The chancellor’s explicit reference to airport capacity in a business-friendly budget came in the same week that David Cameron said the government was “not blind” to the need for more runways.
The Confederation of Business Industry hailed the comments as a sign that its argument is gaining traction among ministers in the wake of vociferous criticism of the coalition’s embargo on new runways at Heathrow, Stansted and Gatwick.
The chancellor gave hope to supporters of expanding existing airports as well as backers of a new site in the Thames estuary by stating that “this country must confront that lack of airport capacity in the south-east … We cannot cut ourselves off from the fastest growing cities in the world.”
A government paper on a new aviation policy, due to be published this month, has now been pushed back to the summer.
The director general of the CBI, John Cridland, said the comments confirmed that the private sector was making headway in its campaign to ease the pressure on London’s congested runways. “I think we are beginning to win the battle for extra capacity in the south-east. Whilst all the focus has been on whether we need a third runway at Heathrow or not, the battle we need to win first is establishing that we cannot run our airports properly without extra capacity. Once we win that argument, it is a locational issue,” he said.
Osborne and Cameron have dropped increasingly heavy hints that a policy shift is on the way, with the chancellor admitting in his 2011 autumn statement that “all options” were on the table for airport expansion – apart from a third runway. Nonetheless, private sector suggestions for the policy review will include appeals for expansion at Heathrow, led by the airport’s owner BAA.
A Department for Transport spokesperson said the framework for a new aviation policy would be accompanied by a call for submissions on international airport capacity in the south-east, paving the way for overtures on a £50bn airport in the Thames estuary on the north Kent coast.
However, the DfT admitted that the outlines of a new policy would still take a year to emerge. “We remain committed to having a final policy in place by next spring at the latest, but we have taken the decision to wait until both documents are ready and intend to publish them in the summer.”
One of Heathrow’s largest airlines, Virgin Atlantic, said the airport must be considered a candidate for new capacity. “We look forward to an urgent and open debate with government on all options, which must include Heathrow,” said Steve Ridgway, Virgin Atlantic’s chief executive.
There was a boost for rail travellers as Osborne said he would make up to £130m available for the Northern Hub project to increase the number of trains on the Sheffield to Manchester and the Manchester to Preston railway lines. However, there was no good news for motorists and airline passengers.
The chancellor looks to be on a collision course with motoring groups after he failed to drop plans to introduce a 3p a litre petrol price increase, set to hit forecourts in August.
Despite oil prices hitting $125 a barrel, and the price of unleaded petrol expected to rise above £1.40 a litre this week, Osborne chose not to help hard-pressed motorists with a further duty cut.
Osborne, who scrapped the annual fuel tax escalator and cut fuel duty by 1p in his March 2011 budget, said fuel would have been 6p a litre more expensive had he not taken his previous action.
He told the House of Commons he had eased the burden on the motorist by £4.5bn and said fuel duty would not rise faster than inflation, unless oil prices were to fall below £45 a barrel – around a third of the current price of crude oil.
AA president Edmund King described the chancellor’s lack of action as a “budget blow-out” that will force drivers off the road.
“We have heard much about tax allowances but the increase in fuel duty makes no allowance for car-dependent, rural and disabled drivers. Only last week the prime minister told American students that UK fuel prices would make them ‘faint’, yet the government seems intent on inflicting more pain for no gain on drivers,” he said.
In a separate move, the chancellor defied a sustained campaign from the aviation industry when he announced that an 8% rise in air passenger duty would go ahead on 1 April.
Aviation industry officials say raising duties could hurt the economy as it forced passengers to avoid the UK.
Chief executives Carolyn McCall of easyJet, Willie Walsh of International Airlines Group, Michael O’Leary of Ryanair and Steve Ridgway of Virgin Atlantic, who led the opposition to the hike in duty, responded in a statement.
“At a time when the government talks about creating jobs and growth, its blinkered insistence on further increases in air passenger duty achieves precisely the opposite,” they said.
The Airport Operators Association said the UK already has the highest aviation taxes in Europe. “This new increase will hit the tourism industry and needlessly jeopardise the recovery of the economy as a whole,” it said.
Budget 2012: Third Heathrow runway back on the agenda
Government opposition to a third runway at Heathrow is beginning to weaken, observers claimed, after the Chancellor pledged to tackle a shortage of airport capacity in the south-east.
By Alistair Osborne, Business Editor (Telegraph)
22 Mar 2012
Despite public denials from the Department for Transport that the Government could sanction expansion at Britain’ premier airport, George Osborne’s commitment in the Budget to “confront” the capacity issue was hailed as the latest sign of a change of ministerial thinking.
Echoing recent remarks from Willie Walsh, chief executive of British Airways-owner International Airlines Group, Mr Osborne stressed: “We cannot cut ourselves off from the fastest growing cities in the world.”
The Government said in January that it was prepared to consider an ambitious £50bn project to build a new four-runway airport in the Thames Estuary. But supporters of Heathrow expansion maintain that a third runway would be a much quicker and cheaper option, costing £8bn-£12bn.
Ashley Steel, KPMG’s global chair for transport, said: “At long last pressure from business and lobby groups appears to be weakening the government’s previous resolve to oppose airport capacity in the south-east. Finally there is hope for a third runway at Heathrow.” He added that extra runway capacity was “essential for the continuing economic recovery”.
Mr Osborne’s admission that a consultation paper on options for a UK hub airport had now been pushed back from next week to “later this summer” was also widely interpreted as signalling a potential change of stance over Heathrow.
Steve Ridgway, chief executive of Virgin Atlantic said: “We look forward to an urgent and open debate with Government on all options, which must include Heathrow.”
Jonathan Riley, planning partner at law firm Pinsent Masons, said: “Taken with the Prime Minister’s speech on Monday, it seems the Government are taxiing for a u-turn on south east airport capacity. The language of confrontation suggests one or more new runways will be supported.”
A DfT spokesman insisted there had been “no change” in the Coalition’s stance on a third runway – though he admitted no government made any commitments beyond one parliament.
He said the delay over the consultation was due to ministers wanting to combine the issue of an airport hub with a separate document on the UK’s “overarching aviation framework”, including such things as aircraft emissions policies. He said the aim was to have “a final policy in place by next spring at the latest”. [The Committee on Climate Change is due to put out a document soon on aviation and its inclusion in UK carbon budgets].
An IAG spokesman said: “We need to see actions rather than words from the government’s airport capacity review. The UK is lagging behind global powers that have understood that effective aviation links are key to unleashing economic growth.”