Clear­ance for third run­way is a dou­ble blow

The Sunday Telegraph - Money & Business - - Business - LIAM HAL­LI­GAN ECONOMIC AGENDA Fol­low Liam on Twit­ter: @liamhal­li­gan

The time for ac­tion is now,” said Chris Grayling last Tues­day. Af­ter years of de­lays, the Cab­i­net fi­nally ap­proved plans to build a third run­way at Heathrow – a de­ci­sion the Trans­port Sec­re­tary de­scribed as a “his­toric mo­ment” for the UK.

I fully ac­cept that Bri­tain has a press­ing need for new air­port ca­pac­ity. But I de­spair at the idea of ex­pand­ing Heathrow. At the most ba­sic level, our big­gest air­port is in the wrong place, with flight paths over some of Lon­don’s most densely pop­u­lated ar­eas.

It is mad­ness to fur­ther de­velop an al­ready enor­mous air­port smack in the mid­dle of a sub­ur­ban land­scape that’s home to mil­lions.

Bri­tain’s Supreme Court pre­vi­ously ruled that air pol­lu­tion around Heathrow breached le­gal lim­its, with air­craft emis­sions com­bin­ing with car fumes from the jam-packed M4 and M25 mo­tor­ways. To add an­other 250,000 flights a year to the present 470,000, with all the re­lated ex­tra road traf­fic, makes a mock­ery of our anti-pol­lu­tion laws.

The case for Heathrow, we’re told, hinges on se­cur­ing “hub” sta­tus, help­ing con­sol­i­date Lon­don as a global busi­ness cap­i­tal. Yet, for over 80pc of in-bound pas­sen­gers into Heathrow, Lon­don is the fi­nal des­ti­na­tion. And almost 70pc of all pas­sen­gers are tourists. Heathrow may want to of­fer more flights to far-flung busi­ness hotspots. But it could do that by giv­ing up slots on var­i­ous pre­dom­i­nantly leisure routes, al­low­ing more of the Mediter­ranean hol­i­day busi­ness to go to Gatwick and Stansted.

Which brings us to the nub of the is­sue. In 2011, the Com­pe­ti­tion Com­mis­sion forced the Bri­tish Air­ports Author­ity, which runs Heathrow, to sell off Gatwick, Stansted and some other UK air­ports. The idea was to chal­lenge BAA’S near­monopoly, so ben­e­fit­ing pas­sen­gers and the broader UK econ­omy.

Since then, the pri­vate in­vestors who bought Gatwick have financed ma­jor im­prove­ments and re­versed years of losses. Hav­ing demon­strated their de­ter­mi­na­tion to give Heathrow a run for its money, they’re now op­er­at­ing the busiest sin­gle-run­way air­port in the world. So it is deeply per­verse the Gov­ern­ment has taken a de­ci­sion that ce­ments Heathrow’s dom­i­nance, rather than al­low­ing Gatwick to com­pete by ex­pand­ing.

Pas­sen­ger land­ing charges at Heathrow have long been higher than those at its south Lon­don ri­val. The west Lon­don be­he­moth ac­counts for over 80pc of all long-haul flights leav­ing the cap­i­tal and, as and when the third run­way ap­pears, that share will grow higher still.

A third Heathrow run­way is es­ti­mated to cost an as­ton­ish­ing £18bn – not least due to the ex­ten­sive de­mo­li­tion of nearby houses re­quired.

More billions must be spent di­vert­ing ex­ist­ing roads, push­ing the to­tal bill way above £30bn. This sheer com­plex­ity ex­plains why a new Heathrow run­way wouldn’t be ready un­til 2029 at the ear­li­est. And, when it comes to it, much of the bill will be footed not by in­vestors, but by a com­bi­na­tion of pas­sen­gers pay­ing even higher charges and tax­pay­ers.

Ex­pand­ing Gatwick, rather than Heathrow, in­volves far less de­mo­li­tion and lo­cal up­heaval – de­liv­er­ing vi­tal new ca­pac­ity far more cheaply and sooner. A big­ger Gatwick would mean Lon­don had two world-class air­ports rather than one. And Cross­rail will any way soon bring much faster links be­tween Heathrow and Lon­don’s other air­ports, weak­en­ing the ar­gu­ment for a sin­gle hub. Yet money talks and, when all is said and done, Heathrow has won this com­pe­ti­tion due to its se­ri­ous lob­by­ing mus­cle.

Last week ex­posed once again the shock­ing ex­tent to which Downing Street is mis­han­dling the UK’S exit from the Euro­pean Union.

This Heathrow announcement sim­i­larly fails to grasp that post-brexit Bri­tain needs global growth cen­tres be­yond the South East. That’s why the “North­ern Pow­er­house” must now get off the draw­ing board, with HS3 be­ing pri­ori­tised over all other high-speed rail projects, link­ing up Liver­pool and Manch­ester, be­fore ex­tend­ing to the long-ne­glected North East. Imag­ine the pos­si­bil­i­ties if the West Mid­lands, al­ready the UK’S sec­ond-big­gest ex­port­ing re­gion, had in Birm­ing­ham a truly in­ter­na­tional air­port that drove lo­cal growth by of­fer­ing reg­u­lar, di­rect links to global mar­kets. And why not Manch­ester and New­cas­tle too?

The UK econ­omy is ridicu­lously im­bal­anced. Theresa May says she wants to change that. Now she’s brought back a 50-year-old plan to add an­other run­way in the South East – a re­gion with mul­ti­ple trans­port hubs al­ready. Her “one-na­tion Con­ser­vatism”, so far a se­ries of va­pid state­ments, has been sent pack­ing with this my­opic Heathrow move.

Bri­tain’s re­gional in­fra­struc­ture is deeply in­ad­e­quate – par­tic­u­larly across the North. That re­flects pal­try in­vest­ment, in­ad­e­quate long-term strate­gic vi­sion, and pre­vi­ous acts of van­dal­ism. The Beech­ing re­forms, which stripped out large parts of the UK’S rail net­work from the mid-six­ties on­wards, at the be­hest of the then all-pow­er­ful car lobby, were par­tic­u­larly destruc­tive.

To­day’s pol­i­cy­mak­ers have been sim­i­larly faced down by BAA – its own­ers led by Spain’s Fer­rovial, along with Chi­nese, Qatari and Sin­ga­porean sov­er­eign wealth funds. As such, May has missed a huge op­por­tu­nity to pro­mote more air travel com­pe­ti­tion, while boost­ing re­gional growth.

A par­lia­men­tary vote is due in mid-july. But even if May wins it, this in­fa­mous third run­way may never be built. The Gov­ern­ment pre­vi­ously an­nounced “clear­ance” in De­cem­ber 2016 – since when there’s been no progress. That makes this de­ci­sion dou­bly dam­ag­ing – be­cause giv­ing Heathrow per­mis­sion for an ex­pan­sion that may not hap­pen pre­vents ex­tra ca­pac­ity go­ing else­where. Which is just as Heathrow wants it.

‘Theresa May has missed a huge op­por­tu­nity to pro­mote more air travel com­pe­ti­tion’

An Emi­rates Boe­ing 787 Dream­liner flies over the In­stru­ment land­ing sys­tem at Heathrow

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