Desperate to persuade MPs to back its runway, increasingly improbable claims by Heathrow of its benefit to the UK
Heathrow is making all possible efforts to persuade as many MPs as possible to back its 3rd runway bid, before the government (Chris Grayling) makes a statement on the matter – probably in October. Heathrow has now commissioned and paid for a “study” by CEBR, perhaps by Vicky Pryce with a foreword by her, that aims to give the impression that the 3rd runway will make an immense financial contribution to the UK. The study would not pass peer review. Its methodology is not given, and there is no justification for any of its claims. Heathrow says (it tries to avoid making it clear this is over 60 years) its runway would boost GDP by “£24,500” per family. It omits to say how many families it is considering, or the total GDP benefit. A bit of simple mathematics shows Heathrow is claiming a GDP boost of £458 billion over 60 years, as the ONS says there are 18.7 million families in the UK (2015). The Airports Commission’s most optimistic scenarios gave a maximum benefit, over 60 years, of £211 billion. Its main forecast was for a UK benefit of £147 billion. This was seriously questioned as being exaggerated, even by the Commission’s own financial advisors. This £458 billion figure, apparently plucked from thin air, is well over double that. And Heathrow says there will be so much benefit that by 2060 (with no rationale given) we could cut VAT by 2.5% due to the runway.
This is the most peculiar report by the CEBR and press release from Heathrow, making outlandish claims.
Heathrow critical to Brexit success – new report
2.9.2016 (Heathrow airport press release)
The first post-Brexit report into the independent Airport Commission study has found that expanding Heathrow could boost UK GDP by up to £24,500 per family – almost double the value of expanding Gatwick.
Respected economic consultancy, the Centre for Economic and Business Research (Cebr https://www.cebr.com/about-cebr/
), says Heathrow’s connectivity and cargo capacity mean the expanded airport will be an “engine of Brexit growth, driving opportunity up and down the UK”.
Using the Government’s own independent Airports Commission figures, the Cebr report also found:
– Heathrow expansion could boost the UK economy by as much as £24,500 of GDP per family – £11,195 more than the equivalent figure for Gatwick. In all future scenarios modelled by the Airports Commission, GDP benefits per family ranges from £12,935 to £24,480 from Heathrow expansion.
– Only Heathrow expansion has the potential to create over 100,000 new jobs outside of London and the South East. In every region and every future scenario, it estimated that Heathrow could deliver more GDP benefits and more jobs than Gatwick. Northern Ireland, Scotland, Wales, the North West, Yorkshire and the South West all see significant job creation.
– Up to £56bn more GDP than Gatwick outside of London. Helping to make Brexit a success, Heathrow’s connectivity to the world and to the UK’s great cities mean that for every region Heathrow expansion is estimated to deliver more economic growth and more jobs than Gatwick. An estimated total of £56bn more GDP benefits outside of London and the South East.
– Heathrow could add 50,000 more jobs than Gatwick in the short term and almost 100,000 more jobs than Gatwick in the long term. The Airport Commission and CEBR found that Heathrow has the potential to create over 50,000 more jobs than Gatwick in the first 5 years of operation. By 2060, Heathrow could create over 98,000 more jobs than Gatwick. Heathrow expansion has the potential to create an estimated 75,700 more jobs outside of London and the South East than Gatwick expansion.
[This para is a cracker ! AW comment]
– Only the tax revenues following Heathrow expansion could fund a VAT cut to 15%. As an example of Heathrow’s role in the UK economy, the incremental additional tax revenue to 2030 created by a third runway, could allow the Government to hire 68,000 police officers or over 76,000 secondary school teachers. Alternatively, the extra revenue by 2060 could be used to cut VAT by 2.5%
[And what is the justification for this, and the workings? The “report” just says:
“4.2 How VAT could be reduced. Here we consider the implications of choosing Heathrow over Gatwick if the Government decided to use the incremental additional tax revenues to reduce VAT. We find that, over the period to 2060, VAT could be reduced by up to 2.5% if such a policy were pursued. So, for example, a consumer purchasing a washing machine for £500 could save £12.50 on that purchase.” That’s it. That is the argument. And the data. AW comment]
Vicky Pryce, Cebr’s Chief Economic Adviser commented: “Airport expansion has been a thorny issue for governments of every political hue. What this analysis shows is the centrality of Heathrow to the British economy. There can be few more important decisions the Government must make, especially after the EU referendum. The price of making the wrong decision by the Prime Minister will be a political and economic gamble that could be costly for decades.”
“If we are to succeed outside of the European Union, every choice the Government makes must aim to deliver a stronger, more competitive economy and seek to encourage growth in the regions, as well as in London. On both those measures, this report shows Heathrow’s future will be crucial in reducing the uncertainties of a post-Brexit world.”
John Holland-Kaye, Chief Executive of Heathrow Airport added: “Heathrow connects cargo and people from all of Britain to new markets around the world. Gatwick mainly connects London and Southern England to European destinations. This report shows that expanding Heathrow will help strengthen an airport that works for the whole of the UK, not just London and the South.
“Heathrow is a political and economic commitment to make Brexit stronger and fairer. That is why businesses support Heathrow expansion, the Unions support Heathrow expansion and an overwhelming majority of MPs support Heathrow expansion. It is now time to make the right choice for Brexit success and expand Heathrow.”
Notes to editors, from Heathrow airport:
Cebr report includes regional breakdown and comparison of expansion economic impact
Methodology: The aggregate economic benefits projected for each airport, in each of the airport growth scenarios were divided up amongst every family and household in the UK. Cebr assumed the ONS definitions of families: a married, civil partnered or cohabiting couple with or without children, or a lone parent with at least one child who lives at the same address. Children may be dependent or non-dependent. Types of families include married couple families, cohabiting couple families and lone parent families
[By contrast, the ONS describes a “household” as :
“A household is defined as one person living alone, or a group of people (not necessarily related) living at the same address who share cooking facilities and share a living room, sitting room or dining area. A household can consist of more than one family, or no families in the case of a group of unrelated people.”
There is also the PwC report for the Commission – Airports Commission 2. Economy: Wider Impacts Assessment November 2014
and by PwC
Airports Commission 1. Strategic Fit: GDP/GVA Impacts June 2015
Not one of these three documents mentions, even once, the benefit per family. The only mentions of families are “visiting friends and family”. There is no mention of households either, except in terms of their consumption.
The only figures that might be compared with the CEBR claims are in the Nov 2014 publication (link above) on Page 22. Copied below.
The CEBR report does not at any time offer the number of “families” it is considering. They do give a link to the ONS. The figure circled (by AW) in green is the figure the Airports Commission used as its headline figure, in its final report.
It would appear the CEBR has taken the £211 billion figure and more than doubled it, for reasons it does not explain. Hence arriving at £458 billion.
This ONS page says:
In 2015 there were 18.7 million families in the UK.
The most common family type in 2015 was the married or civil partner couple family with or without dependent children at 12.5 million.
The cohabiting couple family continues to be the fastest growing family type in the UK in 2015, reaching 3.2 million cohabiting couple families.
In 2015 around 40% of young adults aged 15 to 34 in the UK were living with their parents.
There were 27.0 million households in the UK in 2015, 35% of all households were two person households.
In 2015 there were 7.7 million people in UK households who were living alone.
so, that says there are 18.7 million “families” in the UK.
In order for each one of the 18.7 million “families’ the ONS says we have in the UK (by their definition) to receive £24,500 in benefit from a Heathrow runway over 60 years, there has to be a total of benefit across the UK from the runway of £458 billion.
The Airports Commission said there could be “up to £147 billion” over 60 years on its carbon capped and assessment of need scenario. This figure has been challenged.
Heathrow and Vicky Pryce are now claiming this benefit (they do not state this figure, but one can work it out by simple multiplication) of about £458 billion, which is about three times the highly optimistic figure of the Airports Commission.
The Vicky Pryce report gives no details whatsoever about how their massive figures are arrived at. Indeed, not one of the reports by the Airports Commission or the PwC working for the Commission ever mentions benefits “per family” at all, in any of their publications.
This report seems to be a complete fabrication. It surely is not of sufficient quality for anyone to take seriously. Sadly, one fears it will be taken seriously. The Telegraph has uncritically publicised it.
Third Heathrow runway would ‘boost each British family by £24,500’
By Ben Martin (Telegraph business)
2 SEPTEMBER 2016
Building a third runway at Heathrow could benefit every family in Britain by as much as £24,500, the west London airport has claimed, as it ramps up its campaign to win Government backing for its controversial expansion plans.
Heathrow is seeking to capitalise on the Brexit vote by arguing that the UK’s decision to leave the European Union makes a new £17.6bn runway even more vital to the country’s economy. The airport is intensifying its lobbying amid speculation Theresa May, the prime minister, will decide in October whether to expand Heathrow or rival Gatwick, ending years of dithering by successive governments over the issue.
“Heathrow is a political and economic commitment to make Brexit stronger and fairer,” John Holland-Kaye, the airport’s chief executive said today. “It is now time to make the right choice for Brexit success and expand Heathrow.”
A third Heathrow runway may lift the UK’s gross domestic product by as much as £24,480 per family over a 60-year period, according to a report by the Centre for Economic and Business Research (Cebr) that was commissioned by Heathrow. That compares with a lift of just £13,280 that would result from building a second runway at Gatwick, Cebr estimated.
Expanding Heathrow rather than Gatwick would also deliver a bigger economic boost to the UK regions, the consultancy firm said. A third Heathrow runway would provide £56bn more in “GDP benefits” to the regions beyond London and the south east than Gatwick, it was forecast.
“What this analysis shows is the centrality of Heathrow to the British economy,” said Vicky Pryce, chief economic adviser at Cebr. “There can be few more important decisions the Government must make, especially after the EU referendum.”
However, political divisions threaten to derail Heathrow’s plans, which are strongly opposed by some local residents because of worries about increased noise and air pollution. While many MPs support a third runway, prominent cabinet members such as Boris Johnson, the foreign secretary, and Justine Greening, the education secretary, are vehemently against the airport’s expansion, strengthening Gatwick’s case for a second landing strip in West Sussex.
Furthermore, Mrs May’s constituency, Maidenhead, is overflown by planes using Heathrow and she has in the past expressed concerns about its expansion.