28 October 2016

The Heathrow decision shows the Transport Blob at its worst


It is four years ago since I first tipped up at the Centre for Policy Studies with what seemed like a brilliant idea. I had been introduced to the longest-serving Concorde pilot, Jock Lowe, and he had a scheme for expanding Heathrow for the least cost and bother.

Jock’s idea was simply to extend the existing runways at Heathrow. This would be entirely safe, would cost a fraction of the cost of the third runway, destroy far less private property and send less noise rumbling across London – and, one has to admit, Tory constituencies.

It was, and is, a no-brainer.

Tim Knox, the CPS’s director, saw the merit of the idea, and so the Heathrow Hub consortium was formed. We began a journey in which I and a handful of others – including some of the world’s leading consultants at Aecom and Helios – found ourselves cast in the roles of airport promoters, like (or so we thought) the great Victorian builders of canals and railways.

The CPS published a paper; we then went out and raised some money; and when the Airports Commission got going, we submitted the idea. Much to our surprise, it was shortlisted.

Along the way, we had to battle against the Establishment mindset which so bedevils modern Britain.

Michael Gove used to talk of the Blob, which conspired to thwart education reforms. But the truth is that there are many Blobs. And one of the most powerful is the Transport Blob, lurking in the Department for Transport and former public-sector organisations such as Network Rail and Heathrow Airport Ltd.

The Transport Blob isn’t really interested in new ideas, competition, good customer service, or concepts which are easily workable. Instead, its preference is for flashy grands projets which are complex, cost a fortune, have massive environmental impacts and take years to deliver.

HS2 – still chugging interminably towards Birmingham – and the third runway are classics of the genre.

Unlike the education Blob, the Transport Blob is alive and well. That’s because politicians of all parties – including, sadly, George Osborne and now Theresa May – are willing collaborators. They too love a big announcement: if the thing arrives years late or massively over budget, that is somebody else’s problem.

At various points along the way, we thought the Heathrow Hub had won. Chris Grayling, the new Transport Secretary, was positive. But we learnt this week, along with the rest of the world, that the third runway had been chosen – and we and Gatwick had lost.

This was for three reasons. First, the Department for Transport persisted in the misconception we could not offer sufficient respite from airplane noise. They did not mention the fact that noise mitigation comes from better flight paths, not new runways.

Second, despite numerous positive meetings, we could not get a commitment from Heathrow Airport that it would implement the scheme if it was chosen.

Third, and most seriously, Heathrow and Chris Grayling have committed to hold passenger charges “close to the current level” of £20. This suddenly negated our massive cost advantage over the third runway.

These latter two issues in particular are deeply troubling. At no point were we told that our proposal being considered was conditional on Heathrow’s agreement. We assumed that the Government would make its choice and Heathrow would then be told to adopt it.

In that regard, our investors – led by a successful fund manager called Anthony Clake – poured millions of pounds of their own money into the project on false pretences.

The whole review process, in other words, was a joke – one in which neither we nor Gatwick stood a chance. The Blob always wanted Heathrow’s third runway.

The issue of passenger charges, however, ought to be a matter of wider public concern.

The third runway is expected to cost at least £15.7 billion. Yet how it is to be paid for is a complete mystery. The idea that it can be done without either a contribution from the taxpayer of some kind, or raising passenger charges substantially, is a total fiction.

The reason Grayling extracted the flat-fee commitment – and repeated it in the House of Commons – is there is a powerful risk that IAG, the owner of British Airways, which pays Heathrow £800 million a year, could oppose the plan via the Civil Aviation Authority, which regulates passenger charges.

“The issue of cost will make or break the third runway,” said Willie Walsh, IAG’s CEO, this week. He added: “The government’s directive to cap customer charges at today’s level is fundamental.”

IAG’s analysis is that the third runway will actually cause charges to rise to an average of £40 per passenger – and £80 for long haul.

Given that, Grayling’s directive is welcome for passengers, and for IAG. But there’s a problem: there is no directive, because the Government has no power to issue one.

Passenger charges are a matter for the CAA, the independent regulator. That’s why Grayling didn’t say that the £20 figure would absolutely be kept to, just that the CAA’s aim should be to deliver a plan that did so.

No wonder that sections of the documents published by the DfT in relation to the third runway’s financing have been redacted (including statements by Heathrow’s shareholders), or not published at all.

It is reported that “a row is brewing” over the CAA’s plans to enforce the promise, but Heathrow is already wriggling. In other words, the financial undercarriage of the third runway is non-existent.

We should not really blame this on Grayling, who is new to the job and anyway commended the Heathrow Hub’s “innovative proposal”. Rather, this confusion and expense is a typical construct of the Transport Blob – akin to HS2 costing “only £55bn”, or the West Coast Mainline franchise fiasco.

As for the rest of us, we should marvel that despite the best efforts of the private sector – including the brave Heathrow Hub consortium and a spirited campaign from Gatwick – the UK government consistently makes a mess of infrastructure.

Instead of relying on incremental improvements, privately financed and with a proper business case, it is determined to attempt expensive, unwieldy grands projets. Isambard Kingdom Brunel must be turning in his grave.

Given the widespread consensus that Britain should now be investing more in infrastructure, the attitude of the Transport Blob and the ministers it captures is not just disappointing, but a folly.

So keep a beady eye on those Heathrow passenger charges. I suspect that IAG, passengers and others are set to be reminded of that old saying from the Psalms: “Put not your trust in princes.”

George Trefgarne is the founder of Boscobel & Partners, a communications firm.