The debate over the financial oversight of UK Approved Training Organisations (ATOs) has now made it to Westminster, with Tim Loughton, Member of Parliament for East Worthing & Shoreham, calling on the Department for Transport (DfT) to introduce steps to prevent cadet pilots losing their training investment when an ATO folds.
In a presentation made at Westminster Hall on 12 September, Tim Loughton MP gave an impassioned plea for intervention from the DfT to force the Civil Aviation Authority (CAA) to provide financial oversight of ATOs, as well as reopening the debate over the imposition of VAT on flight training courses.
As reported previously, the collapse of two schools, FTA-Global at Shoreham and Tayside Aviation at Dundee, resulted in over 200 cadets having their training programmes cancelled and, in most cases, the loss of significant sums of money paid upfront for training, as much as £90,000 for certain individuals, and over £4m in total. In his presentation, Loughton opened by stating that the issue is not just a local one but a nationwide problem with far-reaching implications for the UK flight training industry:
“Looking at the figures, we can see the looming problem. Back in 2015, around 2,500 commercial pilot licences were issued in this country. The prediction for this year is down to 500. We are losing a lot of capacity, and those three flying schools [Loughton somewhat erroneously included Bournemouth Commercial Flight Training, which closed in November 2022 without impacting cadets’ training funds, in his list of failed ATOs – Ed] alone are responsible for a large chunk of that capacity. Hundreds of students are finding themselves seriously out of pocket because their flying school has gone down either before they started their course, having paid their fees up front, or mid-way through the course.”
Loughton continued by quoting from letters sent to him from families impacted by the closure of FTA at Shoreham, recounting stories of huge losses borne by them after having paid upfront for flight training programmes, before stating that he had taken the issue up with Aviation Minister Baroness Vere and the CAA. Loughton confirmed that they had written back to him, reiterating their stance that while the CAA has a statutory duty to provide safety oversight of ATOs, it is not responsible for the financial oversight of them.
Those following the story to date will be aware that industry does not agree with the CAA’s stance that it is not responsible for the financial oversight of ATOs, pointing to retained EU law which specifically references such an oversight requirement, but it appears that the CAA and DfT are continuing to close ranks on this. Loughton reiterated the ongoing disagreement, but then took a new angle, arguing that safety and financial stability are interlinked:
“There is growing evidence that the cash-flow problems that flying schools have had were leading to corners being cut, which could lead to compromised levels of safety, so financial sustainability is an important consideration in ensuring that flying training schools offer the full, safe and regulated pilots course that those students pay for.”
Loughton went on to describe some of the reasons why some ATOs are struggling to stay afloat, referencing the impacts of the COVID pandemic, the hike in fuel prices due to the conflict in Ukraine, and also the fact that the UK is almost unique in Europe in imposing VAT on flight training courses.
“…perhaps uniquely in Europe, flying training courses in this country are subject to VAT, which is a large premium on top of already larg fees. That does not happen in most if not all other European countries, where flying training is quite rightly treated as being educational, so is not subject to VAT,” Loughton said.
Addressing Rt Hon Jesse Norman, Minster of State at the DfT, who was deputising on behalf of Baroness Vere, Loughton asked: “Does he think that flying training is a form of education and training, which the Government quite rightly encourage? If so, can he say why it is being treated as just any other sort of consumer item on which people are liable to pay VAT? That does not seem right.”
Responding, Norman said: “…as a former Financial Secretary to the Treasury, I do not share my hon. Friend’s view that a cut to VAT would be the answer to the problem. There is a very simple reason for that. There are many cases of sectors in the UK economy that have called for VAT cuts. In a very small number of cases, because VAT is by design a broad-based tax, reductions have been made to levels of VAT. Very often, they have not been passed on as any kind of saving to the end user; they have gone to support the margins of the company. In the training operator business there may be some value in that, but it is the normal course of things that in a competitive private sector industry there will inevitably be organisations that for various reasons do not manage themselves effectively, or go bust for other reasons.”
Unimpressed with Norman’s answer, Loughton rebuffed his argument, saying: “This is not a huge mass industry; it is not beyond the wit of a regulator or of the Treasury to ensure that VAT savings are directly passed on, or else the companies would not be eligible.”
Having been involved in various campaigns for the removal of VAT on flight training courses for nearly two decades now, FTN is only too aware of the stock answers ministers tend to give when pushed on this topic. The historic response has been that it is EU law which imposes VAT on services provided by commercial enterprises and therefore outside the control of UK government, despite the fact that the majority of EU Member States have always ignored this regulation. That has of course changed since Brexit and it is now within the power of UK Government to remove VAT on flight training, should it want to.
“This is not a huge mass industry; it is not beyond the wit of a regulator or of the Treasury to ensure that VAT savings are directly passed on, or else the companies would not be eligible.”
With Loughton following-up on his presentation in Westminster with a meeting direct with Baroness Vere, FTN contacted him to advise of another argument for removing VAT on flight training – the compromised competitiveness it creates.
FTN advised Loughton that not only does the imposition of VAT put the UK flight training industry at a competitive disadvantage and make a UK commercial pilot licence a more expensive option than an EU one, but there are also EU schools now offering VAT-free UK commercial pilot licence training (licensed by the UK CAA), meaning therefore that not only are UK ATOs compromised when competing with EU ATOs delivering EU licence training, but the UK CAA-regulated flight training industry itself is no longer a level playing field.
The British Airline Pilots Association (BALPA), in partnership with industry representatives from Bristol GroundSchool and Wings Alliance, have been active in campaigning for fairer treatment for pilot cadets, with representatives from BALPA joining Loughton on his meeting with Baroness Vere.
Ahead of the meeting, which was scheduled to take place just after this edition went to print, BALPA told FTN: “Loughton’s efforts to address this issue extend beyond his parliamentary speech. He has successfully secured a meeting with the noble Baroness in the House of Lords, the specific Minister responsible for Aviation. This meeting, to be attended by representatives from BALPA signifies a significant step towards driving change in the industry.
“In a statement released by BALPA’s Interim General Secretary, Miranda Rackle, she stressed the absence of public funding for pilot training. She highlighted the devastating financial consequences students face when flight schools go bankrupt. With pilot training being among the most expensive of all professions and no student funding available, many trainees’ resort to family support, including remortgaging family homes. Rackle called on the government to step up and protect these students who are so vital to the future of the UK aviation industry.”
FTN will be reporting on any developments arising from Tim Loughton’s meeting with Baroness Vere.
Image accredited to FTA Global
