Outlook: Mr Blair should find a slot in his diary to break up BAA

Spilt milk; West Coast misery

The pointy heads at the Institute for Public Policy Research (those clever folk who brought you Gordon Brown's self-defeating Climate Change Levy) have come up with a new plan for easing airport congestion. Since the IPPR is Tony Blair's favourite think-tank, watch out for the idea becoming official New Labour policy any time soon.

The IPPR's proposal is that take-off and landing slots at Heathrow should be auctioned off to the highest bidder, as tends to happen with other commodities in short supply.The idea is not new – Neil Kinnock was banging the drum for a European-wide system of slot auctioning nearly 10 years ago in his role as Transport Commissioner in Brussels.

And indeed, the auctioning of slots already takes place. Slots at Heathrow regularly change hands for money and British Airways has been forced to begin accounting for the value of them on its balance sheet.

But what the IPPR is advocating goes further than anything envisaged before. It wants all slots at Heathrow and Gatwick to be auctioned, not just new ones, as the European Commission proposes. In addition, it wants an end to the system whereby BAA, the owner of Heathrow and Gatwick, cross-subsidises landing charges at the two airports from the profits it makes on retail activities. The Civil Aviation Authority, BAA's economic regulator, likes this idea but the Competition Commission doesn't on the grounds that it will mean higher air fares.

As this column has consistently argued, it is the economics of the madhouse for slots at Heathrow to be given away free and landing charges to be subsidised. This merely creates a vicious circle of congestion, by encouraging more airlines to fight for the limited space at Heathrow, bringing with them more passengers who in turn spend more money which is then used to keep landing charges low which brings in yet more passengers.

The IPPR reasons that auctioning slots at Heathrow will encourage more airlines to fly to cheaper airports and promote the development of regional airports and cut down on a whole lot of unnecessary air travel. At present, 20 per cent of passengers travelling through Heathrow are in transit from somewhere else in the UK.

Who knows, slot auctioning might even obviate the need for a brand new airport in the Thames estuary or a third runway at Heathrow since it will only be the big airlines with their super-jumbo aircraft who will be able to justify the increased costs.

The downside is that congestion charging at Heathrow will add to BAA's monopoly profits and mean increased costs for air travellers. The upside is that slot auctions could bring in £1.2bn a year for the Exchequer, according to the IPPR's figures.The Government could be even more radical and break up BAA up at the same time as introducing slot auctions. Genuine competition between the three south-east airports would help ensure that capacity is used more efficiently, rather than for BAA's convenience. But perhaps that is one for another IPPR report.

Spilt milk

Robert Wiseman has learnt not to cry over spilt milk and it is easy to see why. The Scottish dairy firm has now been the subject of two Office of Fair Trading investigations in the space of three years, neither of which has been able to pin anything on the company.

Despite this, it has had to fork out £700,000 on professional fees alone defending itself against the latest OFT investigation without any hope of recovering its costs. It is money down the drain. There is no mechanism for recovering the fees even though Wiseman has been exonerated.

Like the first inquiry, this latest one into allegations of predatory pricing in the Highlands, was the result of a single complaint from Express Dairies, Wiseman's biggest competitor and sworn enemy. Express has been trying to break into the Scottish market in revenge for Wiseman's incursions south of the border and three years ago it bought a dairy near Inverness

It is easy to see why the OFT might be interested in Wiseman. It has over 70 per cent of the Scottish milk market and dominant positions do not come much more dominant than that.

Nevertheless, after a year of fruitless investigation the dogs have been called off. Wiseman believes that during this time the OFT received not a single complaint from any of its customers. Since the inquiry was into allegations of predatory pricing, which usually involves customers enjoying an initial price reduction, this is perhaps not surprising. Customers may not be so sanguine if Express closes its Inverness dairy and Wiseman is left with no competition once again.

The other theory as to why the OFT packed its bags is that the competition authorities have simply tired of the milk industry after spending the last seven years investigating it. There is even talk that the OFT will allow the farmers co-operative Milkmarque to regroup to pool supplies three years after it was broken up.

West Coast misery

Perhaps you are reading this as you travel from London to Glasgow on the West Coast Mainline. If so, you will not be on one of Virgin Trains' 125 mph Pendolinos. You are more likely to be on a stopping Silverlink service. You may not even be on a train at all but on a bus trundling the 26 miles between Hemel Hempstead and Milton Keynes. For the next four months weekend travel on the WCML will be a nightmare as engineering works add 90 minutes to a journey which, by now, was supposed to have been cut by a fifth.

The WCML is two years late and 1,000 per cent over budget and even then there is no guarantee the project will hit the latest completion target date of spring, 2004. The main blame must lie with Railtrack, which misjudged the scale, cost and technological requirements of the project from the start. The Strategic Rail Authority also deserves a mention for failing to grasp the nettle earlier. But a special thanks must go to John Prescott and his successor at the Department of Transport, Stephen Byers, without whom none of this would, as they say, have been possible.

m.harrison@independent.co.uk