust or unfair proposal and will use every means at our disposal.

The GAA has commenced a formal complaint process with the Minister of Transport, highlighting the areas where consultation has been deficient, and in particular:

  • the “selective” nature of aspects of the consultation process
  • the failure of the CAA to release to all parties the individual submissions it received
  • the timing of the consultation process, which curiously coincided with peak work periods for the industry
  • the lack of full financial transparency around the levy proposals
  • the defective thinking behind decisions that would permit “free-loading”

Individually, these aspects may seem minor. Collectively, they form a convincing basis to claim a breach of process and to challenge these proposals.

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