Government deal to bail out Heathrow if runway plan fails – possible massive cost to taxpayers
Back in October 2016, the government did a deal (The Statement of Principles) with Heathrow (HAL), in which there are clauses implying it would bail out any costs to the airport, if it does not finally get government approval to expand. There is no end date for the agreement. Though the document states it is non-binding, the wording is ambiguous – a gold-mine for lawyers? Justine Greening revealed this massive risk to taxpayers in Parliament, (see video clip) saying Heathrow “have somehow managed to get a poisoned pill agreed by DfT that means the taxpayer has to cover all their costs if things go wrong. Isn’t this the worst kind of nationalisation? The public sector and taxpayers bearing all the Heathrow downsides and risks but the private sector owning all of the upside and financial returns.” The Statement of Principles says: “HAL reserves its rights (including but not limited to its rights to pursue any and all legal and equitable remedies (including cost recovery) available to it under law) in the event of: …. The withdrawal of the Government’s support for aviation expansion for Heathrow Airport only after the Secretary of State has stated that HAL’s Scheme is the scheme it prefers in accordance with paragraph 1 of Part 1.” This was only mentioned in passing in the NPS. John McDonnell and Justine are seek urgent clarity of the clause, in order to give an opportunity for the issue to be discussed in the House of Commons before MPs vote on the NPS proposal – within 3 weeks.
Government sign deal to bail out Heathrow
6.6.2018 (No 3rd Runway Coalition)
The Government has agreed a deal with Heathrow that it will bail out any costs borne by the airport for its expansion if the Heathrow scheme does not proceed.
A clause in an agreed ‘Statement of Principles’ (Oct 2016) between Heathrow Airport Limited (HAL) and the Department for Transport (DfT) states that:
“HAL reserves its rights (including but not limited to its rights to pursue any and all legal and equitable remedies (including cost recovery) available to it under law) in the event of:
- An alternative scheme being preferred by the Secretary of State or Government: and/or
- The withdrawal of the Government’s support for aviation expansion for Heathrow Airport only after the Secretary of State has stated that HAL’s Scheme is the scheme it prefers in accordance with paragraph 1 of Part 1.” (1).
The agreement, signed in 2016 has no end date was only mentioned in passing in the National Policy Statement (NPS).
The NPS provides no detail or information from the statement of principles about any potential liabilities to the taxpayer, should the expansion not take place. The cost of the third runway is expected to total around £18bn, though it could be considerably higher once surface access improvements are taken in to account. Transport Secretary Chris Grayling confirmed yesterday that expansion will only take place if air quality limits can meet legal requirements (2).
The agreement was first raised in the House of Commons by Justine Greening MP (3), who questioned transport secretary Chris Grayling following the announcement of the Government’s intention to support Heathrow expansion.
Mr Grayling made no attempt to answer the question but John McDonnell MP, also present in the chamber, later pressed Mr Grayling for more information on whether his department had made an assessment of the scale of financial liabilities taxpayers could be exposed to if the Government prefers an alternative scheme or withdraws its support for Heathrow expansion at a later date (4).
Following a further attempt to extrapolate more information about this massive liability at PMQs on Wednesday (5), Ms Greening then wrote to Chris Grayling to seek urgent clarity of the clause, in order to give an opportunity for the issue to be discussed in the House of Commons before MPs vote on the proposal (6).
Despite the NPS stating that the agreement is ‘non-binding’, the very existence of this written agreement could potentially be used by Heathrow in any future legal action against the Government (7).
The inclusion of this clause could explain why Heathrow have been spending large sums of money on the early stages of the scheme development prior to it being voted through Parliament. This represents a huge financial risk to taxpayers that has not been adequately explained or analysed in the Government’s NPS.
Paul McGuinness, Chair of the No 3rd Runway Coalition, said:
“While it’s broadly accepted that the whole process of selecting a site for extra capacity was only ever about Heathrow, this is a concession too far. We know there are doubts about Heathrow’s ability to fund the project, but a bail out agreement for Heathrow is potentially a massive burden for taxpayers, and it needs to be disclosed.
“Perhaps it’s little wonder that Heathrow has been spending money on expansion, as if it had nothing to lose, long before the government adopted it as policy. But while it’s broadly accepted that the whole process of selecting a site for extra capacity was only ever about Heathrow, this is a concession too far. We know there are doubts about Heathrow’s ability to fund the project, but any bail out agreement for Heathrow, however vague, is potentially a massive burden for taxpayers and it needs to be disclosed”.
- Heathrow Airport Limited Statement of Principles, 2016 Page 4. para. 2.1.6. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/562175/heathrow-airport-limited-statement-of-principles.pdf
- Chris Grayling in response to oral question by Justine Greening MP https://hansard.parliament.uk/Commons/2018-06-05/debates/ED5F2A14-318D-4A18-8414-E472C9608DD2/AirportsNationalPolicyStatement
- Justine Greening MP question to Chris Grayling MP https://hansard.parliament.uk/Commons/2018-06-05/debates/ED5F2A14-318D-4A18-8414-E472C9608DD2/AirportsNationalPolicyStatement
- Letter from John McDonnell MP to Chris Grayling attached
- Justine Greening MP question to Prime Minister Theresa May https://hansard.parliament.uk/Commons/2018-06-06/debates/26753E92-D124-4BE2-A9DE-126B303829B3/Engagements and see video clip
- Letter from Justine Greening MP to Chris Grayling available on request
- Airports National Policy Statement, para 3.10 (p.20) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/714106/airports-nps-new-runway-capacity-and-infrastructure-at-airports-in-the-south-east-of-england-web-version.pdf
For more information, contact:
Rob Barnstone, 07806 947050; Robert.firstname.lastname@example.org
[Heathrow can also set off its expenses in trying to expand, against its UK tax. The more it spends on promotion, advertising, lobbying etc – all seen as legitimate business activities – the less it pays in tax. So Heathrow already has a way of getting an effective government subsidy for its work on expansion plans. AW comment ]
John McDonnell has highlighted the potential multimillion-pound cost to the taxpayer in the event that the government, including any future Labour administration, should change its mind on expansion.
In a letter to Grayling, he raised concerns over how much, if any, of the £14bn project would be publicly subsidised if Heathrow’s plans for a third runway did not proceed.
McDonnell wrote: “There appears to be no end date to this agreement. This means that taxpayers could be left picking up a bill of multiple millions of pounds if the government does not proceed with developing the Heathrow north-west runway scheme.
“I am extremely concerned that through this agreement the government has tied itself into a considerable liability that could fall upon the taxpayers’ shoulders and preempts the decision of parliament on this matter.”
This is what the Statement of Principles actually says:
2. NOT LEGALLY BINDING
2.1 This Statement of Principles is not legally binding. HAL and the Secretary of State acknowledge that this Statement of Principles does not have (nor is it intended to have) any legal effect. In particular, HAL and the Secretary of State each acknowledge that:
….. [ other clauses….]
2.1.5 this Statement of Principles does not give either HAL or the Secretary of State any right to a claim for damages, losses, liabilities, costs and/or expenses or other relief howsoever arising if, for whatever reason, HAL’s Scheme does not proceed; and
2.1.6 notwithstanding paragraph 2.1.5, HAL reserves its rights (including but not limited to its rights to pursue any and all legal and equitable remedies (including cost recovery) available to it under law) in the event of:
– 18.104.22.168 an alternative scheme being preferred by the Secretary of State or Government; and/or
– 22.214.171.124 the withdrawal of the Government’s support for aviation expansion for Heathrow Airport (the “Airport”) only after the Secretary of State has stated that HAL’s Scheme is the scheme it prefers in accordance with paragraph 1 of Part 1 (Principles Relating to Key Areas of Scheme Development and Implementation).
Justine Greening tears into Heathrow expansion plans and warns ‘poison pill clause’ means taxpayers will be left with a bill if it goes wrong as the PM braces for a Tory rebellion
Ex Cabinet minister Justine Greening tore into third runway plans in PMQs today
She warned that taxpayers will have to foot a hefty bill if the project goes sour
Theresa May dismissed the concerns and said the project will bring jobs to UK
By KATE FERGUSON, POLITICAL CORRESPONDENT FOR MAILONLINE
6 June 2018
An ex Cabinet minister today tore into Theresa May’s plans to expand Heathrow Airport – warning that taxpayers could be left with a hefty bill if the project goes sour.
Justine Greening said the plans include a ‘poison pill clause’ which leaves the Government carrying all the risk of deal.
The ex Education Secretary, whose Putney constituency in west London is vehemently opposed to the third runway, confronted Mrs May about the plans in PMQs.
But the PM hit back – insisting the cost of the project will be funded by the private sector alone.
Mrs May is set to face a backbench rebellion when the plans to build a third runway are voted on in Parliament.
But Theresa May hit back – insisting the cost of the project will be funded by the private sector alone.
A clause in the statement of principles for Heathrow Airport shows that Heathrow Airport Limited reserves its rights to claw back lots money from the project if the Government withdraws its support
Raising the issue in PMQs, Ms Greening branded the project the ‘worst kind of nationalisation’.
She said: ‘Heathrow played an absolute blinder with the DFT (Department for transport) – they are a privately owned company that now has DFT policy to give them an active monopoly status.
‘They have somehow managed to get a poison pill clause agreed by the DFT that means the taxpayer has to cover all their costs if things go wrong.
‘Isn’t this the worst kind of nationalisation – the public sector and taxpayers owning all of the Heathrow downsides and risks and the private sector owning all of the upsides and financial returns.’
But Mrs May said the plans to build a third runway at the west London airport will bring much-needed jobs to the country.
She said: ‘Yesterday’s decision to support Heathrow expansion demonstrates this Governments commitment to delivering the jobs and major infrastructure that this country needs to thrive.
‘But the airport expansion will be fully financed by the private sector. The statement of principles is clear that it does not give Heathrow airport limited the right to claim any costs or losses from Government should their scheme not proceed.’
Meanwhile, Labour has hinted it could vote against the airport expansion plans.
A spokesman for Jeremy Corbyn said the party remained in favour of airport expansion in the south east, subject to four tests set out on the manifesto.
In a signal Labour could vote against the Government’s plans, the spokesman said: ‘It has to meet those four tests.’
The spokesman would not be drawn on which of the tests – on noise, air quality, climate change and economic growth – was causing concern.
But he said Labour needed to see ‘more detail’ before deciding whether to back the Government version.
After the long-delayed airport expansion finally received Government approval the PM today said the plans will be brought to parliament to be voted on in a ‘ timely’ fashion.
Transport Secretary Chris Grayling confirmed yesterday that the third runway project had at last been given the green light. MPs will vote on the plans within three weeks.
The runway is expected to cost £14billion and be running by 2026. It will deliver at least 260,000 extra flights a year, giving Heathrow the capacity for dozens of new routes to trade hubs and tourist destinations.
The Prime Minister said the huge project at Heathrow (pictured) was part of the overhaul needed to ensure the UK can ‘thrive’ outside the EU
Mr Grayling confirmed there would be a six-and-a-half-hour period at night when flights would be banned, to protect residents living in the flight path.
Up to £2.6billion will be spent by the airport on compensation for residents, noise insulation and improvements to the local area, he said.
He argued that the runway would provide an estimated £74billion boost to the economy over 60 years and better connect the UK to the world with an extra 16million long-haul seats available by 2040.
But a strong of Tory MPs, including Ms Greening and Richmond MP Zac Goldsmith, have been vocally opposed to the scheme.
Justine Greening warns Theresa May that Heathrow expansion could cost taxpayers billions
The Former Transport Secretary panned her own Government over a ‘poison pill’ she claimed is buried in the small print of the recommendation to back a third runway
By Steve Hawkes, Deputy Political Editor (The Sun)
7th June 2018,
THERESA MAY was yesterday warned taxpayers could be on the hook for BILLIONS over Heathrow Airport expansion.
Former Transport Secretary Justine Greening panned her own Government over a “poison pill” she claimed is buried in the small print of Tuesday’s recommendation to back a third runway.
Justine Greening warned Theresa May that the Heathrow expansion could cost taxpayers billions. In a direct challenge in the Commons, Ms Greening – a bitter Heathrow opponent – asked the PM to explain a clause that allows the airport to recover costs if the project never eventually goes ahead.
She stormed: “They’ve somehow managed to get a poisoned pill agreed by DfT that means the taxpayer has to cover all their costs if things go wrong. Isn’t this the worst kind of nationalisation? The public sector and taxpayers bearing all the Heathrow downsides and risks but the private sector owning all of the upside and financial returns.”
Speaking during PMQs, Mrs May insisted Heathrow Airport Ltd would not have the right to claim any costs or losses should their scheme not proceed.
But in a ‘Point of Order’ afterwards, Ms Greening said No.10 had been “misinformed” by the Department for Transport.
She said a paragraph in the ‘Statement of Principles’ showed Heathrow had a right to cost recovery “in the event of…an alternative scheme being preferred by a the Secretary of State or Government … and/or the withdrawal of the Government’s support for aviation expansion for Heathrow Airport.”
A Government source last night insisted the statement of principles wasn’t “legally binding”.