Government needs to provide clarity on possible jobs across the UK created by 3rd runway

When the Government announced Heathrow as its preferred option in October 2016 it downgraded the economic benefits of a 3rd runway substantially. The Airports Commission Final Report assessed the economic benefit to the whole of the UK, over 60 years, might be up to £147 billion (their assessment of need scenario). Heathrow often uses a much higher figure of “up to £211 billion” and omit to say it is for all the UK, over 60 years. In October, the DfT, calculating the possible economic benefits in a different way, thought a more likely figure was £61 billion. This is benefits only. But if the costs are taken off, the benefit falls to something more like £6 billion (£2 – 11 billion or so range). Heathrow, and the DfT, say there will be huge benefits to the regions, and large numbers of future jobs. The figures Heathrow has on its website are based on the £147 billion estimate.  These have not been corrected, in the light of the reduced DfT estimate. So what is the actual value of a third runway to the English regions, Scotland, Wales or Northern Ireland? All that we do know is that it will be considerably less than the promises made by Heathrow to so many MPs and local councillors. The onus is on Heathrow and the DfT to come up with revised estimates of the employment benefits to the regions. So far, it has failed to do so.
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The Economic Benefits of a Third Runway Officially Downgraded

27.2.2017

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When the Government announced Heathrow as its preferred option in October 2016 it downgraded the economic benefits of a 3rd runway substantially.

The Airports Commission (Final Report July 2015) used a range of scenarios for Heathrow in the future, and each came up with different amounts of economic benefit.

The scenario with the highest growth in future was their “Global Growth” scenario, and in this – by some rather unusual and unconventional economics – they assessed the economic benefit to the whole of the UK, over 60 years, might be up to £211 billion.

The scenario with much lower economic benefit, but more realistic was the Commission’s “Assessment of Need” scenario. That came up with economic benefit to all of the UK, over 60 years, might be up to £147 billion. [“…the overall effect of Heathrow expansion could be to increase GDP by 0.65-0.75% by 2050, amounting to £131-147 billion in Present Value terms with carbon emissions traded over the 60 years following the opening of any new runway capacity. “] 

This was the figure the Commission most often quoted.

Heathrow sometimes used the £211 billion figure, and sometimes used the £147 billion figure.  [And they say it is by 2050, though the Airports Commission said it was over 60 years after the runway opens – ie. to around 2085].

They had a report done, by a small consultancy called Quod, of possible economic benefits and extra jobs for the regions. It is undated, but probably in the last quarter of 2015.

It set out the alleged economic benefit to the regions of the 3rd Heathrow runway, based on the £147 billion estimate.

However, on 25th October 2016 the DfT came up with a new assessment of alleged economic benefit of the runway. This used a rather different measure (so not comparing “apples with pears”) but came up with a figure of the benefits to the UK and to passengers of just £61 billion, for all the UK, over 60 years.

Those numbers add up all the benefits – but do not take off (as should be done) the costs.

You can see a comparison of some of the Airports Commission figures, and the DfT’s more recent figures, here http://www.airportwatch.org.uk/2016/10/heathrow-overvalued-by-86-bn/

Other attempts to estimate the possible economic impacts of the runway come up with much smaller figures. Indeed the Airports Commission’s estimate of “Net Present Value” (NPV) of the runway was between £11.8 and £1.4 billion, (carbon traded, or carbon capped) and the DfT’s October 2016 estimate of NPV was £0.2 – £6.1 billion. These are for all of the UK over 60 years.

ac-benefits-and-dft-compared

The Heathrow website is still showing the figures below, based on the £147 billion estimate, for benefits to the UK regions:

 

Leaving that aside, the number of jobs that the regions have been promised are an issue.

Jobs across the UK

Heathrow held a large number of promotional events around the country last year, talking to Chambers of Commerce and other local gatherings. These were told of the huge economic opportunities from more passengers, and more freight. They were given suggested figures (from Quod) of the numbers of jobs that would result, from the existence of the 3rd runway.

The table below is from the Quod report, for Heathrow (undated but somewhere before November 2015)

(these numbers are still on the Heathrow website here)

However, all these estimates were based on a presumption of about £147 billion of economic benefit (which does not deduct costs to the UK of the runway).

The actual regional benefits, and the actual number of extra jobs that might – or might not – materialise in the regions has not been amended, even though the DfT reduced the assessment of benefit from £147 to £61 billion.

The Government has not provided a break-down for the English regions, Scotland,
Wales or Northern Ireland.

The government estimates that, overall, the aviation sector currently contributes around £18bn – £21bn per annum to the UK. Even if the 3rd runway contributed £61 billion (over 60 years) rather than just the NPV of £6 billion, that comes to all of £1 billion per year.

That is an increase of 5%.

The question mark remains:

What is the actual value of a third runway to the English regions, Scotland,
Wales or Northern Ireland?

All that we do know is that it will be considerably less than the promises
made by Heathrow to so many MPs and local councillors.

The onus is on Heathrow and the DfT to come up with revised estimates of the
employment benefits to the regions. So far, it has failed to do so.

 

 

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