A major new report ‘The Economics of Airport Expansion‘, launched in the House of Commons in April, challenges the view that improved international air connectivity will necessarily bring significant benefits to the UK economy. The report by the independent Dutch consultants CE Delft, and commissioned jointly by WWF, RSPB and the Heathrow campaign group HACAN, argues that “claims about the economic benefits of connectivity are not founded on solid evidence.”
The report was launched at packed meetinghosted byZac Goldsmith MP.The speakers included Jasper Faber from CE Delft, the main author of the report.
The report is timely. The Airports Commission, set up by the Government under Sir Howard Davies, has been charged with looking at whether the UK, and London and the South East in particular, requires additional airport capacity in order for the UK to maintain its first rate international links over the coming decades. At present it is actively looking at evidence on aviation connectivity .
CE Delft concluded: “many studies find a positive correlation between aviation and economic growth, but no causal relationship between connectivity and economic growth was found”. Their analysis of the evidence shows that increasing connectivity is less beneficial for developed countries than for developing economies. They also found that extra connectivity in cities that are already well-connected, like London, does not necessarily deliver measurable or substantial economic benefits.
The report also challenges the way that the costs and benefits of airport expansion have traditionally been measured. It points out gaps in the Cost Benefit Analysis (CBA) which should “provide an overview of current and future pros and cons of a particular project for society as a whole (public, private sector and government) as objectively as possible.” It argues that the DfT’s current Cost-Benefit Analysis method still omits key social or environmental costs, resulting in an overestimation of economic benefits.
There are also enormous uncertainties in CBA work as it must predict future demands and costs. For example, the Department for Transport estimated that Heathrow expansion would produce £5 billion in economic benefits but when the New Economics Foundation re-ran their figures using different predictions for growth and oil prices but the same models they found that Heathrow expansion would result in a £5 billion loss.
This report also looks at some of the economic arguments being used by proponents of airport expansion and finds them to be miscalculated and exaggerated, distorting the aviation debate.
RSPB economist Adam Dutton said, “This report highlights the uncertainty surrounding the economic benefits of aviation expansion. New airport infrastructure could destroy internationally important and increasingly scarce habitat, such as that found in Thames estuary, and jeopardise the UK’s legally binding greenhouse gas emissions targets, all for uncertain economic benefit and a net loss to society. More specifically, this report urges caution about automatically linking improved connectivity with economic performance. While some base level of connectivity is important for any economy, this report demonstrates that the benefits of extra connectivity in a city as well connected as London are doubtful and difficult to demonstrate with certainty”.
Jean Leston, head of transport policy at WWF, said, “The methods for assessing the benefits and costs of new runways and airports are hopelessly inadequate and open to gross manipulation. CE Delft has instilled a dose of reality into the airports debate. We hope that the Airports Commission and the Department for Transport will adopt the better SCBA methodology and require development proposals to do the same.”
HACAN Chair John Stewart said, “This report could not be more timely. It comes just as the Airports Commission is asking the hard questions about airport capacity and connectivity. And its message is clear: new runways may not be nearly as important for our economy as is commonly assumed.”
Cost Benefit Analysis does not take social and environmental costs into account
Cost Benefit Analysis (CBA) is a widely used tool for complex decision making but it has limitations and is easily manipulated to favour particular results.
The complexities of CBA can lead to double counting and an overestimation of benefits since they tend to be easier to measure in monetary terms than costs. Indeed, some costs are currently excluded, such as landscape impacts, water pollution and biodiversity.
CE Delft recommends CBA could be improved to include external effects, such as social and environmental impacts, that are not internalised in market prices. CBA should also avoid overestimating the economic benefits.
For those of us living in the Thames Estuary for whom our biodiversity, iconic landscapes, historic heritage and water are of paramount importance to us, the CBA finding is extremely worrying indeed. When these effects are not taken into consideration, it could lead to a large under-estimation of the costs of an airport investment project. Environmental values must not be underestimated!
As Jean Leston at WWF says “We hope that the Airports Commission and the Department for Transport will adopt the better SCBA methodology and require development proposals to do the same”
A brief 2 page summary of the report please click here
Full 55 page report please click here
Ours is the marsh country down by the river... 