Disproportionate investment in the south east unfair to regions – and taxpayers – disadvantaging the north
There is often well informed comment on the PPRuNe (the Professional Pilots Rumour Network) forum. A recent discussion was on the price to be paid by the UK for a new Heathrow, or Gatwick, runway. The contributors are amazed by the scale of the costs involved, not only the price of a runway, but the cost to the taxpayer. And those who are not focused on the south east are unimpressed by the amount the government would be spending on the south east, only to disadvantage airports in the regions. It would not only be the regional airports that would suffer, but the regional economies. While in theory there would be “trickle down” of economic benefits, from the south east to the regions, the reality is very little trickle indeed. The south east has had huge investment projects (Crossrail 2, HSI, Channel Tunnel, Thameslink…) “The 70% of us Brits who don’t reside in the SE wish you well with all your recently-added super-infrastructure. But we kind of feel that it is time for a bit of state largesse to head in our direction for a change. It is not an unreasonable idea. The non-SE 70% are taxed at exactly the same rates as Londoners.” “The North has not yet had a single stand-alone publicly-funded infrastructure project approved at a price tag exceeding £1 billion …and to the best of my knowledge neither has any other region of the UK outside the SE.” See the Pprune forum discussion for more.
SHHHHH … Don’t Mention The Price!!!
The last full-length runway constructed in the UK was 05R/23L at MAN/EGCC. This is 3050M in length, offering comprehensive long-haul capability. Opened in 2001, it was delivered for a price-tag of £172M. Run that through an inflation calculator and we get a price of £253M in “today’s money”.
So, if a long-haul capable runway can be built for £253M in Manchester, how much should we expect to pay for an equivalent project in London? Well, obviously, land acquisition costs are higher and there will be more CPO’s required than was the case at MAN (although theirs were smart ‘Cheshire belt’ properties). So what do we think for London? 4x the MAN figure? 5x the MAN figure? Even as much as 10x the MAN figure? Well, let’s do some maths!
The LHR NW option is projected to cost … wait for it … £18,600M. However, one analyst anticipates an overrun of a further £4,000M. So, the lower figure is 73.5x the cost of EGCC 05R/23L adjusted to today’s prices. Add in the anticipated overrun and we get 89.3x the cost! The numbers for the LHR Northern extension option (‘double length’ runway) are £13,500M [53.4x EGCC price-tag before overrun, 69.2x EGCC allowing for overrun].
Now I know that London can be pricey, but seriously … upto EIGHTY-NINE TIMES the price of delivering a directly comparable facility at Manchester? Surely that is outrageous? Even ten times the price would be outrageous! Arguably Britain’s greatest engineering achievement to date – the Channel Tunnel – was delivered for £4,650M in 1994. That is £8,270M adjusted to today’s money via the inflation calculator. How can a single additional runway at LHR possibly amount to more than twice the cost of constructing the Channel Tunnel at today’s prices? This is simply mindblowing!
Moving on to LGW. Their option is costed at £7,800M with an anticipated budget overrun of a further £2,000M. These numbers are 30.83x and 38.73x the equivalent MAN runway price-tag adjusted to today’s prices. Even for Gatwick, these statistics are staggering. North-South price differentials aren’t THAT big!
These monstrous price tags demand further investigation. I’m sure most of us on PPRuNe agree that London’s airports infrastructure would benefit from additional slot capacity, but there comes a price-point at which we must ask whether this scale of cost is truly justified measured against the net incremental benefit provided by the additional runway.
Of particular concern to those of us outside the SE is the amount of public (taxpayer) money required for the respective projects. The numbers cited are £6,000M for LHR and just short of £1,000M for LGW. Even at LGW – by far the cheapest option – the public element of funding is just shy of 4x the entire cost of delivering EGCC 05R/23L (which was privately funded, BTW).
Now the wider issue here is that state funds earmarked for infrastructure investment can only be allocated once. And London has enjoyed a veritable feast of enormous infrastructure innovations one after another spanning the last 30 years. Crossrail 2 is next up for funding … projected cost £27,500M. This follows on from the Channel Tunnel, HS1, Crossrail, Thameslink re-invention, underground extensions, DLR, terminus station rebuilds, London City Airport, ‘reborn’ Stansted with Norman Foster terminal, Gatwick North Terminal, LHR T2 & T5, Olympic village, the M25 and assorted other new roads / motorway upgrades etc etc. So as you can imagine, those 70% of us Brits who don’t reside in the SE wish you well with all your recently-added super-infrastructure. But we kind of feel that it is time for a bit of state largesse to head in our direction for a change. It is not an unreasonable idea. The non-SE 70% are taxed at exactly the same rates as Londoners.
So … LHR/LGW new runways. If you can fund them entirely privately, good luck to you. Go right ahead. But if you need another £6,000M from the public kitty I have to oppose this. Bear in mind that the largest state-funded standalone project so far approved in Northern England is the ‘Northern Hub’ rail upgrade programme. This project is costed at around £750M, and is in reality a series of loosely-related upgrades across the northern network to prevent the system from grinding to a halt. Cynics say it is really the minimum requirement to prevent complete collapse of the service, packaged as a single grand innovation! And the ‘Northern Hub’ proposals were subjected to all manner of scrutiny and cutbacks to secure even that level of funding. It all came across as rather grudging considering that Crossrail alone has cost around 20x this amount. Even the London – East Anglia railway is getting a £4 Billion upgrade.
The North has not yet had a single standalone publicly-funded infrastructure project approved at a price tag exceeding ONE billion (£1,000M), and to the best of my knowledge neither has any other region of the UK outside the SE. Thus, any suggestion that LHR should get £6,000M of public funding … or even a ’rounding error’ of a cool ONE BILLION for LGW … is somewhat offensive to us regionals. And don’t forget that the remainder of the price-tag will likely also be underwritten by taxpayers nationally.
Six Billion from public funds. That is money which can’t then be spent in the regions. Where we still patiently await our very first one-billion-pound publicly-funded infrastructure investment. THIS is our objection. The super-funding which London has enjoyed is sucking the lifeblood out of provincial Britain. How do we persuade CEO’s to locate their new facilities next to our decrepit ‘Pacer Halt’ when London is offering state-of-the-art parkway stations aligned along Crossrail, Thameslink, and HS1? And unrivalled global air links. There is a compelling need for a more equitable distribution of public funding across the UK … the current differential is obscene and accelerating. Public funding for LHR/LGW on the scale proposed would significantly worsen this.
Of course, we’ve all heard the propoganda about how this is a project for the whole nation. As Sir Richard Leese [‘Core Cities Group’] aptly quipped: “In my experience, trickledown really does mean a trickle!” So Liverpool and Teesside could get 3x daily Shuttles to LHR. Well … whoopeedoo! Just think what those two regions could get for £3 Billion each in direct public infrastructure spending. Liverpool needs a total replacement for Lime Street Station (half the required size) which would enable a spur to HS2, doubling of frequencies to Euston and direct trains to Scotland. Sheffield requires a transpennine motorway. Taxpayer rail spending on NE folks has been five pounds per head annually in recent years (diabolical). Other regions have projects of merit to put forward also. And we mustn’t forget that the allure of an expanded LHR could be expected to suck further air services, businesses and wealth directly out of the regions (in the footsteps of Astra Zeneca).
Personally, I am supporting the LGW option for London. It is clearly not the best choice operationally, but the price-tag differential is too enormous to disregard. Especially the public contribution required (five billion less than LHR). Although I would urge our politicians to ensure that any London runway option is entirely privately funded at the point of delivery.
London needs a new runway. But it is needed BY the South-East FOR the South-East. Claims that it will benefit the entire nation simply don’t stand up to scrutiny. The benefits of the new runway will accrue overwhelmingly to the SE alone. LHR/LGW/Crossrail2 must not be allowed to dominate the public infrastructure budget until the regions have enjoyed a substantial period of playing ‘catch-up’.
Not being funny, but if there was a practical way of regional catch up, they’d have done it by now. Honestly, spreading that wealth in a practical way would be a vote winner, but it doesn’t appear to be that simple.Also another runway at LGW does nothing to address hub capacity, so you also managed to agree that we continue to allow that to wither sadly. Can you link to those numbers you’re quoting costs on, keen to have a read?
The LHR/LGW numbers cited were lifted from a briefing document distributed at the ‘Runways UK – Regions’ event. I only have a hard copy plus info drawn from slides at the event. Sorry. The MAN figures are in the public domain and easily verified via the usual channels.By the way, I don’t expect the regions to [fully] catch up with the SE. That is as impractical as you suggest. But there is tremendous scope to close the gap.
As for the hubbing-capability issue, there comes a point at which the price-tag required to achieve that capacity enhancement surpasses the return on investment for so doing. What is that price-tag? Discuss! :-)
EDIT: Whilst I can’t post a link to printed matter, I do refer you to the ‘Runways UK – Regions’ website. The full speaker presentations are posted online in ewe-choob* format for public viewing. Parts of the Q&A sessions have been uploaded also, though the question contrasting London costings with Manchester 05R/23L was amongst those edited out. The LHR/LGW costings I quote are discussed in-depth in the main presentations. [* this slight adjustment to the spelling should prevent site software converting the name to read PPRuNe!]
I can tell you, as one of the “professionals” more than a little involved with actually constructing a runway, that the figures being bandied around are equally incomprehensible to those of us who price up concrete, reinforcing bar and drainage pipes for a living. It certainly doesn’t end up trickling down to the lads on the ground driving the excavators.Although there’s a lot more to it than the actual runway. Heathrow actually has a shortage of not only runway, but also aircraft stands, terminal space, access roads and railways, etc. However the way in which the figures get to these huge amounts, and whatever was quoted last time rises by way more than Spon’s (the industry-standard pricebook of construction costs) inflation index tells you that, still, nobody has a real clue.
I understand that the figures include land purchase costs which get hiked by London-area house prices. But in actual fact, in Harmondsworth etc, Heathrow have (of course) been steadily buying up each house as it comes on to the market over the years, then just renting them out in the interim. Yet I understand these purchases already made are solemnly counted at projected forward prices.
The BBC also had similar coverage.There has been much talk of the #Northernpowerhouse but what we accept are “make do and mend policies” rather than the Mega-transformatiomal investment that Ministers sign off with a flourish in the South East. Our MPs and local media are equally culpable.
We salivate at investment figures of £5m, £20m thinking we are being offered a great deal on a silver platter, we are not !
Last week a political discussion on 5 Live was interrupted by a caller asking the panel if they knew the difference between £1m and £1b..of investment
…one person confidently suggested, “it’s three times more” before they eventually agreed it was of course 1000 times more. It took 30 seconds for them to agree !!!!!!!!
Lord help us if people, MPs, and the media cannot do basic maths
Maybe that IS a part of the problem the figures quoted by The Airport Commission SHOULD be subject to forensic scrutiny , rather than be nodded thru with some ultra vague assurance that “it’s in the national interest”.
I have asked the Comission for the ROI figures, whilst they bandy about sums between £200B and £500B in the press there does not appear to be any concrete forensic valuation which fully supports these wildly optimistic figs.
FDF I appreciate that you are as passionate about more runways as some of us are about the cost of actually paying for them, but what is the cut off ?
At what point do the figures simply become untenable ?
A very good post Shed.Another point that troubles me is this notion of maintaining the UK’s hubbing capacity.
If we are concerned about this subject, then the biggest beneficiary of the State’s largesse would be British Airways. This cannot be right. A new runway at LHR would essentially provide the capacity to run a small number of extra flights from places like LPL or EXT by BA for their benefit….if the numbers stack up. And there’s no guarantee they will. After all other airlines offer much better point to hub service than BA can dream of – KLM being a case in point. If these opportunities are so lucrative why are KLM not offering them now?I also totally refute the argument that what’s good for London is good for the rest of the country – it’s a line we’ve been fed for years – ”the Olympics will be good for the whole country” indeed !!! Total bull.Likewise an expanded LHR or LGW is likely to be be bad for UK regional airports such as BHX; it will also stymy MAN’s aspirations to grow into a northern counterweight as airlines put all their efforts and energy into getting hold of new slots at an expanded LHR.
As Shed has said – if London wants new airport capacity, get the private sector to pay for it – it benefits the privately owned London Airports and the privately owned BA not the rest of the country.
I paid a large amount to the taxman last week and I’m getting sick of the thought that the CAPEX part of the national budget almost totally benefits London and the South East.
and so on.