Huge economic benefits from a new runway ???
In its
publicity the Airports Commission claimed there would be “up to £147 billion
benefit” from a third runway at Heathrow.
This was eagerly seized on by
Heathrow, Back Heathrow and some politicians.
Spot the flaw ?
“Up to £147
billion” could mean anything – even zero or negative !
***************************************************************
The reason
for this vagueness becomes clear if one reads the damning comments the
Commission’s own “Expert Advisors” made about the “novel” studies used to
produce this figure:
“While the content of the model itself has been well tested, the same cannot be said of the front end, where an increase in capacity is converted into an increase in trip-making, trade, tourism and finally productivity. Furthermore the interpretation of the result – what exactly do they mean and is their basis transparent – is an issue. Overall, therefore, we counsel caution in attaching significant weight either to the absolute or relative results of the GDP/GVA SCGE approach (PwC report) within the Economic Case”.[i]
A more conventional economic analysis - WebTag - produced
‘wider economic impacts’ of just £11.5bn or £7.7bn, according to the Airports
Commission.
Less than 1/10th
!
****************************************************************
But the
claims are even more misleading than that.
The lobbyists for expansion have picked on an economic benefit without
taking into account costs. In order to
justify a project, it is essential to look at the NET benefit - that is
benefits less costs. If one picked a
benefit and ignored costs, one could conclude bank robberies are beneficial to
the UK economy because there is a benefit to the bank robber!
The Airports
Commission actually looked at the whole picture using the government’s
established methodology called ‘Webtag’ for evaluating infrastructure
projects. This gave a value of £1.4
billion. See table in the appendix,
copied directly from the Airport’s Commission final report.
This may
seem like at large sum, but it is spread over a period of 60 years and over the
whole UK with over 60 million people. Placed in context, the net benefit is
miniscule. The
net economic benefit is equal to the dregs of a cup of coffee for each airport
passenger ! [ii]
The figure
of £1.4 billion was derived on that basis that a limit should be placed on
carbon emissions from aviation in order to meet the UK’s climate
commitments. If no constraint was placed
on aviation’s carbon emissions, the net benefit was estimated at £11.8
billion. But in context this is still
miniscule. The
net economic benefit is still less than a third of the cost of a cup of coffee
for each airport passenger ! [iii]
It can be seen from the table that even these values required
the addition of a sum for ‘wider economic impacts’ which is not even part of
the official Webtag methodology. Without
these, the net benefits are close to zero or negative.
*********************************************************
Appendix - Evidence
From The Airports Commission
The
following table is from the Airports Commission’s final report (p147). It uses the official ‘Webtag’ methodology for
evaluating infrastructure projects.
Notes on the table
1. The last
two columns show the various costs and benefits of Heathrow expansion with a
north-west runway as compared with no new runway. The figures are all ‘Net Present
Values’. They are produced by summing
all costs and benefits over a 60 year period after applying a ‘discount factor’
for each year.[iv]
2. There are
two separate estimates – carbon traded (CT) and carbon capped (CC). Carbon capped is where aviation’s carbon
emissions are constrained in order to meet the UK’s climate commitments. Carbon traded is where there is no constraint
on carbon emissions.
3. ‘Wider
economic impacts’ of £11.5 bn and £7.7 bn are shown, which contrast hugely with
figures such as £147 bn claimed by supporters of expansion.
4. Summing
the various costs and benefits, the Airport Commission produced final overall
Net Present Values for third runway of £11.8 bn (carbon traded) and £1.4 bn
(carbon capped.)
5. These NPV
values of £11.8bn and £1.4bn include ‘wider economic impacts’. Those impacts are not even part of the
official Webtag methodology. If they had
not been tacked on, the net economic benefits would have been +£0.3bn or
-£6.3bn.
6. A notable
feature of the Airports Commission’s results is the large uncertainties
(doubts) about many of the costs. For
example, Transport for London estimated the surface access costs to be £12bn
higher. Transport for London also
highlighted the fact that the Commission optimised flight paths with 3 runways
but not with 2 runways, making the noise costs about £3bn too low. Such uncertainties are so large compared with
the overall NPV that there can be no assurance whatever that the overall NPV
would be positive.
Contact details
Nic Ferriday, West London Friends of the Earth
0208 357 8426 ; 07873 388453 ; wlfoe@btinternet.com