Heathrow expansion - Parliament UK

BRIEFING PAPER Number CBP1136, 12 June 2017

Heathrow expansion

By Louise Butcher Elena Ares; Henry Midgley; Louise Smith

Contents: 1. Background 2. Third runway: a brief political history 3. Non-governmental views on a third runway 4. Airports Commission, 2012-15 5. Environmental issues 6. Airspace, flight paths & noise 7. The economic & financial case 8. UK connectivity 9. The planning process

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Contents Summary

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1. 1.1 1.2 1.3 1.4

Background History Ownership ‘Hub’ airports Regulation

5 5 7 7 8

2. 2.1 2.2

Third runway: a brief political history Labour’s plan, 2002-09 Policy of the Coalition & Conservative governments, 2010Brexit

11 11 12 15

3. 3.1 3.2 3.3 3.4

Non-governmental views on a third runway Political parties Scotland Wales Northern Ireland

16 16 17 19 19

4. 4.1 4.2 4.3

Airports Commission, 2012-15 Membership and terms of reference Interim Report and subsequent consultation, December 2013 Final report, July 2015

21 21 22 24

5. 5.1

Environmental issues Air pollution Court Ruling on UK Air Quality Plan Implications for a third runway Updated Assessment, 2017 Climate change Airports Commission forecasts Government’s view on meeting carbon targets Implications for regional airport expansion

29 29 29 30 31 33 33 34 36

Airspace, flight paths & noise Airspace change Operational freedoms Operational considerations due to expansion Noise Impacts around Heathrow Measures to deal with noise 2017 consultation proposals Ongoing noise management. Compensation

38 38 39 42 43 44 46 47 49 49

The economic & financial case The cost of the scheme Initial costing Risk and Optimism Bias Updated costing, October 2016 Questions about the costs estimates How will it be financed? Surface access funding The economic case for expansion

51 51 51 52 52 53 54 55 57

5.2

6. 6.1 6.2 6.3 6.4

7. 7.1

7.2 7.3 7.4

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Commons Library Briefing, 12 June 2017

7.5

WebTAG analysis Scenarios Wider Economic Impacts (WEIs) Note from expert advisors Updated assessment, October 2016 Criticisms of the economic case

57 58 59 60 63 64

8. 8.1 8.2 8.3

UK connectivity Domestic routes Impact of expansion on number of domestic routes Financial support

67 67 68 70

9. 9.1

The planning process Airports National Policy Statement (NPS) High Court challenge Parliamentary procedure Development Consent Order (DCO)

73 73 75 75 76

9.2

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Heathrow expansion

Summary This paper gives an overview of the debate about the expansion of Heathrow Airport. It looks at the work of the Airports Commission and the subsequent decision by the Conservative Government to support a third runway and sixth terminal at the airport; the environmental issues and concerns surrounding the decision; the economic case and how the scheme will be taken forwards. In October 2016 the Conservative Government announced that it would support a planning application by Heathrow for a third runway and a sixth terminal, to the north west of the existing site. This is in line with the recommendation of the Airports Commission, which reported in July 2015. Consequently, the Government published for consultation in February 2017 a draft National Policy Statement (NPS) for airports. The draft NPS is subject to parliamentary scrutiny and will require approval by both Houses of Parliament. Once the NPS is approved Heathrow may proceed with a planning application, in the form of a Development Consent Order (DCO). Expansion at Heathrow is not without controversy. While it enjoys widespread support amongst Conservative, Labour and SNP MPs, it is opposed by the Liberal Democrats and the Greens and by some MPs whose constituencies are overflown by planes flying to and from Heathrow. It has also been opposed by successive mayors of London, from both major parties. There are longstanding concerns about the environmental impact of expansion, in particular: •

how the increase in traffic will affect air quality around the airport;

•

whether more flights will cause difficulties for the Government’s climate change obligations; and

•

how noise will impact those living near the airport and under the flight paths

More generally, there is ongoing debate about the robustness of the financial and economic case; whether the taxpayer will be expected to fund surface access improvements; and whether expansion could or should better serve domestic markets. These questions have become more acute following the UK’s decision to leave the European Union. This paper focuses only on the plans to expand Heathrow. More general information on the airport can be found in our paper SN2893, which covers airports across the South East and London. Information on airports across the rest of the UK can be found in SN323. These and other papers can be found on the Aviation Briefings Page of the Parliament website.

Cover page image copyright Anders Sandberg – flickr (Creative Commons) [cropped]

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1. Background 1.1 History Originally designated ‘London Airport’, London Heathrow Airport (LHR) 1 started operations in 1930 as a private airport to assemble and test aircraft. In 1944, as part of the war effort, it was requisitioned by the Air Ministry for development into a Royal Air Force transport base. 2 It officially opened to the public in May 1946 after it was transferred from military to civilian control in January of that year. A December 1945 Command Paper on British Air Services stated that: “Heathrow will be designated as the long-distance airport for London and will be developed to the highest international standards required for transoceanic aircraft”. 3 A July 1948 report by the Select Committee on Estimates gives the following account of the beginnings of the airport: London Airport is being constructed at Heathrow on a site which was originally selected during the war for conversion into an RAF aerodrome. At that time it was intended that there should be three runways forming a triangle, all to the south of the Bath Road. Work was begun but not completed when the war ended and the aerodrome was not in fact used by the RAF. As early as 1943, before the development of the site was begun, the department of Civil Aviation of the Air Ministry realised that Heathrow would be a suitable site for the construction of London’s major civil airport, in place of Heston which was no longer thought to be satisfactory [...] [A lay out panel was subsequently set up and reported in 1946, this proposed] three main stages in the plan of development. Stage I covers the completion of the runways begun for the RAF, with temporary terminal buildings on a site between the triangle of runways and the Bath Road. Stage II allows maximum air traffic capacity south of the Bath Road, with the use of six runways. Such portions of the permanent terminal buildings as are needed to meet requirements will be completed and all the areas allocated for aircraft maintenance will be available for development. Stage III, the final stage, includes use of land north of the Bath Road, the road itself being diverted north of the airport. There will then be nine runways. The three stages were originally expected to be completed in 1946, 1949 and 1953 respectively […] The construction of the last three runways on the land north of the Bath road, under Stage III, involves diverting the road itself some distance to the north and demolishing a number of houses. It was agreed that, as alternative accommodation for the present occupants has first to be provided, the runways cannot be completed for a number of years. 4

it was not designated ‘Heathrow’ until 1966 CAA, Market power determination in relation to Heathrow Airport – statement of reasons, CAP 1133, 2013, Appendix C 3 Ministry of Civil Aviation, British Air Services, Cmd 6712, December 1945, para 21 4 Select Committee on Estimates, Construction of London Airport (eighth report of session 1947-48), 202, July 1948, paras 2, 3, 5 & 10 1 2

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The Committee concluded that: “The choice, during the war, of Heathrow, as the site for London’s major civil Airport was well made and allowed planning to be begun as early as was practicable”. 5 However, by 1963 the noise impacts of the airport caused the Committee on the Problem of Noise to report to the Lord President and the Minister of Science that: Heathrow has proved to have been established in a much too densely populated area, and no good solution to the noise problem is possible … We are convinced that the degree of exposure to noise in areas close to the Airport will not be materially reduced and, indeed, will get a good deal worse, unless appropriate measures are taken now. 6

The map below shows the original plans for the Heathrow site, drawn up in the 1940s:

The first aircraft to land at LHR was a BOAC Lancastrian from Australia. There were no terminal buildings and passengers checked in at a temporary tent village on the north side of the airfield. International communications needs were handled by a row of telephone boxes and a mobile Post Office. The only facilities were armchairs, a bar, a WH Smith shop and chemical toilets. By the end of its first year of operation, Heathrow was serving 18 destinations, with 60,000 passengers and 2,400 tons of cargo passing through the airport. In the 1950s, a new permanent building was built at the airport to replace the existing (ex-military) passenger terminals. By 1961, the old terminal on the north side of the airport had closed and airlines operated either from the Europa terminal (later renamed Terminal 2) or 5 6

ibid., para 29 Committee on the Problem of Noise, Final Report, Cmnd 2056, July 1963, paras 306307

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the Oceanic terminal (now Terminal 3). Terminal 1 was opened in 1969 – at the time the largest airport terminal in Europe. Terminal 3 was expanded in 1970 to accommodate the new Boeing 747s and in 1976 Concorde began operating from the airport. 7 Terminal 4 was opened in 1986, and in 2009 it underwent a major refurbishment. Terminal 5 was opened in March 2008. In 2010, demolition work on Terminal 2 started and the new Terminal 2 opened in 2014. Terminal 1 closed in 2015. 8

1.2 Ownership The British Airports Authority was established under the Airport Authority Act 1966, to take responsibility for four state-owned airports at London Heathrow, Gatwick and Stansted and Prestwick in Scotland. In the next few years, the authority acquired responsibility for Glasgow, Edinburgh and Aberdeen airports. Thirty years later, the Airports Act 1986 restructured the Authority into a main holding company, BAA plc, with seven separate airport companies operating London Heathrow, Gatwick and Stansted; Edinburgh; Glasgow; Aberdeen; and Southampton airports and an intermediate holding company over the four Scottish airports. It was privatised in July 1987, in a sale which raised £1.2 billion. 9 In June 2006 the Ferrovial Consortium, a Spanish construction firm, bought BAA for £10.3 billion. 10 In October 2012 BAA changed its name to Heathrow Airport Holdings Ltd (HAHL). 11 The ownership structure of HAHL as of 24 April 2017 is as follows: • • • • • • •

FGP Topco Limited, a consortium owned and led by the infrastructure specialist Ferrovial S.A. (25.00%); Qatar Holding LLC (20.00%); Caisse de dépôt et placement du Québec [Quebec public pensions investor] (12.62%); Government of Singapore Investment Corporation (11.20%); Alinda Capital Partners (11.18%); China Investment Corporation (10.00%); and Universities Superannuation Scheme (USS) (10.00%) 12

1.3 ‘Hub’ airports Heathrow is the UK’s only international ‘hub’ airport. ‘Hub’ airports are essentially large airports which have a significant number of routes, as the Government’s March 2013 aviation policy framework states: Although there is no single agreed definition of a hub airport, a key characteristic of hub airports across the world is that they are for more information on Concorde, see HC Library briefing paper SN2764 op cit., Market power determination in relation to Heathrow Airport – statement of reasons, Appendix C, and HAHL, Our history [accessed 6 April 2017] 9 NAO, Department of Transport: Sale of Government’s shareholding in BAA plc (session 1987/88), HC 312, February 1988 10 “Ferrovial lands BAA with final offer of £10.3bn”, The Guardian, 7 June 2006 11 HAHL press notice, “End of ‘BAA’”, 15 October 2012 12 HAHL, Company information [accessed 6 April 2017] 7 8

BAA sold off Gatwick, Stansted and Edinburgh between 2009 and 2013 after a 2008 investigation by the competition authorities.

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able to serve destinations that other airports are not. This is because a hub airport supplements local demand with transfer passengers, providing traffic volumes which support higher frequencies of services on more popular routes, and enabling services on more marginal routes that would not otherwise have proved viable with fewer passengers. 13

The Airports Commission’s July 2015 final report explained how consolidation in the airline industry and the associated rise of alliances has resulted in “the expansion of ‘hub-and-spoke’ networks run by major carriers at the world’s largest airports”. In these networks: … airlines and alliances route their traffic through one or more focal airports (‘hubs’), with feeder traffic from other airports in the network (‘spokes’) supplementing local origin and destination traffic. For passengers, the hub-and-spoke model maximises the choice of direct destinations at the hub airport and offers potential to travel to a very wide variety of destinations on one ticket. 14

In Europe, the major hubs are: • • • •

Air France-KLM at Amsterdam Schiphol; Air France-KLM at Paris Charles de Gaulle; Lufthansa at Frankfurt International; and British Airways at London Heathrow. 15

1.4 Regulation Since the main period of airport privatisation in the late 1980s, the Civil Aviation Authority (CAA) has economically regulated those airports deemed to have market power, setting price controls to protect their users from anti-competitive behaviour. In December 2012 the Civil Aviation Act 2012 received Royal Assent; this Act fundamentally changed the way the CAA economically regulates airports, effectively providing for a new system of economic licences. It only regulates airports with ‘substantial market power’, where competition law could not provide sufficient protection for consumers and where the benefits of regulating would outweigh the costs for airport users. This new system of regulation began in 2014. The CAA saw it as an improvement on the old system, which only permitted the CAA to set minimum service standards and a cap on what airports could charge airlines, every five years. Under the new system, CAA has more flexibility to “tailor regulation to the individual circumstances of each airport”, specifically: By setting out economic licences for regulated airports, the CAA is able to vary the licence conditions imposed on them to best protect passengers, based on the circumstances at each airport. For instance, while a price cap might be appropriate at an airport with high market power where there is little or no competition, this type of regulation is costly for airports and airlines, so may DfT, Aviation Policy Framework, Cm 8584, March 2013, para 1.38 Airports Commission, Final Report, 1 July 2015, p13 15 ibid., p13 13 14

Details of Heathrow’s economic licence are available to view on the CAA website

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lead to unnecessary expense for passengers if the airport has less market power. In those situations, it might be more appropriate to allow the airport to agree a commercial contract with its airline customers with the regulator only getting involved to ensure the airport sticks to what was agreed. The new powers also mean we can be much more flexible – under the old system, if something went wrong and passengers lost out, we would have to wait until the end of the price cap period to make any change, potentially five years. The new licence regime will give us the power to make much more rapid changes to licence conditions, to stop passengers suffering. For instance, if an airport performed poorly during bad weather one winter, the CAA would be able to change their licence to give them a duty to ensure it didn’t happen again the next year. 16

In 2014 the CAA concluded that Heathrow has substantial market power and, therefore, required an economic licence from 1 April 2014. The reasons for this judgement were that: … its position as the operator of the UK’s only hub airport and the combined package that Heathrow offers of strong demand, including premium passengers, cargo and connecting passengers. This makes Heathrow attractive for both based and inbound airlines. The airline network effects available at Heathrow means that very few airlines would be able and willing to switch sufficient capacity to constrain an increase in HAL’s charges. Heathrow’s good surface access options, the inherent attractiveness of the London market, and its strategic importance to airlines combined with the capacity constraints in the London system act to reduce the available alternatives to airlines. The strength of airline demand to operate from Heathrow means that HAL would be effectively insulated from the effects of any switching away as a result of higher airport charges. 17

At the same time the CAA published details of what would be in the licence. The proposed price control licence condition contained a singletill, retail price index (RPI) control of RPI-1.5% per year - less than what the airport asked for and more than the airlines wanted: It is composed of the following key building blocks: 1.

traffic forecasts of 347.7 million passengers;

2.

operating expenditure (opex) of £4,731 million;

3.

capital expenditure (capex) of £2,816 million;

4.

a pre-tax, real weighted average cost of capital (WACC) of 5.35%;

5.

commercial revenues of £2,790 million; and

6.

other regulated charges (ORCs) of £1,004 million and other revenues of £675 million.

CAA, Economic Regulation Briefing, CAP 1025, April 2013; information on the old system and how it came to be reformed can be found in HC Library briefing paper RP 12/07 17 CAA, Notice Of Determination under Section 8 of the Civil Aviation Act 2012: Heathrow Airport, CAP 1133, January 2014; the licence will last for 4 years, 9 months 16

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This gives an average per passenger yield of £19.74 over Q6. This compares with £23.43 in HAL's [Heathrow Airport’s] July 2013 Alternative Business Plan (ABP) and £15.56 suggested by the Heathrow airlines. The CAA's proposed price control, RPI-1.5% per year over Q6, compares with RPI+4.2% per year suggested by HAL in its July ABP and RPI-9.8% per year suggested by the Heathrow airlines in their response to the CAA's initial proposals. 18

Passenger experience is now a key part of the regulatory regime. The airport’s licence includes a licence condition on operational resilience. This requires Heathrow “so far as reasonably practicable, to secure the availability and continuity of airport operation services, particularly in times of disruption, to further the interests of passengers and cargo owners in accordance with best practice and in a timely, efficient and economical manner”. 19 This may help to address concerns about, for instance, the airport’s operations during incidents of severe weather. Heathrow’s then chief executive, Colin Matthews, called the RPI-1.5% price control cap a “draconian position”, requiring the airport to reduce operational expenditure by more than £600 million, and stretch commercial revenue targets (for things like retail and car park charges) by £100 million. He argued that “the settlement leaves little spare resource available to manage the consequences of potential disruption at Heathrow”. 20 Major airlines using Heathrow were also unhappy with the outcome, though for different reasons. A spokesman for British Airways said that “customers will still be paying more than is warranted and there is plenty of scope for further efficiencies to be made”; while Virgin Atlantic’s chief executive, Craig Kreeger, said that the decision was “a far cry from the reduction needed to mitigate the incredibly steep price rises customers have seen in Heathrow airport charges in the last few years”. 21 Heathrow’s licence and further information about how it is regulated can be found on the CAA website.

CAA, Economic regulation at Heathrow from April 2014: notice of the proposed licence, CAP 1138, January 2014, p4; prices in 2011/12 money 19 ibid., p39 20 HAHL press notice, “Heathrow’s response to CAA’s Q6 price control decision”, 10 January 2014 21 “Heathrow hits out at CAA for 'draconian' cut to landing charges”, The Guardian, 10 January 2014 18

11 Commons Library Briefing, 12 June 2017

2. Third runway: a brief political history 2.1 Labour’s plan, 2002-09 In 2002 the Labour Government published a series of consultation documents seeking views on the future development of air transport in the UK. 22 In the consultation on the South East of England the Government proposed a new short runway for Heathrow. 23 Stakeholder responses to the consultation process were mixed. While organisations representing the aviation industry were keen to emphasise the material and commercial benefits of significant airport expansion in the South East, 24 conservation and consumer groups contested the need for air transport expansion at all. 25 The subsequent December 2003 White Paper, The Future of Air Transport, offered support for the development of Heathrow, including a new runway, provided that strict environmental limits could be met. The White Paper stated that demand for Heathrow was ‘very strong’ and would always likely be ‘far in excess’ of capacity. Overall, the White Paper stated that the Government supported a third runway at Heathrow, to be built after a second runway at Stansted, probably in the period 2015-2020. The then owners of Heathrow, BAA, stated in their submission to the consultation preceding the White Paper that a third runway would require the building of a sixth terminal outside of the current airport boundary. With that in mind, the White Paper recommended that BAA carry out work on further proposals for terminal capacity and an appraisal of the potential impacts, on the basis of which a further consultation would be required. In November 2007 the Government published a consultation document on the future of Heathrow, and, in particular, whether a third runway should be built and mixed mode be introduced. The main issues outlined in the document were as follows: •

22

Support for a third runway and sixth terminal, conditional on no increase in the size of the area significantly affected by aircraft noise (as measured by the 57dBA Leq noise contour in 2002); being confident of meeting European air quality limits around the airport, in particular for nitrogen dioxide (NO2) which is the most critical local pollutant around Heathrow; and improving public transport access to the airport;

DfT, The Future Development of Air Transport in the UK: South East, Second edition, February 2003; see also: DfT, South East and East of England Regional Air Services Study (SERAS): Appraisal findings report, April 2002 23 ibid., The Future Development of Air Transport in the UK: South East, Second edition, paras 7.4-7.6 24 see, for example: BAA, Responsible Growth: BAA's response to the Government's consultation on the future of air transport, May 2003 25 see, for example: The response of HACAN ClearSkies to the The Future of Air Transport in the United Kingdom: South East Consultation Document, November 2002

All of the documents pertaining to the consultation, which closed in February 2008, are available on the Department for Transport’s archived website.


•

A revised proposal by BAA for adding a third runway north of the A4 (2,200 metres (m) operational length compared with the original 2,000m proposal), with associated passenger terminal facilities and access to the road and rail networks. This could potentially enable the airport to handle around 700,000 air transport movements (ATMs) a year, a nearly 50 per cent increase;

•

Proposals for introducing mixed mode on the existing two runways, either with or without additional ATMs, as an interim measure ahead of a third runway. Runway alternation would have to cease during mixed mode operations; and

•

Whether adding a third runway at Heathrow could provide capacity to increase movements in the night period. 26

Shortly after the consultation was published, anti-expansion groups, led by HACAN, stated that they would challenge the building of a third runway on economic as well as environmental grounds. 27 Later, in March 2008 The Sunday Times ran a story, based on documents obtained under the Freedom of Information Act, to the effect that “the airports operator BAA colluded with government officials to “fix” the evidence in favour of a new third runway at Heathrow”. 28 The Government repeatedly stressed that this was not the case. 29 On 15 January 2009 the then Secretary of State for Transport, Geoff Hoon, announced the Government’s support for a third runway and new terminal at Heathrow, conditional on environmental and air quality criteria being met and additional ground transport capacity being added. 30 He also indicated that the Government had concluded that mixed mode should not go ahead, but that the Cranford Agreement should end, permitting easterly take offs from the northern runway. 31 There was no further progress before the 2010 General Election.

2.2 Policy of the Coalition & Conservative governments, 2010Before the 2010 General Election the Conservative Party had indicated that it was opposed to a third runway and a sixth terminal at Heathrow and campaigned against it. In 2009 the then Shadow Transport Secretary, Theresa Villiers, said that the Conservatives would “fight [the Labour Government] every step of the way” on Heathrow expansion. 32 Subsequently, the Conservative Party Manifesto for the 2010 election stated: “Our goal is to make Heathrow airport better, not bigger. We will stop the third runway and instead link Heathrow directly to our high DfT, Adding capacity at Heathrow Airport: consultation document, 22 November 2007, pp8-9 27 “Report attacks Heathrow expansion”, The Times, 2 December 2007 28 “Revealed: the plot to expand Heathrow”, The Sunday Times, 9 March 2008; the documents in question are: FOI 1, FOI 2, FOI 3, and FOI 4 29 see, e.g.: HC Deb 2 April 2008, cc880-881; and HC Deb 11 November 2008, c674 30 HC Deb 15 January 2009, cc357-358; the documentation published alongside the Secretary of State’s statement, including a report on the consultation responses, is available on the DfT archive website 31 ibid., c357 32 HC Deb 15 January 2009, c360 26


speed rail network, providing an alternative to thousands of flights”. 33 Following the 2010 General Election and the formation of the Conservative-Liberal Democrat Coalition Government, the Coalition Agreement stated: “We will cancel the third runway at Heathrow”. 34 Heathrow Airport Holdings Limited (then BAA), the owners of Heathrow, consequently announced that they would abandon their plans for a third runway and a sixth terminal at the airport. 35 However, there followed concerted lobbying by the airport itself, the main airlines that use it and by business to persuade the Government to look again at its policy on Heathrow. 36 Consequently, the Government set up the independent Airports Commission under the chairmanship of Sir Howard Davies in September 2012, charging it to report on long term capacity options by summer 2015 (see below). The Government initially welcomed 37 the Commission’s December 2013 interim report before publishing its full response in July 2014. In his statement the then Secretary of State, Sir Patrick McLoughlin, said: “Publication of the commission’s final report in summer 2015 will be an important event not just for the aviation industry, but for the national economy more generally”. 38 Unlike in 2010, the Conservative Party’s manifesto for the 2015 General Election did not mention Heathrow, it only said that if it formed the next Government it would “respond to the Airports Commission’s final report”. 39 When the Commission’s final report was published in July 2015 Sir Patrick said: There are a number of things that we must do now in order to make progress. First, we must study the substantial and innovative evidence base that the commission has produced. Secondly, we must decide on the best way of achieving planning consents quickly and fairly if expansion is to go ahead. Thirdly, we will come back to Parliament in the autumn to provide a clear direction on the Government’s plans. This is a vital moment for the future of our aviation industry. Our aviation sector has been at the heart of our economic success and quality of life. All those with an interest in this important question are expecting us to act decisively. This is a clear and reasoned report which is based on evidence, and it deserves respect and consideration, and we must act. 40

Conservative Party, Invitation to join the government of Britain: General Election Manifesto 2010, April 2010, p23 34 HMG, The Coalition: Our Programme for Government, May 2010, p16 35 BAA Heathrow press notice, “Heathrow updates local residents”, 24 May 2010 36 see, e.g. London’s Connectivity Commission for London First, London, Britain and the world: Transport links for economic growth, February 2012; Heathrow Airport press notice, “UK will lose over 140,000 jobs without urgent action on aviation”, 7 March 2012; and: Frontier Economics, Connecting for growth: the role of Britain’s hub airport in economic recovery, September 2011 37 DfT press notice, “Government welcomes Airports Commission interim report”, 17 December 2013; and: HC Deb 17 December 2013, c622 38 HC Deb 15 July 2014, c67WS 39 Conservative Party, Strong Leadership, A Clear Economic Plan, A Brighter More Secure Future: The Conservative Party Manifesto 2015, 14 April 2015, p14 40 HC Deb 1 July 2015, c1484 33


In December 2015 Sir Patrick announced that the Government accepted the case put by the Commission for more runway capacity in the South East by 2013, but that it had not yet decided where that capacity should be. In light of this, the Government would: … develop the best possible package of measures to mitigate the impacts on local people and the environment. This will include a package for local communities to include compensation, maximising local economic opportunities through new jobs and apprenticeships, and measures to tackle noise. More work will be done on environmental impacts. The government expects the airports to put forward ambitious solutions. 41

At this time a final ‘decision’ or statement of preference for where expansion should go, was expected in Summer 2016. However, the EU referendum, David Cameron’s resignation, and his replacement as Prime Minister by Theresa May, caused a delay. Finally, on 25 October 2016 Secretary of State for Transport, Chris Grayling, announced that the Government would support a third runway at Heathrow and would bring forward a draft National Policy Statement and a consultation on airspace change in 2017. 42 Mr Grayling stated that the Government would give three assurances as regards Heathrow expansion: •

to make Heathrow a better neighbour by tackling air quality and noise, and meeting obligations on carbon both during and after construction;

•

on costs for airlines and passengers that “this is not expansion at any cost, but the right scheme at the right price” by the industry working together to drive down costs for the benefit of passengers and the CAA specifically having an aim to deliver a plan for expansion “that keeps landing charges close to current levels”; and

•

on benefitting the whole of the UK by creating jobs across the airport’s UK-wide supply chain, giving more of the UK access to important international markets by strengthening existing domestic links, and developing new connections to regions not currently served. 43

The draft NPS and the consultation on airspace change were published on 2 February 2017. 44 The draft NPS is dealt with in more detail in section 9, below; airspace and noise is dealt with in section 6.

DfT press notice, “Government confirms support for airport expansion in the southeast”, 10 December 2015 42 HC Deb 25 October 2016, cc162-66 43 ibid. 44 DfT, Heathrow expansion: draft Airports National Policy Statement and Reforming policy on the design and use of UK airspace, both 2 February 2017 41


Brexit On 23 June 2016 the United Kingdom voted to leave the European Union. The Prime Minister triggered Article 50 of the Treaty on European Union on 29 March 2017 to begin the process of exit. The process for withdrawal is likely to take around two years, during which time there will be negotiations about what sort of relationship the UK and the EU will have in the future and how individual policy areas will be affected. Until that process has advanced somewhat it is impossible to say with any certainty what the effects of Brexit on aviation policy, industry, services and operations will be. There is no direct reason why Brexit should have an impact on airport expansion in the South East of England. However, there has been comment about the impact of wider changes which may occur as a result of Brexit and their potential impact on Heathrow. For example, one issue that could have a major impact might be a serious fall in demand as a consequence of a more general downturn in the economy and any potentially negative economic impact from Brexit. There is a well-established relationship between GDP growth and growth in passenger traffic, so any reduction in economic growth in the UK (and/or the rest of the EU) could well be detrimental to demand for air travel. 45 The tax expert Richard Murphy has posited that any unwinding of the UK’s access to the Single European Aviation Market would lead to a contraction of routes and wonders why, in this scenario, a third runway would be needed. 46 On 6 April 2017 the BBC reported that Ferrovial, part-owner of Heathrow (see section 1.2, above), had indicated that “uncertainty over the UK's exit from the EU has put a halt on future UK investment deals”. It went on: Although investment in Heathrow is not in doubt, Ferrovial chairman Rafael del Pino said he saw "no opportunities" in the UK, Spain's ABC newspaper reported. 47

CAPA, Brexit and aviation Part 2: lower air traffic, economic uncertainty. UK-EU relations up in the air, 28 June 2016; the Chief Executive of Ryanair, Michael O’Leary, voiced similar concerns more recently, see: “Airfare hikes ahead unless Brexit talks turn, warns Michael O’Leary”, Daily Telegraph, 7 November 2016 46 “Hasn’t Brexit destroyed the case for a third Heathrow runway?”, Tax Research UK blog, 14 April 2017 47 “Heathrow owner halts future UK investment over Brexit”, BBC News, 6 April 2017 45

More information on Brexit and its possible implications for aviation can be found in HC Library briefing paper CBP 7633.


3. Non-governmental views on a third runway 3.1 Political parties Labour supports expansion at Heathrow providing four tests can be met. In October 2016 the Shadow Secretary of State for Transport, Andy McDonald, explained: Labour has consistently been in favour of building an additional runway in the South East of England. But this support has always been conditional on four tests being met: on capacity, climate change, noise and air quality and the wider national benefits … The Government […] must now commit to dealing with their proposal’s environmental and infrastructure issues without further delay. 48

However, Sadiq Khan the Labour Mayor of London who was elected in May in 2016, opposes expansion at Heathrow and supports expansion at Gatwick. He opposes Heathrow mainly on environmental grounds: Our air in London is a killer—it makes people sick, and it is illegal. In those circumstances, I do not see how a new runway at Heathrow addresses the requirement on us to meet the Supreme Court’s judgment. Even without building a new runway, I cannot see how Heathrow is addressing that problem now. 49

In October 2016 he called on the Government “to commit now to building an extra runway at Gatwick, which he said 'can be built quicker, cheaper, and without the years of legal and political battles that Heathrow clearly faces”. 50 The Liberal Democrats are “utterly opposed” to Heathrow expansion; however the party leader Tim Farron has indicated that he is openminded about expansion at other airports in the South East. 51 At the annual conference, party members have tended to vote against any net airport expansion. 52 The Party went into the 2015 General Election being opposed to any expansion of Heathrow, Stansted or Gatwick and any new airport in the Thames Estuary and pledged “no net increase in runways across the UK”. 53 UKIP went into the 2015 General Election with a policy to “consider [the Airports Commission’s] recommendations and then take a position on the basis of what we genuinely believe to be in the long-term best Labour Party press notice, “Andy McDonald responds to the government’s decision on Heathrow”, 25 October 2016 49 HC Deb 26 November 2015, c1554 50 Mayor of London press notice, “London Mayor hits out at Government over runway delay”, 19 October 2016 51 “Liberal Democrat leader Tim Farron may back expansion of airports around London”, Western Daily Press, 19 September 2015 52 see, e.g. “Blow to Nick Clegg as Lib Dems defy leadership over airport expansion”, The Guardian, 7 October 2014 53 Liberal Democrats, Manifesto 2015: Strong Economy. Fairer Society. Opportunity for Everyone., 15 April 2015, p31 48


interests of the country”. 54 The Green Party is opposed to Heathrow expansion. The Party went into the 2015 General Election with a policy to “stop airport expansion, in particular no new runways at either Heathrow or Gatwick, and ban night flying”. 55

3.2 Scotland The Scottish Government announced on 10 October 2016 that it supported the plan to build a third runway at Heathrow, after securing a number of commitments from Heathrow Airport Holdings Ltd, including: •

The creation of up to 16,000 new jobs across Scotland from the new capacity

•

An investigation into using Glasgow Prestwick Airport as a potential site for a logistics hub to support the building of the third runway

•

£200m of construction-related spend in Scotland during planning and construction

•

A £10m route development fund to help support new domestic routes

•

From January 2017, a reduction of £10 per passenger on landing charges paid by airlines operating services from Heathrow to Scotland

•

A significant, long term marketing campaign at Heathrow to promote Scotland

•

A procurement event in Glasgow to enhance opportunities for Scottish firms to win business with Tier 1 Heathrow suppliers. 56

Following the announcement of the UK Government’s decision to support the construction of a third runway, Keith Brown MSP, Cabinet Secretary for Economy, Jobs and Fair Work stated: We welcome this decision and look forward to working with Heathrow to bring the significant benefits of a third runway at the airport to Scotland…It’s now crucial that the UK Government starts work on this immediately and puts in place measures to secure guaranteed access to Heathrow for Scotland’s airports. There can be no further costly delays if Scotland, and the UK as a whole, is to reap the rewards on offer. 57

The development of a third runway has broad support from the Scottish business community. For example, the Scottish Council Development and Industry welcomed the decision and called for guaranteed access to slots to improve Scotland's connectivity and for all political parties to commit to delivery. 58 The Scottish Chambers of Commerce also UKIP, Believe in Britain: UKIP Manifesto 2015, 15 April 2015, p37 Green Party, For the Common Good: General Election Manifesto 2015, 14 April 2015, p65 56 Transport Scotland press notice, “Support for Heathrow expansion”, 10 October 2016 57 Transport Scotland press notice, “Heathrow expansion”, 25 October 2016 58 SCDI press notice, “SCDI Comments on UK Government Airport Announcement”, 25 October 2017 54 55

This section of the paper was written by Alan Rehfisch, Specialist in the Scottish Parliament Information Centre (SPICe)


supported the decision and called for the approval process to be accelerated “…to ensure that Scotland and the UK benefits from the investment as soon as possible”. 59 Almost all Scottish airports support Heathrow expansion. For example, Glasgow Airport chief executive Amanda McMillan stated in The Herald on 26 October 2016 that "We've got a heavy demand for connectivity to Heathrow. The opportunity for Scotland is significant, to be able to increase the number of flights from Glasgow to Heathrow, and from Aberdeen to Heathrow, is something that we really welcome”. 60 Edinburgh Airport was the only Scottish airport to oppose the expansion of Heathrow, although it is worth noting that it is owned by Global Infrastructure Partners – which also owns Gatwick Airport. Edinburgh Airport chief executive Gordon Dewar told The Scotsman on 25 October 2016 that: Scotland’s airports are less dependent on London than they have ever been. Our passengers tell us that they want to fly directly and we believe a larger Heathrow will in effect be a powerful monopoly that could undermine long-haul direct international services from every part of the UK. 61

Opposition to Heathrow expansion has mainly come from Scottish environmental campaigners, concerned about both climate change impacts and the effect on communities around Heathrow. For example, Friends of the Earth Scotland Director Dr Richard Dixon stated: Supporting a new runway at Heathrow is incompatible with serious action on climate change. Emissions from aviation are already 7% of the UK total and another runway will lead to more flights and increasing damage to the climate. Any increase in emissions from more flights into Scotland would have to be compensated with even sharper reductions in other sectors of the economy. Heathrow cannot possibly deliver on all the jobs and economic benefits it has promised. Their public relations onslaught across the country and at party conferences has fooled many of those who should know better. 62

Partick Harvie MSP, Scottish Greens Co-Convenor, raised the issue of Heathrow expansion at First Minister’s Question Time on 27 October 2016, stating: A third runway would create 250,000 extra flights a year, which would cause a massive increase in emissions and be the single biggest threat to the whole United Kingdom meeting its climate change targets. It would leave thousands of people’s homes too noisy and polluted to live in, and unknown tens of thousands more would be left to suffer the damaging health effects.

SCC press notice, “Airport expansion – it’s time to deliver”, 25 October 2016 “Heathrow expansion 'will protect and expand routes to Scotland'”, The Herald, 26 October 2016 61 “Scotland will get ‘significant benefits’ from Heathrow expansion”, The Scotsman, 25 October 2016 62 FOE Scotland press notice, “Heathrow decision will damage the climate and communities nearby”, 25 October 2016 59 60


I can only imagine the outrage—I would join it—from the Scottish Government and its colleagues at Westminster if the UK Government inflicted that kind of damage on so many lives in Glasgow, Inverness or Dundee in exchange for alleged economic self-interest, but Scottish National Party members will now troop through the voting lobbies to bail out a Tory Prime Minister who stood for election saying, “No ifs, no buts—no third runway.” What is the point of a principle such as climate justice when it is surrendered so easily? 63

3.3 Wales In March 2017 the Welsh Government and HAHL signed a ‘Strategic Partnership’. This was described by the First Minster, Carwyn Jones, as: [… opening] the door to explore a wide range of new opportunities particularly for our existing supply chain companies that have the experience and expertise to support infrastructure projects at Heathrow […] plans are already underway to host the first Heathrow business summit in Wales, where our supply chain companies will have the chance to meet and discuss opportunities with Heathrow’s procurement team. 64

Opposition parties in Wales criticised the agreement for lacking substance. 65 When the UK Government indicated its support for a third runway in October 2016 Mr Jones welcomed the announcement but said he wanted to see: •

A fair allocation of landing slots,

•

A spur rail link to Heathrow from the mainline allowing direct rail travel from South Wales,

•

Any spending consequentials due under the Barnett formula. 66

3.4 Northern Ireland When the UK Government indicated its support for a third runway in October 2016 the Northern Irish Minister for the Economy, Simon Hamilton, “warmly welcomed” the decision. He went on: … the business community in Northern Ireland will welcome it and that everybody in Northern Ireland should praise the Government for their decision, because our connectivity, as we know … is incredibly important. We need more direct routes from Belfast and I am glad that we are increasing them. London is a key business route in and of itself, for Northern Ireland, and Heathrow is a crucial hub airport that is a gateway to the world. 67

John Holland-Kaye, Chief Executive of HAHL, told the CBI in Northern Ireland in 2016 that Heathrow expansion could “bring in new airlines, FMQs 27 October 2016, c16 Welsh Government press notice, “New partnership with Heathrow puts Wales on flightpath to growth”, 6 March 2017 65 “Heathrow to Wales flights 'could bid for funds'”, BBC News, 6 March 2017 66 “Carwyn Jones demands a direct rail link to Wales as Heathrow's expansion is approved”, Wales Online, 25 October 2016 67 NIA Official Report, 25 October 2016, T4 63 64


meaning new competition and choice, higher frequencies and lower fares … grow your competitive advantage further. More flights to more cities in China, and Asia, the Americas and Africa - the growing markets of the world”. 68 The then Mayor of London, Boris Johnson, warned that expansion “could see the number of direct flights to Belfast slashed”. 69

“Heathrow expansion 'could create 5,000 jobs in Northern Ireland'”, Belfast Telegraph, 19 May 2016 69 “Heathrow third runway would adversely affect Belfast City Airport, says Boris Johnson”, Belfast Telegraph, 20 October 2015 68


4. Airports Commission, 2012-15 On 7 September 2012 the then Secretary of State for Transport, Sir Patrick McLoughlin, announced that he had asked Sir Howard Davies, the former chairman of the Financial Services Authority, to chair an independent commission tasked with “identifying and recommending to Government options for maintaining the UK’s status as an international hub for aviation”. 70

4.1 Membership and terms of reference The Commission had five other members, in addition to Sir Howard: •

Sir John Armitt (former Chief Executive of Network Rail and Chairman of the Olympic Delivery Authority);

•

Professor Ricky Burdett (Professor of Urban Studies, and director of LSE Cities and the Urban Age Programme);

•

Vivienne Cox (non-executive director of Rio Tinto plc, BG Group, Pearson plc and Vallourec SA; and Lead Independent Director on the board of DfID);

•

Professor Dame Julia King (Vice-Chancellor of Aston University and member of the Committee on Climate Change); and

•

Geoff Muirhead CBE (Non-Executive Chairman of ASK Developments, Chairman of the North West Rail Campaign, Chairman of the IPPR Commission on Northern Economic Future and Chairman of the Atlantic Gateway Programme). 71

The Terms of Reference tasked the Commission with examining the scale and timing of any requirement for additional hub capacity and identifying and evaluating how any need for additional capacity should be met in the short, medium and long term. The Commission was asked to report before the end of 2013 on: its assessment of the evidence on the nature, scale and timing of the steps needed to maintain the UK’s global hub status; and its recommendation(s) for immediate actions to improve the use of existing runway capacity in the following five years – consistent with’ credible long term options’. 72

It was asked to publish a final report no later than summer 2015 on: its assessment of the options for meeting the UK’s international connectivity needs, including their economic, social and environmental impact; its recommendation(s) for the optimum approach to meeting any needs; its recommendation(s) for ensuring that the need is met as expeditiously as practicable within the required timescale; and

HC Deb 7 September 2012, c41WS information from Gov.uk [accessed 19 January 2017] 72 Airports Commission, Terms of reference, September 2012 70 71

All of the reports, consultations and working papers published by the Airports Commission are available on its archived website.


to provide materials to support the government of the day in preparing a national policy statement to accelerate the resolution of any future planning applications for major airports infrastructure. 73

In November 2012 the Commission published an operating protocol, setting out its intended working practices, how it would gather evidence, and its intention to appoint an External Advisory Panel. 74 The External Advisory Panel was made up of 21 members, whose role was to help the Commission to “access, interpret and understand evidence relating to the Commission’s work, and to make judgements about its relevance, potential and application”. 75 The Panel was advisory and had no executive powers.

4.2 Interim Report and subsequent consultation, December 2013 On 17 December 2013 the Commission published its interim report. It concluded that there was a need for one net additional runway to be in operation in the South East by 2030 and that there was likely to be a demand case for a second additional runway to be operational by 2050. The Commission announced that it would take forward for further detailed study proposals for new runways at Gatwick and Heathrow. The two options for Heathrow were Heathrow Airport Holdings Ltd.’s proposal for one new 3,500m runway to the north west of the current site and Heathrow Hub’s proposal to extend the existing northern runway to at least 6,000m, enabling the extended runway to operate as two independent runways. The Commission reported that many of the features and impacts of the two Heathrow options were broadly the same. The costs for each would be higher than those for most single runway options considered at other sites, although less than those for a south west runway option at Heathrow. Estimated as costing £13-18 billion by 2030, the costs were, however, “much lower than most options with four or more runways, in many cases by several orders of magnitude”. 76 However, each proposal had different, specific, impacts as set out by the Commission in its report. For option (a) – one new runway to the north west – these were as follows: a significant increase in capacity of up to 260,000 air traffic movements (ATMs) per year; ‘roughly neutral’ impact on the number of people affected by noise (the new runway would allow a portion of the airport’s traffic to land and take off further to the west than the existing configuration of runways, so those aircraft would fly at a higher altitude over the most densely populated areas);

ibid. Airports Commission, Operating protocols for the Airports Commission, 2 November 2012 75 Airports Commission, Expert Advisory Panel: Terms of Reference , 2012 76 Airports Commission, Interim Report, 17 December 2013, para 6.91 73 74


the spread of the noise impact would be over a larger area, meaning that some people would be newly brought within the 57LAeq contour; no internationally designated sites would be directly impacted by the proposal (the South West London Waterbodies SPA/Ramsar site would lie within 2km of the expanded airport site, with the potential for some indirect impacts); and requirement for a ‘significant number of demolitions’, totalling approximately 1,500 houses and including the loss of the village of Harmondsworth, much of which is a conservation area. A second conservation area in Longworth would also lose listed buildings (around 30 listed buildings would be lost in total). 77

For option (b) – extending the northern runway to the west – the impacts were as follows: a maximum additional capacity of 190,000 ATMs per year; all night flights could use the western portion of the extended runway, resulting in the population falling within the 55 LDen contour, being more than 20,000 lower than for the north western runway option; could potentially encroach upon the South West London Waterbodies SPA/Ramsar site; direct effects on just eight listed buildings (none Grade I or Grade II*) and only indirect effects on the Colnbrook Conservation Area; and relatively few demolitions, with a probable total of 720 properties estimated to be lost. 78

HAHL welcomed the Commission’s report and in particular the shortlisting of the new north west runway option. 79 Heathrow Hub also welcomed the inclusion of their proposal for an extended northern runway in the Commission’s report. 80 HACAN, the body that campaigns against aircraft noise around Heathrow, stated that the report was “‘the trigger to 18 months of intense campaigning against Heathrow expansion”. John Stewart, Chair of HACAN, said: “The scale of the opposition will be so great that we believe that [the Heathrow options] are politically undeliverable and should have been dropped at this stage”. 81 In November 2014 the Commission published for consultation its assessment of proposals for additional runway capacity at Gatwick and Heathrow. It invited public comment on its detailed consideration of each proposal. This included analysis of the cost of each proposal, the effect on communities of noise, property loss and construction, and the economic benefits and environmental impacts. The purpose of the ibid., paras 6.101-6.106 ibid., paras 6.107-6.111 79 HAHL press notice, “Heathrow north-west third runway option short-listed by Airports Commission”, 17 December 2013 80 Heathrow Hub press notice, “Heathrow Hub shortlisted by Airports Commission in its Interim Report”, 17 December 2013 [Heathrow Hub is not affiliated to HAHL, for more information visit its website] 81 HACAN press notice, “Campaigners vow to fight any expansion at Heathrow”, 17 December 2013 77 78


consultation was to test the evidence base the Commission had assembled; understand stakeholders’ views as to the accuracy, relevance and breadth of the assessments it had undertaken; and seek views on the potential conclusions that might be drawn from them. There were three separate business cases and sustainability assessments as well as information from the three scheme sponsors (Gatwick Airport, HAHL and Heathrow Hub) and a number of technical reports. 82 The main headline in the consultation was the difference in cost: the Commission projected that the Gatwick scheme would cost approximately £2 billion more and the two Heathrow schemes between £3 billion and £4 billion more than their sponsors originally estimated. However, the consultation paper made it clear that the differences between the sponsors’ estimates and the Commission’s estimates were in large part a result of differing opinions on the application of risk and optimism bias (and for Heathrow Hub/extended runway some smaller differences of opinion on taxiway, land and car parking costs). 83

4.3 Final report, July 2015 The final report was published on 1 July 2015. Various estimates put the total cost of the Commission’s work at about £20 million. 84 However, the Government subsequently put the official cost at £13.4 million: … up until the end of August 2015, the cost of the Airports Commission is around £13.4 million across 2012-13 to 2015-16. This covers buildings, staff and IT costs, consultancy, publishing, travel and hosting public consultation events. The final cost will be known once the commission secretariat has been dissolved, following which we intend to publish the final figures. 85

There was some concern expressed about the independence of the report, and particularly that of Sir Howard Davies. This was based on various reports as to conflicts of interest in his business dealings (e.g. Sir Howard's role chairing the Risk Committee of Prudential plc. and his role as an advisor to the Investment Strategy Committee of GIC Private Ltd., which part-owns HAHL). 86 The Treasury Solicitor wrote to the Teddington Action Group on the GIC issue and said that Sir Howard “did not have any involvement in individual investment decisions in any event while he was there. Neither did he hold any shares or have any financial interest” in the company. The Solicitor concluded: “There is accordingly no presumed bias … as to apparent bias, the fair minded and informed observer would not have any concerns as to [his]

Airports Commission, Increasing the UK’s long-term aviation capacity, 11 November 2014 83 ibid., pp26-28, 47-48 [Gatwick], 65-66 [HAHL], and 81-82 [Heathrow Hub] 84 e.g. “Heathrow Airport expansion: Nine things you need to know”, The Independent, 1 July 2015; and “Heathrow expansion: After three-years and £20m inquiry, Airports Commission makes clear call for third runway”, London Evening Standard, 1 July 2015 85 HL Deb 7 September 2015, c1216 86 see, e.g. “Independence of Airports Commission questioned over chair's Prudential role”, The Guardian, 5 August 2015; and Teddington Action Group, Letter dated 10 July 2015 [accessed 19 January 2017] 82


involvement with this company, prior to his taking up his post at the Commission…”. 87 The final report rehearsed the arguments made in earlier reports about economic growth, demand and environmental protection and concluded that all three shortlisted schemes represented ‘credible options for expansion’. However, the Commission unanimously recommended that: … a new northwest runway at Heathrow Airport, combined with a significant package of measures to address its environmental and community impacts, presents the strongest case and offers the greatest strategic and economic benefits – providing around 40 new destinations from the airport and more than 70,000 new jobs by 2050. 88

Heathrow Hub As indicated above, there were two distinct proposals for expansion at Heathrow: the new north west runway, sponsored by HAHL itself and an extended northern runway (ENR), sponsored by Heathrow Hub. Heathrow Hub, led by the former Concorde pilot and past president of the Royal Aeronautical Society, Capt. Jock Lowe, proposed the extension of the existing northern runway and dividing it into two, separated by a central safety zone. The runways could be operated independently, one for departures and one for arrivals. They contend that the scheme could be delivered for a lot less than a new third runway and constructed in stages, further it would avoid bringing significant new areas into the noise footprint as operationally it would use the same flight paths as those which are currently in operation. The Airports Commission concluded that the ENR is “an imaginative idea, which has usefully opened up thinking about the way the airport operates, but … is less attractive from a noise perspective” [Final Report, p4]. Specifically, while the ENR would be cheaper and involve the loss of far fewer homes, it would deliver a lower level of capacity; limit respite; lead to higher number of people within the highest noise contours close to the airport; present greater air quality challenges; and create a more congested airfield than the alternative option, leading to lower resilience and less space for ancillary development [ibid., pp29-30]. Heathrow Hub has contended the accuracy of some of these claims, such as the 700,000 limit and that the Commission had not accepted some of its proposed mitigation measures [Heathrow Hub, 1 July 2015].

In full, the Commission’s recommendations were as follows: Expanding Heathrow provides a unique opportunity to change the way the airport operates. The additional income generated as a result of operating a third runway should be allocated in a new way, and the airport should be obliged to develop a better and more collaborative relationship with its local communities, as some overseas airports have done. The Commission therefore recommends that a number of measures should be taken forward, in parallel with the approval,

Government Legal Department to Teddington Action Group, Letter dated 27 July 2015 [accessed 19 January 2017] 88 Airports Commission press notice, “Airports Commission releases final report”, 1 July 2015 87


construction and operation of any new capacity at Heathrow, to address its impacts on the local environment and communities: 1.

Following construction of a third runway at the airport there should be a ban on all scheduled night flights in the period 11:30pm to 6:00am. This is only possible with expansion.

2.

A clear ‘noise envelope’ should be agreed and Heathrow Airport must be legally bound to stay within these limits. This could include stipulating no overall increase above current levels.

3.

A third runway should allow periods of predictable respite to be more reliably maintained.

4.

Heathrow Airport Ltd should compensate those who would lose their homes at full market value plus an additional 25% and reasonable costs. It should make this offer available as soon as possible.

5.

Heathrow Airport Ltd should be held to its commitment to spend more than £1 billion on community compensation. In addition, a new aviation noise charge or levy should be introduced to insure that airport users pay more to compensate local communities. Taken together these would fund enhanced noise insulation and other schemes. Support for schools should be included as a priority.

6.

A Community Engagement Board should be established under an independent Chair, with real influence over spending on compensation and community support and over the airport’s operations.

7.

An independent aviation noise authority should be established with a statutory right to be consulted on flight paths and other operating procedures.

8.

Training opportunities and apprenticeships for local people should be provided so that nearby communities benefit from jobs generated by the new infrastructure.

9.

A major shift in mode-share for those working at and arriving at the airport should be incentivised, through measures including new rail investments and a continuing focus on employee behaviour change. A congestion or access charge for motor vehicles should also be considered.

10.

Additional operations at an expanded Heathrow must be contingent on acceptable performance on air quality. New capacity should only be released when it is clear that air quality at sites around the airport will not delay compliance with EU limits.

11.

A fourth runway should be firmly ruled out. The government should make a commitment in Parliament not to expand the airport further. There is no sound operational or environmental case for a four runway Heathrow. 89

The Commission estimated that the cost of the scheme would be £17.6 billion, which would be paid for by HAHL. 90 In terms of how that might be passed on to the airport’s customers (airlines and, ultimately, 89 90

Airports Commission, Final Report, 1 July 2015, pp10-11 [emphasis added] ibid., para 13.80


passengers and companies shipping freight), any increase in the airport’s fees would be set by the CAA as part of the regulatory process. 91 The Commission also said it would be deliverable by 2026, though “it must be accepted that a number of factors, such as potential delays to, or acceleration of, the planning and legal processes might impact the dates at which a new runway would come into operation”. 92 Responses to the report were mixed. HAHL naturally welcomed the report. 93 Heathrow Hub expressed disappointment that their plan for an extended northern runway was not the favoured option but more generally welcomed the decision to expand at Heathrow. 94 Gatwick said that its proposal remained the “only deliverable option”. It said that although the Commission had opted for Heathrow, the evidence it had taken showed that expansion at Gatwick was deliverable. It then called on the Government to choose Gatwick over Heathrow. 95 The then Mayor of London, Boris Johnson, described the decision to recommend that a third runway be built at Heathrow as “highly predictable, short-termist and completely politically undeliverable”. 96 The Aviation Environment Federation (AEF) urged the Government to reject the Commission’s recommendation, not least on the grounds that it would “breach the climate change target for aviation unless politically challenging measures are introduced to limit growth at other airports or to substantially increase the cost of flying”. 97 London First, the business advocacy group, said that it was “time for the government to implement the recommendation and get on with a new runway at Heathrow. Anything else is now inexcusable” and that the report “gives the Government an up-to-date, comprehensive, and independent analysis of our runway needs”. 98 Gatwick published an analysis of the Final Report in August 2015, setting out its areas of concern. It charged that “key elements of the Commission’s report and evidence base, although comprehensive in many respects, suffer from omissions or superficial analysis in some critical areas and are not sufficiently thorough in a number of important respects, nor are the Commission’s assessments or their presentation in the final report always balanced and fair”. 99 It highlighted the nature Oral evidence: Surface transport to airports, HC 516, 16 November 2015, Qq241-2 op cit., Final Report, para 11.33; pp231-6 go into detail about delivery risks in terms of planning, construction etc. 93 HAHL press notice, “Heathrow will work with Government to deliver expansion for 'all of Britain'”, 1 July 2015 94 Heathrow Hub press notice, “Heathrow Hub responds to the Airports Commission Final Report”, 1 July 2015 95 Gatwick Airport press notice, “Gatwick expansion remains only deliverable option”, 1 July 2015 96 Mayor of London press notice, “Mayor condemns highly predictable and catastrophic third runway plan”, 1 July 2015 97 AEF press notice, “Davies Commission recommendations beset with environmental hurdles, says Aviation Environment Federation”, 1 July 2015 98 London First press notice, “Airports Commission recommends Heathrow”, 1 July 2015 99 Gatwick Airport, A Second Runway for Gatwick: Airports Commission Final Report – Areas of Concern, 10 August 2015, p2 91 92


and timing of the need for additional capacity; regional connectivity; the economic benefits to the UK; noise impacts; air quality and deliverability risks as the main areas of concern. Sir Howard Davies wrote to the London Assembly and the Secretary of State for Transport in September responding to these particular points. 100 In a separate statement, he said that Gatwick’s dossier “appears to repeat many points which Gatwick made to the Commission in the course of its work and which, unsurprisingly, were carefully considered. They did not alter the Commission’s view that Heathrow was the best option”. 101

Airports Commission, Sir Howard Davies: letters following the Airports Commission final report, 28 September 2015 101 Sir Howard Davies statement, 19 August 2015 100


5. Environmental issues 5.1 Air pollution During his statement to Parliament on 25 October 2016 announcing the Government’s support for a third runway, the Secretary of State for Transport, Chris Grayling, made clear that “the Government will grant development consent only if we remain satisfied that a new runway will not impact on the UK’s compliance with its air quality obligations”. 102

Court Ruling on UK Air Quality Plan London is one of the areas in the UK that has been failing to meet its air quality targets for nitrogen dioxide (NO2) under EU legislation. The Government’s current Air Quality Plan (AQP) does not expect London to meet quality standards for nitrogen oxides (NOx) 103 until 2025. 104 In November 2016, a High Court ruling made clear that air quality plans should set out appropriate measures so that the exceedance period can be kept as short as possible. The judgement also concluded that relying on older air pollution models, which were known to significantly underestimate ‘real world driving’ NO2 emissions to model compliance, was also incorrect: In June 2015 Ricardo carried out a sensitivity analysis which assumes that Euro 6 diesel cars emit 5 times the legal emissions limit. On that basis the number of zones with exceedances in 2020 would be 30 rather than the 8 estimated on the basis adopted in the plan. […] emissions from some 80 Euro 6 diesel cars have shown that the nitrogen dioxide emissions under real urban driving conditions are approximately 4.5 times the emission limit. 105

And It seems to me plain that by the time the plan was introduced the assumptions underlying the Secretary of State’s assessment of the extent of likely future noncompliance had already been shown to be markedly optimistic. In my judgement, the AQP did not identify measures which would ensure that the exceedance period would be kept as short as possible; instead it identified measures which, if very optimistic forecasts happened to be proved right and emerging data happened to be wrong, might achieve compliance. 106

HC Deb 25 October 2016, c164 Nitrogen oxides (NOx) is the term used to describe the sum of nitrogen dioxide (NO2) and nitric oxide (NO); ambient NO2 concentrations include contributions from both directly emitted primary NO2 and secondary NO2 formed in the atmosphere by the oxidation of NO 104 Defra, Improving air quality in the UK: Tackling nitrogen dioxide in our towns and cities - UK overview document, 17 December 2015, table 3, p11 105 ClientEarth -V- Secretary of State for the Environment, Food and Rural Affairs, [2016] EWHC 2740 (Admin), 2 November 2016, paras 77 & 79 106 ibid., para 86 102 103

The Environmental Audit Committee examined the environmental impact of a proposed third runway at Heathrow, publishing two reports: The

Airports Commission Report: Carbon Emissions, Air Quality and Noise, HC 389, 1 December 2015; and The Airports

Commission Report Follow-up: Carbon Emissions, Air Quality and Noise, HC 840, 23 February 2017


Mr Justice Graham concluded that “to adopt a plan based on such assumptions was to breach both the Directive and the Regulations”. 107 The Government was ordered, for the second time, by the courts to redraft its AQP. Defra subsequently announced its intention to consult on a revised AQP by 24 April 2017 and publish a final plan by 31 July 2017. 108

Implications for a third runway In its work between 2012 and 2015, the Airports Commission used the same COPERT models for road traffic emission that were used to estimated emissions for the AQP rejected by the courts. 109 DfT published an air quality reanalysis in October 2016 to take into account the judgement in the original Client Earth court case. 110 However, this did not use updated COPERT models in its analysis. Instead the foreword to the document included a qualitative assessment of the impacts of updating the COPERT models for 2025 and 2030 and acknowledged that these still did not reflect real world driving conditions. 111 It concluded that as regards to emissions following the update to the COPERT factors: •

Gatwick Second Runway is at very low risk of impacting on the UK’s compliance with EU limit values

•

Heathrow Northwest Runway is at risk of worsening exceedances of limit values alongside some roads within Greater London, but this would be unlikely to affect the overall zone compliance. However, the overall risk has increased compared to the WSP|Parsons Brinckerhoff Reanalysis Study.

•

Heathrow Extended Northern Runway is at high risk of worsening exceedances of limit values alongside some roads within Greater London, and that this would be likely to affect the overall zone compliance post 2030. Subsequent to the Airport Commission’s (AC) work and modelling on air quality, further iterations of surface access plans have been proposed by the promoter of the Heathrow Extended Northern Runway scheme. Most elements of their plans have remained unchanged, but there have been some changes to road layout. Although these iterations have not been considered in the Re-analysis Study, or indeed this foreword, it is acknowledged that they were developed with one aim being to reduce air quality impacts associated with the proposal considered by the AC. 112

ibid., para 86; meaning the EU Air Quality Directive (2008/50/EC) and the UK domestic regulations giving it effect 108 Air Pollution: Written question – 54488, 28 November 2016 109 COPERT is a software tool used world-wide to calculate air pollutant and greenhouse gas emissions from road transport. The development of COPERT is coordinated by the European Environment Agency; for more see: National Atmospheric Emissions Inventory, Emission factors for transport [accessed 31 March 2017] 110 DfT, Air quality re-analysis: impact of new pollution climate mapping projections and national air quality plan, 25 October 2016 111 op cit., Air quality re-analysis: impact of new pollution climate mapping projections and national air quality plan, pp1-2 112 ibid., p2 [emphasis in original] 107


In evidence to the Environmental Audit Committee on 30 November 2016 the Secretary of State for Transport, Chris Grayling, made clear his view that that the air quality issues addressed in the Client Earth case and the challenge around reducing levels of NOx are not part of the same debate as Heathrow expansion and that it “is an issue that has to be addressed much more quickly”. 113 He went on to state: As I see it, the definition is that we cannot wait until 2026 to make a real difference in air quality. The assumption appears to be that nothing is going to happen between now and then, and of course that cannot be the case. We have a genuine issue. It is not just an issue created by the legal position. It has also been created by emerging public health evidence. We are committed, as you have seen this week, to continuing to drive the development and implementation of the low emission vehicle technologies. I don’t think we can wait until 2026. My view is that in 2026, by the time this runway is opening, the paradigm must have already changed. I say this in complete clear conscience that we are going to have to make a difference to what is a road traffic problem, not an airport problem, long before the airport expansion happens. 114

Updated Assessment, 2017 In evidence to the Environmental Audit Committee in November 2016 Caroline Low, Director of Airport Capacity at DfT, stated that the Government intended to publish a full appraisal of sustainability (AOS), based on the current AQP, and full updated modelling with the latest emissions factors, alongside the draft National Policy Statement on airport expansion. This would set out the position for Heathrow. 115 She also stated that the AOS would be updated further to take into account the new AQP (to be published in draft in April 2017) if necessary: The new national air quality plan will come later. That will also use the best possible information. I would need to check with colleagues at DEFRA, but I assume that will take into account planned infrastructure and therefore will take into account proposed expansion at Heathrow. We will at that point also check that the information we have put out about air quality around the airport captures anything new coming out of the new national plan, and we will update if necessary. 116

The draft airports National Policy Statement (NPS) was published for consultation on 2 February 2017. 117 A full AOS was published at the same time. The draft NPS acknowledges that the AOS shows that there will be “inevitable harm” caused by the runway, and therefore suitable mitigation measures will need to be identified and delivered: Whilst there will be inevitable harm caused by a new Northwest Runway at Heathrow Airport in relation to some topics, the need EAC, Oral evidence: The Airports Commission Report: Carbon Emissions, Air Quality and Noise, HC 840, 30 November 2016, Q1 114 ibid., Q9 115 ibid., Q17 116 ibid., Q17 117 DfT, Consultation on Draft Airports National Policy Statement: new runway capacity and infrastructure at airports in the south-east of England and Draft Airports 113

National Policy Statement: new runway capacity and infrastructure at airports in the south-east of England, both 2 February 2017


for such a scheme, the obligation to mitigate such harm as far as possible, and the benefits that such a scheme will deliver, outweigh such harm. However, this is subject to the assessment of the effects of the preferred scheme, identification of suitable mitigation, and measures to secure and deliver the relevant mitigation. 118

This means that measures will need to be put in place to address the increased pollution. It also states that the preferred scheme has been subject to ‘further refinement’ by HAHL since the conclusion of the work of the Airports Commission and that these refinements: … were not captured within the Airports Commission’s appraisals and are not expected to significantly alter the key appraisal findings. The Government expects any applicant to carry out a further and more detailed study, and to secure appropriate mitigation measures, ahead of seeking development consent. 119

The AOS itself states with regards to compliance with legal air quality limits that: “Impacts near the airport do not, in general, affect zone compliance” and “total pollutant concentrations in central London with the scheme are generally higher”. This means that although there will be increases in emissions, they will not affect compliance, as levels of pollutants are already above legal limits due to road traffic emissions, and: As such, the level of risk is primarily dependent on the timing of the introduction of, and effectiveness of, measures to reduce emissions from vehicles on the wider road network. It is largely independent of assumptions relating to the impact of the option itself or the direct mitigation of option-related emissions. 120

The Government’s new draft Air Quality Plan, which will set out how this is to be achieved, is, as mentioned above, expected after 24 April 2017. The Government subsequently indicated that it has applied to the court to extend the deadline for publication of a new draft AQP to 30 June and publication of the final AQP to 15 September. This is further to the onset of the civil service ‘purdah’ period for the June 2017 General Election. 121 In his submission to the Transport Select Committee’s inquiry into the draft NPS (see section 9.1, below) the Mayor of London, Sadiq Khan, was critical of this approach: Heathrow is already one of the worst locations for air quality in the UK. It exceeds legal limits for air pollution by some margin, and it is yet to be demonstrated how a third runway can be delivered without worsening air quality. The NPS even acknowledges that if the third runway opens around 2025 there is a very real risk it would lead to breaches of the legal air quality ibid., Draft Airports National Policy Statement: new runway capacity and infrastructure at airports in the south-east of England, para 1.25 119 ibid., para 1.26 120 DfT, Appraisal of sustainability: draft Airports National Policy Statement, main report, 2 February 2017, paras 7.4.86-89 [emphasis added] 121 see statement by Secretary of State for the Environment, Food and Rural Affairs, 24 April 2017; reported widely including, e.g. “UK in last-ditch plea to delay air pollution plan”, Financial Times, 24 April 2017 118


limits with few mitigation options available to the airport to address this. Instead, the government is seeking to use the air quality improvements the Mayor is delivering to enable Heathrow expansion rather than reducing the already toxic air quality across London. 122

5.2 Climate change In January 2013 the DfT published carbon emissions forecasts, which concluded the following on emissions by 2050: The constrained passenger forecasts lead to a central prediction of CO2 emissions from aircraft departing UK airports growing from 33.3 million tonnes of carbon dioxide (MtCO2) in 2010 to 43.5 MtCO2 by 2030. The range around this forecast is 39.7 - 48.2 MtCO2. By 2050, UK aviation CO2 emissions are forecast to be 47.0 MtCO2, with a range around the forecast of 34.7 – 52.1MtCO2. 123

The Aviation Environment Federation (AEF) said at the time that while the forecasts predicted reduced demand (as they had done on three previous occasions), the overall number was still higher than the Committee on Climate Change (CCC) had concluded was the maximum possible growth to meet emission targets: But even with figures as low as they are now, the central forecast for 2050 is for passenger numbers of 445 million per annum: a 93% increase on 2005 levels, generating 47 Mt CO2. By contrast, CCC’s figure for possible aviation growth given likely improvements in aviation and air traffic management technology, together with 10% of aviation fuel coming from biofuels, was for a 60% growth in passenger numbers between 2005 and 2050. 124

Airports Commission forecasts The Airports Commission looked at climate impacts when considering the options for airport expansion in 2012-15. It examined two scenarios that in its view would result in meeting the CCC targets set out above: one where carbon limits are met by trading to cover excess emissions and another where emissions are capped: •

Carbon-traded – These forecasts assumed that carbon emissions from flights departing UK airports are traded at the European level until 2030 and then as part of a global carbon market. The carbon-traded forecasts incorporated DECC’s central carbon price projections and assumed that the total emissions allowed beyond 2030 in the global market were set with reference to stabilisation targets and that society would seek to make reductions where they were most desirable or efficient across the global economy.

•

Carbon-capped – These forecasts assumed the level of aviation demand could only grow in line with the CCC’s current assessment of how UK climate change targets can most effectively be met. The carbon-capped forecasts

Mayor of London press notice, “Mayor raises lack of answers to fundamental questions on Heathrow“, 31 March 2017 123 DfT, UK aviation forecasts 2013, 29 January 2013, para 16 [emphasis added] 124 AEF press notice, “How the latest DfT forecasts show that any new runways would be incompatible with the Climate Act”, 11 February 2013 122


assumed no trading of aviation emissions either within the UK economy or internationally, and increased the carbon price used in the model (as a proxy for any broader policy framework) to ensure that total UK carbon emissions from aviation did not exceed 37.5 MtCO2 in 2050, in line with the planning assumption recommended by the CCC. 125

The Commission concluded that a more substantial package of measures would be required to meet climate targets if Heathrow were chosen for expansion over Gatwick: An indicative set of policies was identified that could enable aviation emissions for each short-listed scheme to be restricted to a level consistent with the planning assumption, which were then used as the basis for sensitivity testing. For the Gatwick option, the changes required are modest, an increase in the carbon price (to around £330 per tonne in 2050) and a level of biofuels usage below the CCC baseline are sufficient to constrain emissions to 37.5MtCO2. For the two Heathrow schemes, a more substantial package of measures would be needed, including for example the same carbon price and significantly higher biofuels usage, plus a range of operational efficiency improvements, all of which represent technologies or practices understood today but as yet to be implemented on a wide scale. 126

The AEF published its own assessment of how the Commission arrived at its figures and the assumptions it had made. It was critical of the Commission’s assumptions on efficiencies from larger aircraft; the increase of the 2050 carbon price from £194 to £335 and the projection of a 5.6% use of biofuels for a third runway, which it viewed as overoptimistic. 127 The CCC wrote to the Government on 22 November 2016 expressing concerns that that a full business case for a third runway at Heathrow was only presented for the “central” case and no other cases. The central case includes aviation emissions that are higher than the planning assumptions for emissions from aviation made by the CCC and included in the UK carbon budgets. These plan for aviation emissions to be at the same level in 2050 as they were in 2005 without the use of international carbon credits. The letter stated: The business case, concentrates on a “central” case which has emission in 2050 that are about 15% higher than the [CCC’s] planning assumption [for emission for aviation]. A full business case is only presented for this central case. Using the Government’s publications, it is not possible to assess whether the investment makes sense when emissions conform to planning assumptions. 128

Government’s view on meeting carbon targets In November 2016 the Environmental Audit Committee questioned the Secretary of State for Transport, Chris Grayling, on the emissions op cit., Final Report, para 3.50 [emphasis added] ibid., para 7.18 127 AEF, The Airports Commission’s final report – has it closed the carbon gap?, August 2015 128 CCC Letter to Greg Clark MP, 22 November 2016 125 126


increases expected by the Government as a result of the third runway and whether it planned to introduce a carbon cap (or target) or carbon trading (offsetting). Mr Grayling said that the Government had “not taken a policy decision yet on whether we will go for a hard target or whether we will include offsetting”. 129 During the session the Green MP Caroline Lucas highlighted a number of concerns regarding the Government’s approach: We have looked at what would happen if you went down the carbon traded route and we have established the fact that the Committee on Climate Change is recommending you do not do that, for very practical reasons. We have now looked at the issue of whether or not you will be expecting other sectors to make greater cuts in order to allow aviation to expand, and it appears that, because you will not put down your flag on what you are going to do, you are able to evade the downsides and the flaws in either of those strategies. […] Your business case is assuming that aviation will emit 15% more CO2 than the amounts allowed for in the carbon budgets by 2050. You have a letter from the Committee on Climate Change, which is saying that they think you might have misunderstood them and they would like to point out, for example, that they have limited confidence about the options for other sectors to go beyond cuts of 85%, which are already factored into your calculations. I will just put it to you that you are boosting the amount that you think that aviation is going to be allowed to emit in the face of the evidence. 130

In response, Mr Grayling said that the Airports Commission had worked very closely with the CCC and that it reached its conclusions on the basis of that joint work. 131 Following the evidence session the Committee Chair, Mary Creagh, wrote to Mr Grayling seeking clarity on three questions: 1

Whether the Government would be working towards the CCC’s planning assumption for actual UK aviation emissions to be around 2005 levels by 2050;

2

If so, whether he accepted the CCC’s advice that this implies an increase in passenger growth of around 60% over the same period (which also takes into account forecasts around the impact of technological and other advances); and

3

If not, what empirical basis the Government is using to support its assumption that excess emissions from aviation can be compensated for by deeper cuts from other sectors. 132

In his response to that letter, dated 9 January 2017, Mr Grayling said that on the first question, the Government remains committed to the emissions reduction target set in the legislation 133 but it has “not taken op cit., Oral evidence: The Airports Commission Report: Carbon Emissions, Air Quality and Noise, Q50 130 ibid., Qq 53 & 54 131 ibid., Q54 132 EAC Chair Letter to Chris Grayling MP, 19 December 2016 133 i.e. at least 80% emissions reduction below 1990 levels by 2050, as set out in section 1 of the Climate Change Act 2008 129


a view on whether to accept the CCC’s planning assumption” and “remains open to considering all feasible measures to ensure that the aviation sector contributes fairly to UK emissions reductions”. 134 In response to the second and third points, he said that the Airports Commission had: Demonstrated, through its Carbon Policy Sensitivity Test, that measures are available to allow the planning assumption to be met even with higher demand growth than 60%. This would not require any other sectors within the UK economy to make greater reductions to compensate for higher emissions from the international aviation sector. 135

In October 2016 Business Green published an article questioning the lack of an aviation climate strategy. It highlighted that expansion of Heathrow “makes delivery of the UK's currently faltering decarbonisation efforts even more challenging - large swathes of the economy will have to become virtually zero emission just to give aviation more headroom”. It went on: Moreover, even if the decarbonisation of the economy proceeds smoothly from this point on (spoiler alert: it won't) UK aviation could still blow its carbon budget if hugely ambitious improvements in fuel efficiency and low carbon technology are not delivered as envisaged. The government's long term climate strategy once again rests on a hit and hope approach to new technology development that is not backed by a sufficiently robust plan for ensuring these promising innovations emerge. 136

The Mayor of London, Sadiq Khan, has also expressed concerns about the impacts of the continued growth of aviation on other sectors of the economy. Following the publication of the Government’s draft NPS in early 2017 (see section 9.1, below), he said that it appeared: … to ignore the recommendations of the Committee on Climate Change which advises that all UK aviation targets should be met without resorting to using 'carbon credits' that seek to take advantage of improvements in other sectors. This could have an impact on other industries and restrict growth at other UK airports. 137

Implications for regional airport expansion

In 2014 the AEF published a paper setting out the implications of airport expansion in the South East of England on growth at other airports, if aviation emissions were to remain within carbon budgets. It concluded that: •

Building a new runway in the South East would in practice mean that airport capacity elsewhere would need to be reduced in order for UK aviation to keep within carbon limits required by the Climate Change Act. This could involve closure of a number of regional airports.

•

Government policy, however, supports the growth of regional airports, and official forecasts anticipate that they will grow by over 200% between now and 2050. Many

Chris Grayling Letter to Mary Creagh, 9 January 2017 ibid. 136 “If the government wants Heathrow expansion, why hasn't an aviation climate strategy been cleared for take-off?”, Business Green, 10 October 2016 137 op cit., “Mayor raises lack of answers to fundamental questions on Heathrow“ 134 135


airports in fact consider Government figures to be conservative. With politicians from all main parties having made commitments to supporting regional economic growth, capping or reducing aviation activity outside the South East would therefore require very significant hurdles to be overcome. •

By contrast, with full utilisation of current airport capacity, it would be challenging but achievable to keep aviation emissions to a level compatible with the Climate Change Act. 138

The impact of Heathrow expansion on the ability of other airports to expand would likely need to be considered within a broader framework. In March 2016 Lord Deben, 139 Chair of the Committee on Climate Change, wrote to the Chair of the Environment and Climate Change Committee, Angus MacNeil, 140 setting out the view that the Government should put a in place a policy framework on aviation: The Committee on Climate Change has previously advised on the level of aviation emissions that is compatible with meeting the 2050 target (i.e. around 2005 levels, 37.5 MtCO2e). This level is based on a combination of technical improvements (e.g. fuel efficiency, alternative fuels) which in turn allow demand to grow by about 60% on 2005 levels by 2050. The Government should more formally consider the measures that it can put in place to overcome any barriers to UK-based aviation making its contribution to the 2050 target. Part of that, as noted in our 2015 Progress report to Parliament, should be a policy-framework on aviation that explicitly incorporates the actions required to 2050. 141

AEF, Implications of South East airport expansion for regional airports, June 2014, p1 former Conservative Cabinet Minister, John Selwyn Gummer 140 following changes in the structure of Government departments, the Committee was dissolved in 10 October 2016 when the House of Commons approved changes to Standing Orders to establish a Business, Energy and Industrial Strategy Committee with a remit covering the energy and climate change brief 141 Lord Deben Letter to Angus MacNeil MP, 24 March 2016 138 139


6. Airspace, flight paths & noise 6.1 Airspace change Airspace is a complex thing to understand, the easiest way to think of it is as a motorway network in the sky. Airspace is the volume of space above ground level and extends as far as aircraft can fly. UK airspace contains a network of corridors, or airways. These are usually ten miles wide and reach up to a height of 24,000 feet from a base of between 5,000 and 7,000 feet. Airspace is either considered to be ‘controlled’ or ‘uncontrolled’. In controlled airspace, there is a system of structured routes and aircraft which are managed by air traffic control (ATC) services. By contrast, a large volume of airspace in the UK is uncontrolled and this is where the pilot of the aircraft does not receive a service from the ground but has to “see and avoid” other aircraft and navigate independently. Three main organisations have responsibility for UK airspace management and design: the Government (largely the Department for Transport) is responsible for overall aviation policy; the Civil Aviation Authority (CAA), the UK's aviation regulator, is responsible for the planning and regulation of all UK airspace, and at the operational level, NATS is the monopoly provider of en-route air traffic services to aircraft flying in UK airspace. The current legal and policy framework for airspace is set by Government, in accordance with international and European standards and requirements. Member states of the International Civil Aviation Organization (ICAO), including the UK, collaborate on a common regulatory framework and agree international standards on various issues, including the access to and use of airspace. EU laws implement several of ICAO’s resolutions. The main EU initiative in this area is the Single European Sky (SES), launched in 1999 to reform the architecture of European air traffic management. Its implementation is intended to increase the overall efficiency of the European air transport system. The UK and Ireland is planning to meet the SES requirements through its Future Airspace Strategy, published in June 2011, with a programme to modernise airspace across the UK out to 2030. The biggest changes in the UK are likely to be in the South East of England (whose airspace was designed over 40 years ago), where London’s five big airports and many smaller aerodromes create some of the world’s busiest and most complex skies. On 2 February 2017 the Department of Transport published a consultation on UK airspace policy reform. The main proposals in the paper include establishing an Independent Commission on Civil Aviation Noise; providing industry with ways to assess noise impacts and choose between route options to help them manage change more effectively; bringing compensation policy for airspace changes in line with policy on changes to aviation infrastructure; and offering greater flexibility to three of London’s major airports. It closes on 25 May 2017.

Further information on airspace change and modernisation can be found in HC Library briefing paper CBP7889.


Operational freedoms The South East Airports Task Force, set up by the Coalition Government shortly after the 2010 General Election, reported in July 2011. One of the key measures it recommended regarding Heathrow was the introduction of more ‘operational freedoms’, such as extension of simultaneous use of runways. 142 The taskforce concluded that there should be a trial of extended simultaneous runway use starting in autumn 2011. 143 Phase 1 of the trial ran from November 2011 to February 2012, and Phase 2 – with slightly different parameters – ran from July 2012 to February 2013. Heathrow published the outcome of the trials in October 2013. They involved more flexible use of the runway infrastructure, i.e. the use of both runways for arrivals; the use of both runways for departures; redirecting departures after take-off; and the increased use of the southern runway for A380 aircraft, small and light aircraft and Terminal 4 traffic. During Phase 1, the freedoms were used regularly whilst in Phase 2, the freedoms were staggered to provide, as far as possible, a means to assess the benefit of each freedom independent from the others. 144 The final report concluded that, on balance: Operational Freedoms, as trialled, delivered useful operational performance improvements in limited areas. While their use did not provide the wholesale significant benefits that could be required to facilitate recovery from the most severe episodes of disruption, Heathrow believes that operational freedoms do help to mitigate against, and recover more quickly from, those less serious disruptive events which still result in poor performance and passenger experience. 145

With that in mind, it recommended that three operational freedoms should be integrated into standard procedures as soon as practically possible. 146 However, the CAA thought that the data from the trial was ‘inconclusive’ and that the benefits claimed by Heathrow Airport in their report had “not been statistically proven”. The CAA said that operational benefits of operational freedoms were offset by some redistribution of aircraft noise among local communities, and preliminary work had suggested some detrimental impact. 147

DfT press notice, “New measures to cut delays at Heathrow”, 14 July 2011; and DfT, South East Airports Taskforce: Report, July 2011, paras 5.11-5.12 143 ibid., para 5.19 144 HAHL, Operational Freedoms Trial: Final Report, October 2013, p2 145 ibid., p3 146 ibid., p3 147 CAA, Heathrow Airport Operational Freedoms Trial, CAP 1117, October 2013, p9 142


Setting up airspace trials Every airspace change trial is different, its aims, conduct, timing and outcomes are determined by the airport involved; the initial trial justification statement and its scope and objectives must be agreed with the CAA. Its consequent initiation plan must also be approved by the CAA. The sponsor must also complete a post-trial analysis and outputs report. 148 For short-term, temporary changes (i.e. for trials of 90 days or less), consultation is not likely to be required, and the change sponsor should agree with the CAA the actual level of engagement. 149

Optimisation strategy Taking these findings on-board, the Airports Commission’s December 2013 interim report recommended further ways to make better use of existing capacity, including airport collaborative decision making; airspace changes supporting performance based navigation; enhanced en-route traffic management; and time-based separation. Particularly as regards Heathrow, it further recommended “trials of measures to smooth the early morning arrival schedule to minimise delays and provide more predictable respite for local communities as part of a range of measures to increase the flexibility of runway use”. 150 In his response to the Commission’s interim report, the then Secretary of State for Transport, Sir Patrick McLoughlin, asked the CAA to set up a Senior Delivery Group (SDG) to develop and where appropriate lead delivery of a broad ‘optimisation strategy’ “to improve the efficiency of UK airports and airspace at congested airports, balanced against the needs of local communities”. 151 In July 2014 SDG published its first report, setting out three packages of optimisation measures it intended to progress; these were: operating to schedule; tactical responses to traffic overloads; and investments in route infrastructure. They are described as follows: •

•

Operating to schedule: under this package the SDG would consider the deployment of measures to smooth the flow of traffic and improve punctuality. The measures in scope were: Airport Collaborative Decision Making systems to link up information about the aircraft turnaround phase and optimise runway capacity; Real-time Departure Planning Information to optimise airspace capacity; Queue Management systems to sequence inbound and outbound traffic flows; and Time-Based Separations to maintain arrival rates in strong headwinds. Tactical responses to traffic overloads: under this package the SDG would consider the impacts of introducing more flexible, temporary measures to reduce the severity of delays as they build up. As part of the package SDG would consider the Airports Commission’s recommendation to increase the flexibility of

for full details see: CAA, Policy for the Conduct of Operational Airspace Trials, 3 June 2015 149 DfT, Guidance to the Civil Aviation Authority on environmental objectives relating to the exercise of its air navigation functions, 8 January 2014, paras 9.10-9.11 150 op cit., Interim Report, pp12-13; full details in chapter 5 151 HC Deb 15 July 2014, c65WS 148


•

triggers for Tactically Enhanced Arrival Measures (TEAM) at Heathrow. Investments in the route infrastructure: under this package the SDG would monitor the implementation of new arrival and departure routes for Heathrow and Gatwick, designed to Performance-Based Navigation (PBN) standards. The measures in scope were: PBN Departure Trials to assess route spacing, runway throughput and noise respite opportunities; a PBN Arrivals Trial to test the feasibility of advanced arrival concepts; the development of the LAMP Phase 1 systemised PBN route network; raising the UK Transition Altitude to 18,000ft to create significant additional airspace capacity in the London terminal area; and the design and development of the LAMP Phase 2 systemised PBN route network. 152

Departure trials

In 2013-14 Heathrow undertook three further rounds of departure trials, both easterly and westerly. These tested the following: •

Easterly and westerly departure trial 1 (16 December 2013 – 15 June 2014): satellite-based navigation/performance-based navigation and the airport’s ability to provide predictable noise respite on aircraft departures; • Easterly departure trial 2 (28 July 2014 – 12 November 2014): satellite-based navigation/performance-based navigation and resilience on 3 easterly departure routes; and • Westerly departure trial 2 (25 August 2014 – 12 November 2014): satellite-based navigation/performance-based navigation, resilience and noise respite. 153 The second round of trials resulted in mixed noise impacts on local communities: Westerly Trial The trial routes introduced new areas to consistent aircraft overflight and generally dispersed flights over a wider area. However, flights were generally found to be more concentrated around routes than previously. This “concentrated-dispersion” and change in route position resulted in significant changes to the shape of the overall noise exposure contours during the trial. Fewer people were exposed to average aircraft noise levels greater than 54 dB LAeq,16hr during the westerly trial. Most areas where there was a substantial increase in average noise level were in areas outside those that would be considered with traditional measures for aircraft noise assessment (eg 54 dB LAeq,16hr). 98% of people exposed to noise levels greater than 54 dB LAeq,16hr experienced no substantial increases in noise from flights using the trial routes. Fewer people were exposed to more than 20 and 50 noise events over the 16 hour period during westerly departures. The trial routes appear to enhance reduction in levels of overflight afforded by the runway alternation pattern. There were some areas that did not experience a reduction in flights by switching

152 153

CAA SDG, Delivery Report #1, July 2014, pp5-6 HAHL, Heathrow's airspace trials [accessed 10 November 2016]


runways as a consequence of routes from each converging over their area. Easterly Trial The easterly trial increased the concentration and consistency of aircraft flight tracks. Areas overflown during the trial period were similar to those prior to the trial. There were no areas where there was a substantial increase in average noise exposure during the trial. Fewer people were exposed to noise levels greater than 54 dB LAeq,16hr. As a result of the increased concentration there was an increase in the number of people to experiencing more than 50 events over the average 16 hour day of easterly departures. 154

Airportwatch said: The changed, concentrated, routes have been blamed for the “unacceptable and intolerable” noise above a number of Surrey villages. Some of the worse affected areas to the west are Englefield Green, Egham, Thorpe, Virginia Water, Windlesham, Bagshot, Lightwater, Sunninghill and Ascot. Petitions to the airport have been set up in Ascot, Lightwater and now in Englefield Green, asking that the trials be stopped. People feel that even after the end of the trials that ended in June, the increased noise from them has continued. People living under the new, concentrated, routes are now subjected to more, louder, aircraft noise as late as 11.50pm and as early as 6am. 155

6.2 Operational considerations due to expansion If Heathrow expansion goes ahead the airport’s operations will have to change to accommodate new flight paths and increased amounts of traffic. As indicated above, an overhaul of the UK’s airspace has already begun and will take many years to complete and implement. Understandably there is an issue about how safe the new operational framework would be. In September 2014 the CAA published a preliminary safety review of the three schemes under consideration by the Airports Commission and found a number of issues for more detailed investigation and resolution. Specifically, with regards to a third runway it stated that: The proposal is likely to require new procedures and mitigations to ensure safety of the ATC operation. Due to the intensive and complex nature of the current Heathrow operation, the development of a new 3rd runway will require a complete review and update of the entire operation. There can be no automatic reliance on previous mitigations which are likely to have been designed for different scenarios. This could provide an opportunity to exploit safety enhancements that may be now available with an expanded infrastructure and increased resilience.

Anderson Acoustics, Westerly and Easterly Departure Trials 2014 - Noise Analysis & Community Response, 9 August 2015, p36 155 Airportwatch press notice, “Anger as Heathrow’s latest flight path trials subject thousands to unacceptable noise levels”, 19 September 2014 154


Note: The operation associated with noise respite periods 2 and 3, where aircraft are departing from adjacent runways may be particularly difficult to achieve given the staggered position of the northern runway. Further work will be required to understand whether these modes are viable. 156

It also stated that the design was “likely to require a dependency with RAF Northolt to ensure safe separations, which could further reduce capacity at either or both airports. Any impacts on RAF Northolt procedures need to be understood and assessed”. 157 Finally, the CAA considered whether a third runway could be progressed without the need for significant safety analysis of the concept to prove that it could be delivered safely without subsequent safety mitigations restricting traffic capacity and flow even further than already assumed. On this, it concluded that: Missed Approach Procedures (including when procedure is not followed) and likely dependency with RAF Northolt needs to be assessed further to understand the risks and effects on capacity. A worst case impact may be one movement less at Heathrow for every movement permitted at RAF Northolt. Some proposed modes of operation and runway separation/stagger may be difficult to operate safely and could therefore limit respite opportunities. 158

The Airports Commission’s final report had nothing substantive to say about this. 159 The draft NPS states: … environmental, safety, social and economic benefits and adverse impacts should be considered at national, regional and local levels. These may be identified in the Airports NPS, or elsewhere. The Secretary of State will also have regard to the manner in which such benefits are secured, and the level of confidence in their delivery. 160

6.3 Noise Aviation noise can be a source of constant and/or disruptive annoyance to those who live under airport flight paths and for those subject to lower levels of disturbance caused by low flying smaller aircraft and helicopters. This form of noise pollution is explicitly excluded from general noise nuisance legislation. The noise impacts of aviation on individuals and communities have been subject to a number of reports in recent years. There have also been efforts to properly map and monitor noise, including the development of online live data sites which can be used by the public as well as industry. Suggested measures to tackle noise vary from more controls and restrictions, to charges and better airspace and aircraft design. Some of these measures are exercised by international bodies and the UK CAA, Airports Commission shortlisted options - Module 14: Operational Efficiency preliminary safety review, CAP 1215, September 2014, p28 157 ibid., p29 158 ibid., p31 159 see, e.g. op cit., Final Report, pp243-4 160 op cit., Draft Airports National Policy Statement, para 4.5 156

Further information on aviation noise can be found in HC Library briefing paper SN261


Government while others are in the control of the industry – particularly airports. There are also proposals for a new Independent Commission on Civil Aviation Noise (ICCAN), which would help develop airspace and noise policies and act as a guarantee to local people that their noise concerns would be heard. Finally, for those affected there is the possibility of compensation, particularly in the form of funds for insulation; there will be specific schemes, possibly funded by a new noise charge, at Heathrow should it receive planning permission to build a third runway.

Impacts around Heathrow In recent years there has been renewed focus on the impacts of noise from aviation on those living beneath flight paths. In January 2016 the Aviation Environment Federation (AEF) published a report stating that in the UK, over one million people are exposed to aircraft noise above levels recommended for the protection of health, and that around 460 schools are exposed to aircraft noise at levels around Heathrow “that can impede memory and learning in children”, while around 600,000 people in the UK are exposed to average aircraft noise levels that risk regular sleep disturbance. 161 In July 2016 the European Commission published a summary of a report looking at how living with aircraft noise affects wellbeing. It found that living within a daytime aircraft noise path (with noise at or above 55 decibels) was negatively associated with all measures of subjective wellbeing: lower life satisfaction, lower sense of worthwhile, lower happiness, lower positive affect balance, and increased anxiety. 162 This followed the publication of the final report of the Airports Commission, in July 2015 (see section 4, above). Alongside the report the Commission published a review looking at aircraft noise effects on health. It briefly summarised the strength of the evidence for aircraft noise effects on: •

cardiovascular health;

•

sleep disturbance;

•

annoyance;

•

psychological well-being; and

•

effects on children’s cognition and learning

It also briefly discussed guidelines for environment noise exposure. Overall, it concluded that: The health effects of environmental noise are diverse, serious, and because of widespread exposure, very prevalent … For AEF, Aircraft Noise and Public Health: the evidence is loud and clear, 12 January 2016 162 “How does living with aircraft noise affect wellbeing? A study of UK airports”, Science for Environment Policy, Issue 462, 8 July 2016; based on: Lawton, R. and Fujiwara, D. (2016). Living with aircraft noise: Airport proximity, aviation noise and subjective wellbeing in England. Transportation Research Part D: Transport and Environment, 42: 104– 118. DOI: 10.1016/j.trd. 2015.11.002 161


populations around airports, aircraft noise exposure can be chronic. Evidence is increasing to support preventive measures such as insulation, policy, guidelines, & limit values. Efforts to reduce exposure should primarily reduce annoyance, improve learning environments for children, and lower the prevalence of cardiovascular risk factors and cardiovascular disease … 163

Data from the CAA showed that in 2014 the top fifteen airports in the UK accounted for over one-third of the population affected by noise at the European level using standard measurements, with Heathrow accounting for more than a quarter. 164 The Airports Commission found that, focusing on the 55 Lden metric (as this covers the full 24 hour period), expansion at Heathrow would affect more than 550,000 people in 2030, rising to between 570 and 640,000 by 2050, more than twenty times more than the number who would be affected by Gatwick expansion. 165 The Commission continued: … looking at the 57 decibel daytime contour, the two expansion schemes at Heathrow would see an increase in the population affected of 16-37,000 people in 2030 against the do minimum case, compared to fewer than 3,000 at Gatwick. The same pattern is seen in the number above contours, with the population experiencing more than 50 flights in a day whose noise impacts exceed 70 decibels rising by 12-28,000 people with expansion at Heathrow, as opposed to just 3,600 people with Gatwick expansion. The latter is approximately a trebling of the baseline level compared to an increase of less than 20% at Heathrow, but that does not outweigh the stronger performance of the Gatwick scheme in aggregate terms. 166

In terms of night noise, the Commission said that the largest 48 decibel night time contour at Heathrow would reduce “significantly in size” after expansion due to the dispersal of flights over a broader area and the “heavy use in these periods of the new runway capacity, which … would be to the west of the existing runways and hence would keep flights at a greater altitude as they approach over London”. 167 Finally, it said that: The number of people newly affected by noise is generally higher for the Heathrow schemes, but this is offset, and in some cases outweighed, by people who are taken out of a contour. It should also be remembered that noise contours provide a valuable means of measuring noise impacts, but do not mark the limits of where aviation noise may be experienced. In designing flightpaths for any new runway, it will therefore be important to take a broad view of how and where the effects of noise may be felt. 168

Queen Mary University of London, for the Airports Commission, Aircraft noise effects on health, May 2015, p27 164 CAA, CAA Insight Note: Aviation Policy For The Environment, 2014, p22 165 op cit., Final Report, para 9.19 166 ibid., para 9.21 167 ibid., para 9.22 168 ibid., para 9.23 163


Noise mapping and tracking Heathrow has a noise and track-keeping computer system which gathers information on both the noise made by aircraft operating to and from the airport and the actual track each aircraft takes. In August 2016 HAHL announced that 50 new noise monitors would be added the airport’s existing network. 169 Over the past ten years major airports have partnered with technology companies to launch interactive aircraft noise websites available to the public. WebTrak provides live tracking for Heathrow. The Environmental Research and Consultancy Department (ERCD) of the CAA estimates the noise exposures around Heathrow on behalf of the DfT. The magnitude and extent of the aircraft noise around the airport is depicted on maps by contours of constant aircraft noise index (Leq) values. The contours are generated by a computer model validated with noise measurements, which calculates the emissions and propagation of noise from arriving and departing air traffic. The most recent data covers 2015. 170 The Department for Transport also publishes noise exposure contour reports for Heathrow on Ordnance Survey (OS) maps produced by the CAA. The most recent data covers 2015. 171

Measures to deal with noise Aviation noise is generated mainly by actual aircraft and by airport ground operations, including ground transportation. However, noise from ground operations is largely confined to the airport site and the immediate vicinity, usually along well-established transport corridors where there are limited numbers of residential homes (i.e. along motorways and major A roads). Noise from aircraft is more pervasive and can be heard from a greater distance. When looking at measures for tackling noise pollution from aviation it is sometimes difficult to separate out those specifically aimed at airports, encompassing the wider array of operations including how aircraft use the airport, from those only aircraft owners and operators can tackle (i.e. in the design and manufacture of quieter aircraft). The Government’s policy on aviation noise is “to limit and, where possible, reduce the number of people in the UK significantly affected by aircraft noise, as part of a policy of sharing benefits of noise reduction with industry”. 172 There are a number of ways of dealing with aviation noise, including curtailing expansion, better airspace and flight path design, and quieter

HAHL press notice, “50 new noise monitors installed around Heathrow”, 17 August 2016 170 DfT, Noise exposure contours around London airports, 12 January 2017 171 DfT, Noise exposure contours on Ordnance Survey maps, 12 January 2017 172 DfT, Aviation Policy Framework, Cm 8584, 22 March 2013, para 3.12 169


aircraft. There are also two regulatory tools which can and are used at Heathrow: •

Night flights: Under section 78(3) of the Civil Aviation Act 1982, as amended the Secretary of State may “specify the maximum number of occasions on which aircraft of descriptions so specified may be permitted to take off or land” at Heathrow. 173 In effect, this means that the Secretary of State can limit the number of flights and the type of aircraft that fly into and out of Heathrow during the early morning (from 2300 to 0700). These are generally referred to as ‘night flights’. The current regime expires in October 2017 and in January 2017 the Government published its proposals for new limits to operate between 2017 and 2022. It is proposing to reduce the total noise quota at Heathrow by at least 43% in the winter and 50% in the summer and set a strict cap at the existing level for the number of night flights from Heathrow. 174

•

Charges: Under section 38 of the 1982 Act licensed aerodrome authorities have the power to fix their charges in relation to aircraft. In addition, sections 78, 78A and 78B conferred on the aerodrome manager at Heathrow a power to levy financial penalties on an aircraft operator in respect of any breach by that operator of noise abatement requirements imposed by the Secretary of State. It also requires the aerodrome manager to make payments, equal to the amount of penalties received, for the benefit of persons who live in the area around Heathrow. Since the late 1990s, Heathrow has provided a financial incentive for airlines to use the quietest aircraft through the application of variable landing charges. 175

6.4 2017 consultation proposals In February 2017 the Government published two consultations on aviation: one on future airspace policy and a second on the draft National Policy Statement (NPS) for new runway capacity and infrastructure at airports in the South East of England (see section 9, below, for more on the NPS). The Government decided to bring forward the two consultations at the same time because of the relationship between them: The policy principles set out in [the] airspace consultation will influence decisions taken later in the planning process for a Northwest runway at Heathrow, including how local communities can have their say on airspace matters and how impacts on them are taken into account. Some of the proposals, for example the role of a new Independent Commission on Civil Aviation Noise, are also needed to influence decisions on noise management measures. 176

With regards to airspace change, the Government is proposing a new procedure for so-called ‘Tier 1’ airspace changes (i.e. changes to the as an airport designated for these purposes under section 80 if the Act for more information see: HC Library briefing paper SN1252 175 HAHL, A quieter Heathrow, May 2013, p20 176 DfT, UK airspace policy: a framework for balanced decisions on the design and use of airspace, CM 9397, 2 February 2017, para 2.8 173 174


permanent structure of UK airspace). It is proposing a new ‘call-in’ function or the Secretary of State for Transport, specifically for airspace changes deemed to be of national importance. As in the planning system, there would be no obligation on the Secretary of State to agree to call-in a specific airspace change application, rather, it would be at his or her discretion. 177 The Government is proposing a specific noise trigger for a calling-in; applications to the Secretary of State to call-in an application can be made on other grounds. 178 The consultation further states that the call-in role would need to be exercised within the context of any relevant planning decision already agreed: In such cases, the airspace change process will need to consider whether the planning consent included references to airspace matters. If it did, the assumption is that the airspace change process should not override the original planning consent, but would seek to work within the framework granted by the planning consent. For example, in developing its application for a Development Consent Order (DCO) for its proposed new runway, Heathrow Airport Limited is expected to use indicative airspace arrangements, which will be considered and decided upon by the SofS. Any subsequent consideration of the airspace arrangements for a new runway by the SofS would not revisit what was agreed at the DCO stage, but would examine the further detail that had been developed in light of the planning agreement. 179

A second important proposal in the airspace consultation, which will affect Heathrow, is the establishment of an Independent Commission on Civil Aviation Noise (ICCAN). The final report of the Airports Commission into airport capacity, published in July 2015, said that an Independent Aviation Noise Authority (IANA) “should be established with a statutory right to be consulted on flight paths and other operating procedures. The authority should be given statutory consultee status and a formal role in monitoring and quality assuring all processes and functions which have an impact on aircraft noise, and in advising central and local Government and the CAA on such issues”. 180 In its airspace consultation the Government put forward its proposals for ICCAN, basically its version of IANA. ICCAN’s detailed role in airspace change and planning and ongoing noise management is set out in section 6 of the paper. 181 Specifically as regards Heathrow, it states that timing will be key in the establishment of ICCAN as “there will soon be live issues, such as the planning process for Heathrow’s proposed third runway … and the urgent need for airspace

ibid., para 4.22 ibid., paras 4.23-4 179 ibid., para 4.27 180 op cit., Final Report, p32 181 further details can also be found in section 3.4 of HC Library briefing paper SN261 177 178


modernisation. ICCAN could have a positive impact on these, and we wish to see the influence taking effect as quickly as possible”. 182

Ongoing noise management. As regards noise, the airspace consultation stated that overall, “aircraft noise is expected to continue to fall in the future compared with today’s levels. This trend has the potential to outweigh the noise from increases in traffic, for example as a result of the proposed airport expansion at Heathrow Airport”. 183 Section 7 of the paper deals with ongoing noise management. It proposes an overhaul of how noise is currently regulated at Heathrow, essentially so that the Government would only get involved in significant decisions. The consultation paper explains: In line with our proposed policy that Government involvement should be determined according to the significance of the decision, rather than the airport in question, our objective would be that night flight restrictions are considered through the planning process or otherwise agreed locally where possible. Expected developments at some of these airports provide such an opportunity. The draft Airports National Policy Statement includes an expectation for a night flight ban at Heathrow Airport, subject to consultation with local communities and relevant stakeholders in accordance with the International Civil Aviation Organisation’s Balanced Approach to noise management. The Secretary of State would therefore have a role in approving these restrictions in line with our proposal. 184

Further, it is proposing that responsibility for setting other types of noise controls, including the ownership of Noise Preferential Routes (NPRs), 185 is transferred to Heathrow airport, “in order to allow [it] to manage noise in the way that best reflects the issues faced by [its local] communit[y]”. Controls “could then be agreed locally or decided through the planning process or airspace change processes, making use of ICCAN’s best practice in the future”. 186 Under this approach, there would still be a role for the Secretary of State in approving any noise controls associated with Nationally Significant Infrastructure Projects (NSIPs), such as the development of a new runway at Heathrow. The Government argues that overall this approach “would incentivise airports to engage and consult with their local communities and other industry partners to develop innovative and bespoke solutions to managing specific noise problems”. 187

Compensation In spring 2014 Heathrow announced a new compensation package for people who would be most disrupted by the future expansion of the airport, which involve payments of 25 per cent above market value for op cit., UK airspace policy: a framework for balanced decisions on the design and use of airspace, para 6.5 183 ibid., para 3.11 184 ibid., para 7.28-9 185 ibid., para 7.35-7 186 ibid., para 7.31 187 ibid., para 7.33 182


properties subject to compulsory purchase, stamp duty and legal fees; and a further £550 million fund for noise insulation and property compensation. 188 In April 2017 Heathrow’s largest single customer, International Airlines Group (IAG) 189 criticised the extent of this compensation package. Chief executive of IAG, John Holland-Kaye, said that in offering this level of compensation Heathrow “has no regard for its airline customers who are paying for this as for all elements of the development and has not consulted IAG or others on the topic”. 190 In February 2015 HAHL announced a new scheme to offer insulation to homes within the 55db Lden noise contour; residents would be eligible regardless of whether they experienced noise under existing flight paths or would be newly affected by noise from a new runway. Homes in the designated zone closest to the airport with higher levels of noise would have the full costs of their noise insulation covered by the airport. In addition, up to £3,000 in noise insulation would be offered to homes further away from the airport. The airport estimated the costs of the scheme somewhere in the region of £700 million. 191 The February 2017 draft NPS set out proposals for the development of an ongoing Community Compensation Fund at an expanded Heathrow. It stated that “Heathrow Airport must fulfil its statutory obligations on compensation” and indicated Government support for a noise levy at Heathrow of 50 pence per passenger, which could raise around £50 million per annum. 192

HAHL press notice, “Heathrow proposes higher compensation for people most affected by a new runway”, 10 May 2014 189 British Airways, Aer Lingus, Iberia and Vueling 190 “British Airways owner complains Heathrow residents' compensation 'far beyond' level required”, Daily Telegraph, 14 April 2017 191 HAHL press notice, “Heathrow responds to calls for world - class noise insulation scheme”, 2 February 2015 192 DfT, Consultation on Draft Airports National Policy Statement: new runway capacity and infrastructure at airports in the south-east of England, 2 February 2017, pp33-4 188


7. The economic & financial case 7.1 The cost of the scheme Initial costing In its July 2015 final report, the Airports Commission estimated the cost of building a new runway at Heathrow. It said that the cost of the capital expenditure alone would be £17.6 billion in 2014 prices. 193 The Commission broke down this expenditure into three items: •

£12.8 billion for the capital cost of constructing the new runway;

•

£2.6 billion for risk (an allowance for potential overruns in cost or time); and

•

£2.2 billion for optimism bias (this reflects the common bias in the original estimates of project cost).

The Commission estimated further costs for surface access improvements of £5 billion in 2014 prices. 194 The Commission’s consultants, Jacobs, assessed the costs of the project. They described the process they followed: using the material provided by the scheme promoter, we determined the scope of work and disaggregated works into a level of detail reasonably possible and appropriate to this stage of analysis; for each element of the disaggregated works, we determined the effective unit rate; we assessed the unit rates to determine whether they were in accordance with our expectation of a reasonable market rate, taking into account the nature, site and location of the works; by exception we made amendments to rates and quantities as appropriate; we established the base cost, made adjustments for ‘on costs’ and applied risk and optimism bias as discussed below. 195

Jacobs distributed the cost of enabling works and operational readiness “in proportion across all other capital cost line items with the exception of environment and community compensation”. It calculated project fees (to allow for design and project management services) at 15% base cost and applied this to all cost categories. 196 As indicated above, in October 2016 the Secretary of State for Transport, Chris Grayling, indicated the Government’s support for a third runway at Heathrow. At this time Mr Grayling announced that

op cit., Final Report, p224 ibid., 224 195 Jacobs, Cost and Commercial Viability: Cost and Revenue Identification Update Heathrow Airport North West Runway, June 2015, p3 196 ibid., pp3-4 193 194


Heathrow would have to spend a further £2.6 billion on “community support, insulation, and respite from noise”. 197

Risk and Optimism Bias The Airports Commission included risk and optimism bias estimates in its final costing for the project. The Commission explained these as follows: Risk reflects the observation that there is always likely to be some difference between what is expected and what actually materialises. Appraisers calculate an expected value for the different risks (e.g. ground conditions and excessive variation) for a particular option and consider how exposed each option is to future uncertainty. In addition, optimism bias is the demonstrated, systematic, tendency for project estimates to be overly optimistic. This is a worldwide phenomenon that affects both private and public sectors. Parameters affected by optimism include the tendency to overstate benefits and understate timings and costs, both capital and operational. To redress this tendency, appraisers (in this case the Commission) have made an explicit adjustment to allow for this bias. 198

In its final report, the Commission reduced the amount of optimism bias it applied to the scheme capital expenditure. 199 This was a consequence of representations from “a number of respondents, including the scheme promoters [who] though that too much cost contingency had been applied through risk and optimism bias”. 200 The risk allowance for the project was set at 20%. The consultants used by the Commission defended this risk allowance: Whilst we would observe 20% to be at the lower end of an expected range for projects at this relatively early stage of development, we consider it to be a reasonable base upon which to establish a reasonable cost estimate. 201

Updated costing, October 2016 In October 2016, the Government published new analysis of the costs of a third runway. 202 It included an update to the figures to take account of inflation and to bring the methodology closer to that set out in the Department’s Transport Analysis Guidance (WebTAG). 203 The two key changes were: WebTAG requires that costs are uplifted using an indirect tax factor (of 1.19) to convert capital expenditure (capex) estimates into market prices to ensure consistency with other monetised elements of the appraisal expressed in market prices. This factor DfT press notice, “Government decides on new runway at Heathrow”, 25 October 2016; as this value was arrived at using 2016 prices, it should not be combined together with the values used by the Commission, which were in 2014 prices 198 op cit., Final Report, p222 199 ibid., p223 200 Airport’s Commission, Consideration of Consultation Responses, 1July 2015, para 2.15.1 201 op cit., Cost and Commercial Viability: Cost and Revenue Identification Update Heathrow Airport North West Runway, pp4-5 202 DfT, Further review and sensitivities report: airport capacity in the south-east, 25 October 2016 203 WebTAG provides information on the role of transport modelling and appraisal; see: Transport analysis guidance: WebTAG [updated 28 March 2017] 197


was not applied by the [Commission] and so has been applied by the department to the … scheme and surface access costs. This is to ensure consistency in terms of the unit of account with the monetised impacts and does not imply that the observed cost will be higher than that estimated by the [Commission]. For the surface access impacts, WebTAG suggests that scheme costs and benefits should include capital costs, operating costs (opex), revenue, ongoing benefits (such as passenger benefits and wider economic impacts) and disbenefits (such as air quality and noise impacts). The [Commission] calculated opex and replacement capex for surface access schemes, but not any additional benefits or disbenefits. For some surface access schemes, the net benefits could be positive, however this may not be the case for all schemes and therefore the overall impact is unclear … For consistency, therefore, operating costs and replacement capex have been removed from the surface access costs in the central case [and] replacement opex and capex have not been included in the assessment of scheme costs. 204

Questions about the costs estimates Jane Davison, Professor of Accounting at Royal Holloway, University of London and Len Skerratt, Emeritus Professor of Accounting and Finance at Manchester Business School have argued that the financial costs of a third runway at Heathrow “are likely to be underestimated – for example, the cost of the new airport in Berlin soared to more than 300% of the original estimate”. 205 Willie Walsh, chief executive of International Airports Group, has repeatedly expressed doubts about whether an expanded Heathrow would be affordable for airlines. For example, in October 2015 he said: “I honestly can’t see how you can spend that much money on an airport and not discourage people from flying there”. 206 This is because of fears that any costs incurred by HAHL from constructing a third runway and a sixth terminal would be passed on to passengers via the airlines. This will to a great extent depend on how the Civil Aviation Authority (CAA) decides to economically regulate Heathrow expansion. 207 The Airports Commission said that the debt acquired by the project would be paid off by: “increased charges to airlines to use the runway and other additional revenues such as greater car park usage by the additional passengers”. 208 In October 2016 the CAA wrote to Heathrow confirming that it planned to keep the airport’s costs under review. The Government’s aspiration is to keep airport charges at Heathrow flat, understandably many of the airlines which use the airport hold the same op cit., Further review and sensitivities report: airport capacity in the south-east, para 2.3 [emphasis added] 205 L. Skerratt and J. Davison, The unbelievable benefits of a third runway at Heathrow, February 2016 206 “Cheaper Heathrow expansion plan should be put back on table”, The Guardian, 5 May 2016 207 for more information see: CAA, Approach to economic regulation of new capacity [accessed 19 April 2017] 208 op cit., Final Report, p222 204


view. 209 It could also be considered that the affordability of a third runway relies on efficiency being designed in from the start. This is made clear in the CAA's letter. As indicated in section 7.3, below, concerns have also been expressed about the estimated costs of surface access improvements for an expanded Heathrow.

7.2 How will it be financed? Heathrow is a privately-owned company and a third runway would be funded by the company, largely through raising money on the markets. As set out in section 1.2, above, Heathrow Airport Holdings Ltd. (HAHL) is privately owned; it has a mix of international shareholders with interests in infrastructure, pensions and financial investment. In 2013 HAHL received £2.7 billion of equity financing and £11.7 billion of debt financing, excluding a further £275 million in a revolving credit facility. 210 In 2015, HAHL had liabilities of £16 billion, £14.6 billion of which was long term debt. 211 Most of the debt financing was either BBB or A- rated bonds. Overall the company had an A- credit rating. 212 The Airports Commission assumed “a corporately financed cash flow approach [towards financing a third runway], with the existing operator developing the scheme”. 213 The operator would raise the money from the capital markets. The Commission said that in the case of Heathrow, depending on assumptions made about the costs attributable to the project, the operator would need to raise between £22.1 and £27 billion of debt finance and £5.5 and £7 billion of equity funding. 214 The Commission argued that in the early stages of the project the operator would raise more debt finance and, as the uncertainty around the project reduced in the later stages, raise more equity finance. 215 The Commission’s model for when the Heathrow project would raise money assumed that it would require, in its peak year, £6 billion of debt finance. That is higher than the highest bond issue on the UK market (£3.5 billion from Vodafone) in 2013. 216 The Commission’s consultants, PwC, did separate work on two types of available finance: debt and equity. •

209 210

They suggested that debt financing would be available at 175 basis points above the gilt rate. They based this on “recent market data for a range of comparable indices and corporates,

Letter from Andrew Haines to John Holland-Kaye, 25 October 2016 PwC, Cost and Commercial Viability: Funding and Financing Update, 1 July 2015,

p32 HAHL, Annual Report and Financial Statements for the year ended 31 December 2015, p31 212 op cit., Cost and Commercial Viability: Funding and Financing Update, p32 213 Airports Commission, Business Case and Sustainability Assessment – Heathrow Airport Northwest Runway, 1 July 2015, para 4.29 214 ibid., para 4.31 215 ibid., para 4.31 216 op cit., Cost and Commercial Viability: Funding and Financing Update, p29 211


including [Heathrow’s] currently trading debt issues”. PWC then added an additional amount to this average return to reflect the higher level of risk for this particular project. 217 •

They suggested that the return-to-equity would be 9% over the period. 218 They assessed returns to comparable projects; perceived cost and demand risks; the level of debt the company would have to hold to finance the project; the nature of the investors interested in such projects; the market for infrastructure equity; and the regulatory environment in the UK. 219

PwC caveated this analysis by saying that: In reality, the return required by investors would only be determined at the point of investment. This return may prove to be different to the assumption in our models, once the project risks, regulatory structure, prevailing cost and revenue forecasts and likely levels of demand are better understood. Depending on the amount required, a premium may also be required to ensure the equity can be placed in the market. Alternatively, the scheme’s cost of finance may be lower if it can attract long term equity finance from investors who consider the investment as low risk and that the finance is prudently structured. 220

7.3 Surface access funding Surface access is the one area where the taxpayer might have some liability for the financing of the new runway. There is a general principle for this sort of scheme that ‘user pays’. For example, the London Underground Piccadilly line extension to Heathrow Terminal 5 was wholly funded by the airport owner. 221 It is also worth noting that any sort of public sector contribution would be affected and likely limited by EU State Aid rules – though this may change post-Brexit. 222 In evidence to the Transport Select Committee in November 2015 the then Aviation Minister, Robert Goodwill, expounded on this principle and how the Government would apply it: Generally speaking, the view would be taken that, if a transport investment project would benefit only the airport, the airport would be expected to be the one that primarily stepped up to the mark with the money for investment. If there were wider benefits to the overall community or the region, I am sure the airport would make that point and would wish to engage with central Government, if it were a Highways Agency or a Network Rail project, or with local government, or the wider combined ibid., p38 ibid., p33 219 ibid., p39 220 ibid., p39 221 TfL press notice, “First Piccadilly line passengers travel to Heathrow Terminal 5”, 27 March 2008 [see ‘notes to editors] 222 for example, the December 2012 Leipzig Halle judgement of the ECJ held that the construction of infrastructure with a view to its subsequent commercial use, is an economic activity “and shall be prima facie aid to the operator”, for more, see: DCLG, State Aid and Infrastructure – Leipzig Halle Guidance (ERDF-GN-1-010), February 2013 217 218


authorities that we are going to have springing up across the country, to ensure that they see it as a priority for public sector investment. We need to be very careful that if we put public sector investment into airport connectivity we remain within the rules in terms of EU state aid. By and large, this is not a Government that is likely to be erring into those difficult areas. 223

He also said that in terms of specifically paying for improved surface access to an expanded Heathrow, “it would be a mixture of investment from the taxpayer and the airport. Primarily if infrastructure investment was for the benefit of the airport, its customers and staff, we would expect that the bulk of the investment in that case would be from the airport operator”. 224 In terms of how much this could be, the Commission estimated that the cost of surface access improvements for a north west runway at Heathrow was approximately £5 billion, 225 made up of the following road and rail schemes: 226

Then Mayor of London, Boris Johnson, and Transport for London (TfL) said that this underestimated the amount of work that would be required to meet the anticipated increase in passengers at an expanded Heathrow. TfL said that the Commission had underestimated surface

223

Oral evidence: Surface transport to airports, HC 516, 16 November 2015, Q178

ibid., Q243 op cit., Final Report, table 11.2, p224 226 ibid., table 8.2, p158 224 225


access costs by £10-£15 billion due to the amount of new capacity that would be required in London by 2030. 227 In October 2016 the Government suggested that some of the recommended surface access changes in the Commission’s final report might be unnecessary (e.g. the M4 may not require widening). The DfT argued that “it is not possible at this stage to say with confidence what the cost of any eventual solution to increased congestion on the M4 might be, or what proportion should fall to the airport”. 228

7.4 The economic case for expansion The Airport’s Commission argued that there were clear economic benefits to increased airport capacity in South East England. Due to limitations on capacity, it forecast that: … both business and leisure passengers will, over time, pay increased fares, experience reduced availability of flights and falling connectivity, meaning passengers have to either travel further to second or third choice airports in order to fly where they need to or not travel at all. Once at the airport, passengers can expect to experience longer ground holding, a worsening passenger experience and more delays and cancellations, as the ability of the system to cope with disruption reduces. Businesses looking to expand by trading with other nations will find new opportunities harder to connect with as connectivity falls and costs rise, and the clusters of businesses that have been established around the UK’s major airports will weaken, as these locations become less attractive to high performing firms. 229

This argument supports expansion in the South East and not specifically expansion at Heathrow.

WebTAG analysis In arguing for expansion at Heathrow rather than another site, the Commission undertook a modified version of the Government’s standard WebTAG (Web-based Transport Analysis Guidance) evaluation. 230 This analysis included: assessments of passenger convenience; available frequencies and destinations; delay impacts; lost producer surpluses; Government revenue; gains from trade, agglomeration and clustering of services; and the effects on competition and the tax take. The Commission produced a social benefit net present value (NPV) rather than a normal NPV, which compares costs to income. It argued that this was appropriate as: The overall scale of net social benefits delivered by each scheme is most relevant to the consideration of whether a National Policy Statement or Hybrid Bill should be passed through parliament, given that a large proportion of the cost will be funded privately TfL, Mayor of London’s response to the Airports Commission recommendation for a three-runway Heathrow, October 2015, pp-26-29; for Sir Howard’s response to this, see: op cit., Sir Howard Davies: letters following the Airports Commission final report 228 op cit., Further review and sensitivities report: airport capacity in the south-east, p18 229 op cit., Final Report, para 7.4 230 ibid., para 7.8 227


rather than by the public purse…. In addition, a calculation including scheme costs has been carried out to provide a net present value, given the scope for some or all of these costs to displace expenditure elsewhere in the economy. 231

The Commission also decided to use carbon emissions as a constraint for its forecast. It adopted two different models for the UK’s future policy on carbon emissions (a carbon cap and a carbon traded model – see section 5, above). Finally, the Commission noted that its estimates of the benefit of expansion may have been an underestimate because it did not include the effects of increased competition upon airline productivity. 232

Scenarios The Commission tested the third runway in five different scenarios, which represented different views of how the aviation sector and other macro-economic factors could develop. It defined these scenarios in the following way: 233 Assessment of need

Future demand is primarily determined by central projections published by sources such as the Office for Budget Responsibility, OECD and IMF

Global growth

Higher global growth in demand for air travel in the future, coupled with lower airline operating costs.

Relative decline of Europe

Higher relative growth of passenger demand in emerging economies in future and a strengthened position of Far and Middle Eastern aviation hubs and airlines.

Low-cost is king

Low-cost carriers strengthen their position in the short-haul market and capture a substantial share of the long-haul market, plus higher passenger demand from all world regions and lower operating costs.

Global fragmentation

Economies adopt protectionist policies, with a decline in passenger demand from all world regions, coupled with higher operating costs.

The Commission selected the first scenario, Assessment of need, as its starting point and then tested its results in the other scenarios. The Commission’s forecasts saw “a faster and more substantial increase in passengers and destinations served at an expanded Heathrow” than at

ibid., para 7.46 ibid., para 7.25 233 ibid., p107 231 232


Gatwick. This was the same for every scenario except ‘Low cost is king’. 234

Wider Economic Impacts (WEIs) What are WEIs? WebTAG Unit A2.1, updated in September 2016, defines WEIs as follows: Within welfare analysis, economic impacts are primarily captured by the estimation of user benefits e.g. as a result of time savings. Under a well-defined set of circumstances user benefits will capture the entire welfare effects of a transport investment. However, if there are ‘distortions’ or market failures that mean the economy is not functioning efficiently, additional benefits (or disbenefits) will arise as the impact of transport improvements is transmitted into the wider economy. These are termed wider economic impacts … Research has shown that these wider economic impacts can be significant and can arise in a number of ways. These include productivity gains resulting from improvements in how well businesses are connected to each other as well as potential employees, and benefits arising from structural changes as businesses and households relocate. There has been a great deal of debate about the value of WEIs and how they are incorporated into transport appraisal, largely as part of the debate about HS2. 235

The Airports Commission asked PwC to analyse the wider effects of airport expansion. Sir Howard Davies explained the reasons for this at a hearing before the London Assembly in September 2015. He said: We thought it was necessary to undertake that work because the benefits of an airport are very broad and the second-round and third-round consequences of expanding and airport are not captured by the usual straightforward net present value (NPV) calculations. 236

PwC used a Spatial Computable General Equilibrium (S-CGE) model to do this analysis. PWC described what they did as follows: The equations in the S-CGE model are calibrated based on historic actual UK economic data, and a baseline scenario for the economy (absent any new airport capacity) has been created. In order to use the S-CGE model to estimate the impact of an airport expansion scheme, we change key variables in the model which are associated with increased airport capacity. 237

PwC performed this analysis for London and the South East, the rest of England and the rest of the UK. 238 They argued that there would be four main economic impacts from the scheme: •

additional passenger journeys resulting in increased consumption;

ibid., para 6.43 for further information see section 5 of HC Library briefing paper RP11/75 236 London Assembly (Plenary) Meeting: Transcript of Agenda Item 4, 8 September 2015, p19 237 PwC, Airports Commission 1. Strategic Fit: GDP/GVA Impacts, 1 June 2015 pp. 10-11 238 ibid., p10 234 235


•

improved connectivity with overseas markets and firms;

•

reduction in effective journey times for businesses; and

•

a lower cost of travel (resulting from an increased number of flights) resulting in higher consumer spending elsewhere in the economy.

The model included potential offsetting impacts such as passengers spending more money overseas because of the reduced cost of flights. PwC’s estimates depended on spillover effects, for example it “assumes there will be increased investment and operating expenditure in sectors of the economy other than aviation”. 239 PwC said in their report that the potential scale of the return to investment was large. They argued that this was because “there is a strong link between increases in the UK’s connectivity by air to other countries and increases in UK GDP and trade”. Improved air connectivity in this view acts as an ‘enabler’ and because it requires additional investment from other firms to ensure that the benefits are realised. The report warned that a “calculation which expressed the additional GDP we have estimated as a multiple of only the additional airport investment would be highly misleading”. 240 The possible GDP benefits from Heathrow expansion are shown in the table below. They show the highest and lowest estimates for each impact: 241 Impact

PWC Forecast (Low) (£bn)

PWC Forecast (Highest) (£bn)

Construction

12.6

12.6

Passenger Benefit

16.7

32.8

Productivity impact

41.8

79.7

Frequency benefit

4.5

10.6

Transport Economic Efficiency

21.6

73.6

PWC estimated the overall GDP impact in the central Assessment of Need scenario at £131bn to £147bn over sixty years. 242

Note from expert advisors The Airports’ Commission’s expert advisors, Professor Peter Mackie (Emeritus Professor at the Institute of Transport Studies, University of Leeds) and Bryan Pearce (Chief Economist at the International Air

ibid., p13 ibid., p62 241 all figures in this table are taken from ibid., pp221-5; as the figures relate to different scenarios they should not be totalled. 242 ibid., p228; this figure was reused in the Airports Commission’s final report 239 240


Transport Association) provided an assessment of the Commission’s findings. Mackie and Pearce said that the evaluation of Heathrow was “in some respects a unique or at least very unusual appraisal”. 243 The advisors proposed several reasons for the difficulties faced by those undertaking economic evaluation of the project: 1

Conventional transport appraisal methodologies had “largely been designed to inform public investment decisions”, but Heathrow would largely “be funded privately by air travellers rather than publicly by taxpayers”;

2

The behaviour of airlines, passengers and airports elsewhere in the world were “difficult to model with confidence” and “price formation, and the fact that there is heavy price discrimination and yield management, is particularly difficult to represent in appraisal”;

3

The “usual rubric that a UK plc appraisal is required is difficult to implement in the context of an internationally owned industry operating from many bases around the world and carrying a big mixture of passengers ranging from purely domestic right through to international travellers using the UK as an interchange point”; and

4

The treatment of the Committee on Climate Change’s planning assumption for carbon emissions from aviation in the modelling and appraisal was “inherently problematic”. 244

Mackie and Pearce made comments about limitations to other aspects of the Commission’s analysis: •

They deemed the analysis of the market for slots at Heathrow as “a little conservative” given that in their view the ‘do minimum strategy’ would be “a journey into the unknown and it is inherently more difficult to predict the behaviour of the actors in highly constrained conditions than in what, over the appraisal period, is broadly a facilitation strategy designed to accommodate demand growth”;

•

They argued that the frequency and delay benefits in the appraisal were “more modest than we would have expected”;

•

They also argued that, in their view, “the assumption that the aero charges can be passed through with no effects on demand and net user benefits seems to us a very strong assumption”; and

•

They said that the methodology for estimating the agglomeration and tax wedge benefits, as applied in the context of airport capacity, was “rather different from the generality of applications” and that “the approach taken to measuring agglomeration benefits does not adequately cover very high value added international sectors where aviation may be a key input

Airports Commission, A Note from Expert Advisors, Prof. Peter Mackie and Mr Brian Pearce, on key issues considering the Airports Commission Economic Case, May 2015, p1 244 ibid., p1 243


enabling clustering of enterprises and people in particular locations”. They judged this “a significant limitation of the method” and concluded that any judgement about the interrelationship between airport capacity and the economic performance of the City of London should be part of the Strategic Case. 245 They added that the model used by PwC had “been extensively used to assess impacts or shocks to the economy which are broadly uniform in nature” including “macro changes in taxes, public spending etc”. They argued that: In this case, building an extra runway is not modelled directly through a price effect. It is modelled by predicting the effect of increased capacity on air travel and then using relationships between travel, trade and tourism to reverse engineer an equivalent increase in productivity. Given statistical difficulties of understanding the direction of causality running through these interconnected relationships, we think the estimation of this equivalence is both uncertain and crucial to the subsequent calculations. The most serious issue is not with the model itself but with how to estimate the shock which new runway capacity will administer to the economy... We believe that the implied elasticity (or responsiveness) of productivity to seat capacity in the model may be high and that this may partially account for the high model impacts on GVA. 246

They also argued that because of the complexity of economic impacts “there is likely to be some double counting between the direct and wide impact channels in the PwC channels”. 247 It was unclear to Mackie and Pearce why the general welfare benefits were smaller than the GDP impact in the PwC calculation (savings of time on leisure holidays would contribute to the former not the latter). They also commented on how the multiplier effects in the model worked. In terms of the PwC analysis of Gross Value Added (GVA), 248 Mackie and Pearce said “we counsel caution in attaching significant weight either to the absolute or relative results of the GDP/GVA S-CGE approach (PwC report) within the Economic Case”. 249 Sir Howard Davies gave his view on Mackie and Pearce’s note when he appeared before the London Assembly in September 2015: We looked at the PwC work and we took account of Mackie and Pearce’s comments on it. They are cautious academics. What they said was what they meant. They did not say that we should not use it. They said that we should be cautious in the way we use it and, as a result, we produced quite broad ranges of figures.

ibid., pp3-4 ibid., pp5-6 [emphasis in the original] 247 ibid., p6 248 GVA measures the contribution to the economy of each individual producer, industry or sector; it is used in the estimation of Gross Domestic Product (GDP); see: ONS, 245 246

The relationship between gross value added (GVA) and gross domestic product (GDP) [archived 28 January 2016] 249 op cit., A Note from Expert Advisors, Prof. Peter Mackie and Mr Brian Pearce, on key issues considering the Airports Commission Economic Case, p7


However, we believe that it is a thoughtful and interesting way of assessing the economic impact of a major increase in capacity. 250

Updated assessment, October 2016 In its October 2016 updated analysis (see section 7.1, above) the Government refreshed the Airports Commission’s figures. Rather than presenting a single figure, the DfT presented a range of Net Present Values (NPVs). 251 This suggested that under the Carbon Traded scenario (see section 5.2, above), the NPV of the construction of a third runway could be between £0.2 billion and £6.1 billion: 252

DfT noted that for the Heathrow case WEIs were particularly important in ensuring a positive economic case: If wider economic impacts are excluded, the LGW Second Runway continues to deliver a positive NPV across the entire central case range, but the LHR Extended Northern Runway and LHR Northwest Runway options both deliver negative NPVs at the lower end of the range, given the impacts that the department has been able to monetise. 253

DfT also provided sensitivity estimates by calculating what it would take for the NPV of the scheme to fall to zero. Ultimately, this depended on the initial variable assumptions about costs and benefits: 254

op cit., London Assembly (Plenary) Meeting: Transcript of Agenda Item 4, p19 NPV is the difference between the present value of cash inflows and the present value of cash outflows; it is used in capital budgeting to analyse the profitability of a projected investment or project, see: Investopedia, Net Present Value – NPV [accessed 20 April 2017] 252 op cit., Further review and sensitivities report: airport capacity in the south-east, p39, table 7.1; note that the Commission assumed the ENR scheme could only provide capacity for 700,000 ATM’s, compared to NWR’s 740,000; Heathrow Hub contends that they could provide the same level of capacity at a cheaper and that therefore the net benefits for the two schemes are not accurate, see. e.g.: Heathrow Hub press notice, “Heathrow Hub’s ‘no frills’ option cuts price by £2bn to £7.5bn”, 19 September 2016 253 ibid., para 7.6 254 ibid., p44, table 7.3 250 251


It concluded from this analysis that while there was a “greater degree of uncertainty about the precise NPVs” for Heathrow expansion, “all schemes [including a third runway] are in some degree resilient to changes in costs and benefits”. 255 Finally, DfT commented on PwC’s S-CGE model. It said that while the model was “increasingly common in the appraisal of improvements to surface modes of transport”, it was: … highly innovative when applied to a project of this scope. The addition of international relationships inherently complicates attempts to model changes in the UK economy. And, as in conventional appraisal, the transmission mechanisms for air travel may be significantly different to those observed in other modes of transport. 256

A DfT-commissioned review into refining the model found that: … while changes could be made to some aspects of the implementation, there remains a lack of consensus around the specification of some key relationships within the model (e.g. the increase in trade and productivity that would result from an increase in airport capacity). 257

In light of this lack of consensus DfT concluded that it was: …highly challenging to produce a single central estimate of the GDP impact of airport expansion using the S-CGE approach with the evidence currently available. The existence of the relationships within the modelling, however, is accepted (such as an increase in airport capacity leading to greater levels of productivity). 258

However, it also argued that the decision to go forward with Heathrow did not depend upon the use of the model. 259

7.5 Criticisms of the economic case There have been various criticisms of the economic case for Heathrow expansion. The Aviation Environmental Federation (AEF) argued that the Airports Commission’s novel approach to assessing benefits meant that the widely-reported figure of up to £147 billion in benefits to the UK economy was “based on analysis that takes no account of the environmental or surface access costs of expansion”. It also stated that: ibid., para 7.22 ibid., para 5.24 257 ibid., para 5.25; the review was also carried out by PwC 258 ibid., para 5.26 259 ibid., para 5.27 255 256


… the results generated by using the Government’s methodology for cost benefit analysis meanwhile, are dramatically different: the Commission’s own figures, based on this methodology, suggest that building a third runway at Heathrow would result in a net £9 billion loss to the UK once all environmental and surface access costs are included. With some ‘wider economic benefits’ included, the benefit over sixty years would still be only £1.4 billion, as quoted in the Commission’s final report. 260

Professor Len Skerratt also raised concerns about the impact of WEIs: There would not be an economic case for the 3rd runway without the supposed indirect benefits to the national economy. These wider economic benefits are said by the Commission to amount to some £131-£147 billion, between 0.65% and 0.75% of GDP by 2050. However, these predictions are not believable. 261

Then Mayor of London, Boris Johnson, published his own assessment of the Airports Commission report, which argued that: ”the wider economic benefits of Heathrow expansion calculated by the [Commission] are likely to have been overstated”. 262 A group of South London Councils (including Wandsworth, Kingston, Croydon and Southwark) argued on the basis of the Mackie and Pearce analysis (see section 7.4, above) that the Commission had exaggerated its case. Ravi Govindia, Leader of Wandsworth Council, said that: … the commission has based its recommendation to expand Heathrow on a grossly exaggerated economic case. Their own expert advisors tore apart the PWC growth forecasts but their evidence was buried and ignored. Sir Howard and his team were hell bent on presenting Heathrow as the best option and refused to let reality get in the way. 263

Professor John Kay, visiting Professor of Economics at the London School of Economics also criticised the Commission’s model. In a November 2015 article for the Financial Times he said that: … the Commission relied heavily on an elaborate modelling exercise that calculated costs and benefits for the next 50 years. Little weight should be attached to these calculations. They project the present into the future with essentially linear trends. 264

Andrew Tyrie, Chair of the Treasury Select Committee, wrote on a number of occasions to successive Chancellors of the Exchequer and the Secretary of State for Transport about what he saw as unanswered questions in the Airports Commission’s final report. 265 After the DfT

AEF, The Airports Commission’s economic fudge: How the economic case for expansion dissolves once climate change limits are accounted for, August 2015, p6 261 Airportwatch, The uneconomic case for a 3rd runway at Heathrow, November 2015 262 Mayor of London, Mayor of London’s response to the Airports Commission recommendation for a three-runway Heathrow, October 2015, p11 263 Wandsworth Council press notice, “Airports Commission “buried doubts” over Heathrow growth forecast”, 20 August 2015 264 “Heathrow v. Gatwick: the flawed case for expansion”, Financial Times, 3 November 2015 265 see, e.g. Letter from Treasury Committee Chair to Chancellor of the Exchequer re the economic case for airport expansion, 1 June 2016; Letter to Rt Hon Philip Hammond 260

MP, Chancellor of the Exchequer, regarding the economic case for airport expansion, 21 July 2016; and Letter from Committee Chair to Transport Secretary regarding airport expansion and HS2, 14 September 2016


published its updated analysis in October 2016 Mr Tyrie wrote again to the Chancellor seeking updated analysis showing: •

NPV under all four alternative growth scenarios (see section 7.4, above);

•

capped demand at and an appraisal period of 10, 20 and 30 years; and

•

the effect on the conclusions of the Airports Commission's Final Report of the Commission's decision not to take account of high value-added international sectors in measuring the agglomeration benefits of the three shortlisted projects.

Finally, Mr Tyrie commented on the “number of changes to the cost-benefit analysis to make the Airports Commission's assessment of costs and wider economic impacts more consistent with its appraisal guidance for transport projects, WebTAG”. He argued that this had the effect of “reducing the difference in NPV between the three shortlisted schemes that the Airports Commission argued clearly favoured the economic case for expansion of a third runway at Heathrow”. He asked:

266

•

When considering the economic case, what interpretation and weight is put on each of the investment measures - net present value, net public value, net social benefit and total benefits - … in informing your decision about the value for money represented by each proposal?

•

The report indicates that the net public value investment measure was included as a result of a request from the Treasury. Why did the Treasury propose net public value as a measure for consideration in this review? Can you provide any examples where net public value has previously been used as a measure to assess the cost-benefit case for major infrastructure projects? 266

Letter from Treasury Committee Chair to Chancellor of the Exchequer re the economic case for airport expansion, 8 December 2016


8. UK connectivity 8.1 Domestic routes The number of domestic flights using Heathrow declined by 41% over the period 2001 to 2016. Domestic flights using other London airports (Gatwick, Stanstead, Luton, City, Southend) have also declined over the same period, but only by around 20%. The trend over most recent years has been for the number of flights from London airports other than Heathrow to increase, as new routes have been brought into operation: 267

Domestic passenger flights to/from London airports, 2001 - 2016 120,000 100,000 80,000 60,000 40,000 20,000 0

Heathrow

Other London Airports

As set out in the table below, the number of domestic destinations served by Heathrow shrank from 9 to 8 in the period 2001-2016, however there were fluctuations in the years between. Over the same period the number of destinations shrank at Gatwick, Luton and Stansted but grew at London City and Southend. The 8 domestic destinations served by Heathrow in 2016 were: Aberdeen; Belfast; Edinburgh; Glasgow; Inverness; Leeds-Bradford; Manchester; and Newcastle.

267

from CAA statistics, various years


8.2 Impact of expansion on number of domestic routes There is a great deal of debate about whether Heathrow expansion would be good for the whole of the UK, in particular whether it would lead to more and improved connections between Heathrow and other UK airports. The Airports Commission’s final report stated that expansion at either Heathrow or Gatwick would ‘strengthen’ access to London from the rest of the UK, particularly Scotland and Northern Ireland: For nations and regions where domestic air connections to London remain crucial, such as Scotland and Northern Ireland, expansion at Heathrow will create space at the airport for increased frequencies and for new links to be established. The number of services from Scottish airports to Heathrow has declined by more than a quarter over the past 10 years, and to Gatwick by almost 20% over the same period. Expansion at either airport would provide the opportunity to reverse that trend, and would strengthen access to London from Scotland, as well as to the capital’s wider international route network. 268

It went on to explain that the benefits accruing to domestic services from expansion would vary, due to the relative strengths of Heathrow and Gatwick. Specifically on Heathrow, it said that the airport could provide access to the strongest international connectivity. The Commission’s forecasts suggested that with expansion more than twice as many domestic passengers would travel via Heathrow in 2040 than if the airport’s capacity remained constrained. However, it was clear that in order to achieve this the Government would need to use Public 268

op cit., Final Report, para 13.52


Service Obligations (PSOs) to ensure that areas such as the Highlands and Islands would have access to the airport. 269 To this end, the Commission recommended the following with regards to domestic routes: The Government should alter its guidance to allow the introduction of Public Service Obligations on an airport-to-airport basis, and use them to support a widespread network of domestic routes at the expanded airport. [Heathrow Airport] should implement additional measures to enhance domestic connectivity, including reduced charges and start-up funding for regional services. 270

According to the Commission, the number of UK destinations with a direct service into Heathrow more than halved between 1990 and 2014 (from 19 to 7). 271 The Commission stated: … unless capacity is expanded, this pattern will continue, with the number of destinations served from Heathrow declining to as few as three by 2040. The primary reason for this reduction in domestic connectivity at Heathrow is that, with practically all the airports slots taken up, many domestic destinations are priced out by long-haul routes that deliver higher yields per passenger. 272

Furthermore, over the 20 years to 2015 the number of daily services operating to and from Glasgow and Edinburgh fell by over a third. 273 As indicated above, the Commission stated that expansion at Heathrow would allow the airport to reverse the decline in domestic routes, but that this could only be achieved if other measures were put in place – specifically the PSO network of supported domestic routes and financial support (set out in the two recommendations above): The Commission’s forecasts … suggest that without specific measures to support domestic connectivity even an expanded Heathrow may accommodate fewer domestic routes in future than the seven served currently. It would still however see more than the three domestic routes predicted to be available from the airport without expansion. 274

However, in its response to the Commission’s final report Gatwick asserted that “as regards connectivity for the UK Nations and Regions, the Commission’s forecasts demonstrate that an expanded Heathrow will serve fewer domestic routes than today – by 2050, only 4 domestic routes compared to 7 today”. 275 This claim was based on data published in the Commission’s November 2014 strategic fit forecasts. These forecasts involved a number of scenarios, which showed the following:

ibid., paras 13.53-55 ibid., p33; these are discussed in more detail in chapter 15 of the report 271 ibid., figure 3.3, p77 272 ibid., para 3.29 273 ibid., para 15.1 274 ibid., para 15.8 275 op cit., A Second Runway for Gatwick: Airports Commission Final Report – Areas of Concern, para 3.16 269 270


•

Gatwick (second runway): in 2011 operated 9 domestic routes; under the range of scenarios this would decrease to between 7 and 8 by 2050; and

•

Heathrow (third runway): in 2011 operated 7 domestic routes; under the range of scenarios this would decrease to 4 by 2050. 276

Gatwick stated that the Commission ignored this data in its final report. However, as set out above, the report does acknowledge that supplementary interventions (PSOs etc.) would be needed to grow domestic routes at Heathrow and that without them routes could decrease. In its February 2017 consultation on its draft airports NPS the DfT said that it “expects to see expansion at Heathrow Airport driving an increase in the number of UK airports with connections specifically into the airport”. 277 As indicated in section 8.1, above, Heathrow currently serves eight routes, it has committed to serve six other domestic routes by 2030, post-expansion: Belfast International (in addition to the existing route to Belfast City); Durham Tees Valley; Humberside; Liverpool; Newquay; and Glasgow Prestwick (in addition to the existing route to Glasgow). 278 In April 2017 IAG, which includes British Airways and Aer Lingus, said that it thought it was “unlikely” airlines would be able to operate domestic services on a commercial basis based on the current costs for the new runway. 279

8.3 Financial support As indicated above, the Airports Commission’s final report stated that a domestic network of flights at an expanded Heathrow would depend on a PSO network of supported domestic routes and financial support. There is nothing on PSOs in the draft NPS, or the consultation on airspace. It is possible to ring-fence regional air services to a national hub (such as London, Glasgow or Cardiff) by establishing a Public Service Obligation (PSO). A PSO is a form of ‘State Aid’. It provides the basis on which noncommercial but socially and economically necessary air services can be subsidised by national or local authorities, notwithstanding the EU Single Market. Article 4 of the 1992 EU Route Access Regulation 280 harmonised the procedures for ensuring the operation of PSOs. This was replaced by the provisions in Article 16 of the Air Services Regulation (ASR) (Regulation 1008/2008/EC), which came into force on 1 November 2008. The Route Airports Commission, Strategic Fit: Forecasts, November 2014, tables 6.32-6.35, pp149-52 277 op cit., Consultation on Draft Airports National Policy Statement: new runway capacity and infrastructure at airports in the south-east of England, para 4.25 278 ibid., para 4.25 279 op cit., “British Airways owner complains Heathrow residents' compensation 'far beyond' level required” 276

280

EU Regulation 2408/92/EEC: access for Community air carriers to intra-Community air routes, 23 July 1992

The only PSO affecting Heathrow is a route between London airports, including Heathrow, and Derry; a full list of PSOs is maintained by the EU


Access Regulation was designed to protect lifeline routes to peripheral or development regions, not commercially viable regional services into congested hubs where they compete against alternative uses of the slots. The criteria for PSO imposition are set out but not precisely defined in the ASR, allowing Member States some flexibility in how they interpret these terms. There are essentially four hurdles, as set out in Article 16(3): The necessity and the adequacy of an envisaged public service obligation shall be assessed by the Member State(s) having regard to: ─

the proportionality between the envisaged obligation and the economic development needs of the region concerned;

─

the possibility of having recourse to other modes of transport and the ability of such modes to meet the transport needs under consideration, in particular when existing rail services serve the envisaged route with a travel time of less than three hours and with sufficient frequencies, connections and suitable timings;

─

the air fares and conditions which can be quoted to users;

─

the combined effect of all air carriers operating or intending to operate on the route.

It also: •

states that the maximum concession period during which the route can be restricted to one single operator is four years (five years for ‘ultra-peripheral’ regions);

•

provides for an emergency procedure to designate an alternative airline in situations of failure of the airline servicing the PSO route; and

•

to avoid abuse of the PSO system, explicitly states the necessity of respecting the proportionality between the obligations imposed and the economic development goals pursued and confers a right on the Commission to request a detailed economic report from a Member State justifying the need for a PSO.

Article 17 details the public tender procedure for a PSO. The updated guidance on the application of PSOs by the Department for Transport for regional air services to London was published in December 2013. 281 In order to assist regional bodies in assembling the evidence required to demonstrate the wider regional benefits, the Government produced accompanying advice on Cost-Benefit Analysis and the Commercial Viability Test, contained in Annex A. Generally, it states that the Government considers it “unlikely that PSOs would be appropriate for new routes from the regions to London” and that new services could be launched with some assistance from start-up aid (through a Route Development Fund (RDF) – see below) provided by 281

DfT, Public service obligation: regional air access to London, 19 December 2013


a devolved administration or regional body. Nor did the Government “consider it likely that PSOs would be appropriate on a route that received start-up aid once the initial funding has ended because 2005 State aid guidelines state that start-up aid can only be provided if the route receiving the aid will ultimately prove profitable”. 282 The guidance made it clear that it would be the responsibility of Devolved Administrations, Local Enterprise Partnerships (LEPs) or local authorities in England to develop the business, financial and legal cases required by EU regulations on PSOs and to demonstrate the importance of a particular air service to the economic development of areas of the UK. Where the case were made for a PSO, “where appropriate” the Government would provide funding alongside regional support. 283 Route Development Funds A Route Development Fund (RDF) is another form of State aid. 284 Changes to the EU State Aid Guidelines in 2005 significantly reduced the scope for RDF support. The most recent edition of the guidelines, published in 2014, contains restrictions in terms of the sorts of services that can be supported and the amount of support that can be given. 285 In March 2015 Heathrow said that if it were granted permission to expand, it would establish a new Heathrow Route Development Fund comprised of £10 million in start-up capital for airlines to support five new routes for three years. 286

ibid., para 7 ibid., para 9 284 OJEU, Community guidelines on financing of airports and start-up aid to airlines departing from regional airports, 2005/C 312/01, 9 December 2005 285 EU, Guidelines on State aid to airports and airlines, 2014/C 99/03, 4 April 2014 286 HAHL press notice, “Heathrow announces new measures to connect UK nations and regions to global growth”, 23 March 2015 282 283


9. The planning process Any significant airport expansion will almost certainly meet the thresholds set out in section 23 of the Planning Act 2008 to be classed as a Nationally Significant Infrastructure Project (NSIP). Under section 23(5) the threshold to be classed as an NSIP is where the effect of the alteration to the airport is: (a) to increase by at least 10 million per year the number of passengers for whom the airport is capable of providing air passenger transport services, or (b) to increase by at least 10,000 per year the number of air transport movements of cargo aircraft for which the airport is capable of providing air cargo transport services.

Instead of seeking planning permission, developers of NSIPs must apply for a Development Consent Order (DCO) to be granted by the Secretary of State. A DCO is a form of consent which includes planning permission. The relevant Secretary of State will appoint an “Examining Authority” to examine the DCO application. The Examining Authority will be from the Planning Inspectorate, and will be either a single Inspector or a panel of three or more Inspectors. Once the examination has been concluded, the Examining Authority will make a recommendation to the Secretary of State, who will make the decision on whether to grant or to refuse consent. 287 Applications for DCOs are normally decided in accordance with National Policy Statements (NPSs), which set out the national policy in relation to NSIPs. NPSs undergo a process of public consultation and Parliamentary scrutiny, before being officially designated by Government. The DCO application decision making process is heavily regulated in the 2008 Act with tight timescales for each part of the procedure. From accepting an application to making a decision, the whole process should last in the region of 15 months. The process however, is front-loaded with a number of pre-application consultation requirements, which, depending on the complexity of the project, can take a number of years to carry out.

9.1 Airports National Policy Statement (NPS) On 2 February 2017 the Government published its draft Airports National Policy Statement (NPS). 288 This was accompanied by a number of technical reports 289 and a formal consultation, which closes on 25 May 2017. 290 Planning Inspectorate, Nationally Significant Infrastructure: how to get involved in the planning process: Advice note 8.3, April 2012 288 DfT, Draft Airports National Policy Statement, 2 February 2017 289 these include the Appraisal of Sustainability examined in more detail in section 5, above and health and equality impacts, see: DfT, Heathrow Airport expansion [updated 22 February 2017] 290 DfT, Consultation on Draft Airports National Policy Statement: new runway capacity and infrastructure at airports in the south-east of England, 2 February 2017 287

More detailed information on NSIPs and the DCO process can be found in HC Library briefing paper SN6881


The draft NPS states: The Airports NPS provides the primary basis for decision making on development consent applications for a Northwest Runway at Heathrow Airport, and will be an important and relevant consideration in respect of applications for new runway capacity and other airport infrastructure in London and the South East of England. 291

It explains the Government’s general policy and reasons for supporting the third runway at Heathrow. It also sets out particular considerations relevant to a DCO application to which the Airports NPS relates. 292 It further states that “the Secretary of State will use the Airports NPS as the primary basis for making decisions” on a DCO application for the third runway. 293 It goes on: The policies in the Airports NPS will have effect in relation to the Government’s preferred scheme, having a runway length of at least 3,500m and enabling at least 260,000 additional air transport movements per annum […] For a scheme to be compliant with the Airports NPS, the Secretary of State would expect to see these elements comprised in its design, and their implementation and delivery secured, particularly with regard to runway length and increased capacity of air transport movements. Other NPSs may also be relevant to decisions on nationally significant infrastructure projects at airports but, if there is conflict between the Airports NPS and other NPSs, the conflict should be resolved in favour of the NPS that has been most recently designated. 294

Section 5 of the draft NPS sets out specific impacts and requirements. It covers the following areas: •

Surface access;

•

Air quality;

•

Noise;

•

Carbon emissions;

•

Biodiversity and ecological conservation;

•

Land use including open space, green infrastructure and Green Belt;

•

Resource and waste management;

•

Flood risk;

•

Water quality and resources;

•

Historic environment;

•

Landscape and visual impacts;

•

Land instability;

•

Dust, odour, artificial light, smoke and steam;

op cit., Draft Airports National Policy Statement, para 1.10 ibid., para 1.11 293 ibid., para 1.13 294 ibid., paras 1.13 & 1.15 291 292


•

Community compensation;

•

Community engagement; and

•

Skills

Finally, it states that the Government “does not see a need” for a fourth runway at Heathrow, and that an “application in the vicinity of Heathrow Airport for a fourth runway would not be supported in policy terms, and should be seen as being in conflict with the Airports NPS”. 295 Whether a planning condition in relation to the third runway could be used to prohibit a fourth would depend on it being able to meet the six tests for planning conditions set out in the National Planning Policy Framework as being: “necessary; relevant to planning and; to the development to be permitted; enforceable; precise and; reasonable in all other respects”. 296 Once it is formally adopted, the Airports NPS will form the policy basis for assessing future applications for airport expansion in the South East.

High Court challenge On 30 January 2017 the High Court refused permission to for claimants (including Greenpeace, the London boroughs of Hillingdon, Wandsworth and Richmond, the Royal Borough of Windsor and Maidenhead and a Hillingdon resident) to bring a judicial review against the draft NPS. The claimants argued that the proposal involved a flawed approach to air quality and that the decision was contrary to their legitimate expectations "because the Government made repeated promises over a number of years that there would be no third runway at Heathrow". The application was refused on the basis that the 2008 Act precludes a judicial review claim before the NPS has been published and adopted by Government. Mr Justice Cranston noted that once the

Secretary of State adopts and publishes an NPS the court will have jurisdiction to entertain the challenges the claimants advance. 297

Parliamentary procedure Under the provisions of the Planning Act 2008 a draft NPS (called a “statement” in the legislation), may be designated as an NPS only if the consultation and publicity requirements set out in section 7, and the Parliamentary requirements set out in section 9, have been complied with in relation to it. Under section 9 if either House of Parliament makes a resolution with regard to a proposed NPS, or a committee of either House of Parliament makes recommendations with regard to the a proposed NPS, the Secretary of State must lay before Parliament a statement setting out his response to the resolution or to the recommendations.

295 296

297

ibid., para 5.264 this is a complex question; interested readers should refer to section 70(1)(a) of the Town and Country Planning Act 1990; , Paragraph 206 of the National Planning Policy Framework; and Guidance from the Planning Inspectorate on drafting Development Consent Orders, para 17.2

London Borough of Hillingdon and Others v Secretary of State for Transport and Others [2017] EWHC 121 (Admin), 30 January 2017


House of Commons standing order 152H (11 October 2016 addendum), shows that an NPS can be considered by either a designated select committee, or a dedicated National Policy Statement Committee established for that purpose. The NPS will be the main formal opportunity for MPs to have a say on something which would directly affect any proposed airport expansion (wherever it may be). As with previous NPSs on ports and national transport networks, the Transport Select Committee has indicated its intention to scrutinise the Statement. 298 There will not, however, be a Parliamentary Bill specifically on Heathrow (or other location). In the Statement of Principles made between and signed by the Secretary of State for Transport and HAHL one of the “key principles” agreed was the designation of an NPS by the Government on airport capacity which supports the development of the Scheme “by no later than 31 July 2017”. 299 In a written statement to Parliament on 2 February 2017, the Government set out the following proposed timetable for scrutiny and designation of the airports NPS: At the same time, and as required by the Planning Act 2008, a period of Parliamentary scrutiny (the ‘relevant period’) now begins for the Airports National Policy Statement, ending by summer recess 2017. I will be placing copies of all relevant documents in the Libraries of both Houses. Following consultation and Parliamentary scrutiny, and assuming that in the light of these processes the decision is made to proceed, we expect to lay a final Airports National Policy Statement before Parliament for debate and an expected vote in the House of Commons by winter 2017-18. 300

This timetable precedes the announcement of the 8 June 2017 General Election announcement, and may well be subject to change.

9.2 Development Consent Order (DCO) A DCO application is normally determined in accordance with an NPS, subject to the exceptions listed in section 104 of the Planning Act 2008. Under section 104, the Secretary of State must decide any DCO application in accordance with any relevant NPS unless he or she is satisfied that to do so would: •

Lead to the UK being in breach of its international obligations;

•

Be unlawful;

•

Lead to the Secretary of State being in breach of any duty imposed by or under any legislation;

298

299

300

Transport Committee, Airports National Policy Statement inquiry [accessed 132 April 2017]; it will be for the new Committee of the 2017 Parliament to decide how to proceed

Statement of Principles made between and signed by the Secretary of State for Transport and Heathrow Airport Limited, 2016, para 1.2.2 HC Deb 2 February 2017, c30WS


•

Result in adverse impacts of the development outweighing its benefits; or;

•

Be contrary to legislation about how the decisions are to be taken. 301

An emerging NPS can carry some weight for decision takers in the development consent process. The amount of weight given will depend on how far along the process the NPS is at and how much consultation has taken place. 302 Section 105 of the 2008 Act gives the Secretary of State the power to take the decision on a DCO in the absence of an NPS. Section 107 of the 2008 Act and section 23 of the Infrastructure Planning (Examination Procedure) Rules 2010 (SI 2010/103) (the ‘procedure rules’) allows for further time to be taken in the decision making process. Under section 107 any extension to the statutory timetable would require the Secretary of State to make a statement to Parliament and would not be a decision which “would be taken lightly”. 303 The Secretary of State may reach a different decision on the DCO to that recommended by the Examining Authority. Government guidance states that the Secretary of State: … is required under the Procedure Rules to notify all interested parties if he is inclined to disagree with the Examining Authority’s recommendation because he differs from the Examining Authority on any matter of fact mentioned in, or appearing to be material to, a conclusion reached by the Examining Authority, or because the Secretary of State proposes to take into consideration any new evidence or any new matter of fact. The Secretary of State will set out the reasons for disagreement with the Examining Authority and will give interested parties the opportunity to make representations in writing, in respect of any new evidence or new matter of fact, by an appropriate deadline. 304

If the airports NPS is designated by the Government following its consultation and Parliamentary scrutiny, the need for a third runway at Heathrow will have to be taken as decided and cannot be questioned during the DCO process. 305 Once a DCO application is submitted and accepted there is a process for members of the public (including MPs) to register as an “interested party” to be able to take part in the examination process, provide written evidence and speak at meetings. 306

op cit., Draft Airports National Policy Statement, para 1.16 Planning Inspectorate National Infrastructure Planning website [accessed 13 April 2017] 303 HM Government, Planning Act 2008: Guidance for the examination of applications for development consent, March 2015, para 108 304 ibid., paras 117-118 [emphasis added] 305 “Heathrow: ready for take off”, Estates Gazette, 5 November 2016 306 for further information see: op cit., Nationally Significant Infrastructure: how to get 301 302

involved in the planning process: Advice note 8.3


The Statement of Principles document sets out that Heathrow Airport Limited intends to submit an application for development consent by March 2020 with a view to securing a DCO for the new runway by September 2021. 307 There might also need to be Transport and Works Orders for surface transport (road and/or rail) improvements. The main points of potential legal challenge, by judicial review, in the process are likely to be once the NPS is designated and again when the DCO application is determined. An October 2016 blog piece by infrastructure planning lawyer Angus Walker at Bircham Dyson Bell speculates about some of the possible points of legal challenge in the DCO process and the impact of these challenges on the proposed timetable. 308 It is likely that the DCO will contain a number of pre-commencement conditions (called “requirements” under the 2008 Act). These are conditions and restrictions on the development and matters for which detailed approval needs to be obtained from the local planning authority before the development can be lawfully begun. Securing approval for these requirements will also add time to the process.

op cit., Statement of Principles made between and signed by the Secretary of State for Transport and Heathrow Airport Limited, para 1.2.3 308 “725: Heathrow timetable and observations”, BDB blog, 27 October 2016 307

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