Transport Committee
Wednesday 2nd September 2026
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09:23
09:23
Alex Mayer
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Alex Mayer
Welcome to this morning's evidence session. This is the first session into the Transport Committee. Scrutiny into the government's draft Heathrow expansion National policy statement that will be used as the policy basis, against which a decision on whether to grant planning permission for a third runway at Heathrow Airport will be decided. We're. We've been granted by the Liaison Committee the. The right, I guess, to scrutinise the draft Heathrow expansion. NPS, including the extent to which it provides clear guidance about how to assess a.
The proposed runway scheme and the robustness of the assumptions and requirements in the NPS and its associated documents. This is a very important session, given that the former Chancellor used the economic growth reason as the reason for moving ahead with government policy to support runway three, so that. Hence this session being particularly important today. I'd like to welcome Barry Gardiner, joining us as a guest from Environmental Audit Committee, and we look forward to Barry or a colleague joining us for future evidence sessions in this inquiry.
I'd also like to thank all of the people who have been advising us and the core team on the work to for this inquiry, although it's a single piece of infrastructure, it's the most extensive inquiry I've been involved with in all of my time that I've been on, on the transport committee. It has so many different aspects which require an awful lot of work and support. So I'd like to thank both our core transport committee team and all the additional people who've come in to help us and advise us on this inquiry.
We've got two panels today. During our first panel, we'll be hearing about the economic case for Heathrow expansion. And in our second panel today, we'll be hearing about the business and employment case for Heathrow expansion. So first of all, could I ask our witnesses to introduce themselves? And could I just remind colleagues that it helps Alex, who's can't see our faces clearly? If you can be clear who you are asking a question of because it makes his life a bit easier.
I'll start with Ian.
The proposed runway scheme and the robustness of the assumptions and requirements in the NPS and its associated documents. This is a very important session, given that the former Chancellor used the economic growth reason as the reason for moving ahead with government policy to support runway three, so that. Hence this session being particularly important today. I'd like to welcome Barry Gardiner, joining us as a guest from Environmental Audit Committee, and we look forward to Barry or a colleague joining us for future evidence sessions in this inquiry.
I'd also like to thank all of the people who have been advising us and the core team on the work to for this inquiry, although it's a single piece of infrastructure, it's the most extensive inquiry I've been involved with in all of my time that I've been on, on the transport committee. It has so many different aspects which require an awful lot of work and support. So I'd like to thank both our core transport committee team and all the additional people who've come in to help us and advise us on this inquiry.
We've got two panels today. During our first panel, we'll be hearing about the economic case for Heathrow expansion. And in our second panel today, we'll be hearing about the business and employment case for Heathrow expansion. So first of all, could I ask our witnesses to introduce themselves? And could I just remind colleagues that it helps Alex, who's can't see our faces clearly? If you can be clear who you are asking a question of because it makes his life a bit easier.
I'll start with Ian.
09:26
09:26
09:26
09:26
09:26
Alex Mayer
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Alex Mayer
Okay. Thank you. And sorry we have now got over the technical problems , so we can now see you. So okay, we've got limited time this morning and an awful lot to cover. So to our witnesses, if you find yourself being drawn into a lot of detail on something, please bear in mind you're more than welcome to follow up the detail in writing afterwards. And I'll also remind our members today to keep their questions as brief questions.
So my first question is sorry. Yes, I've got an initial question to Ian Mulhern, because you were able to send us some additional well, a correction last night. So thank you for drawing your letter, drawing attention to your letter to a technical correction, to the department's analysis, which we've published. Could you very briefly explain what the significance of that correction is?
So my first question is sorry. Yes, I've got an initial question to Ian Mulhern, because you were able to send us some additional well, a correction last night. So thank you for drawing your letter, drawing attention to your letter to a technical correction, to the department's analysis, which we've published. Could you very briefly explain what the significance of that correction is?
09:27
Speaker 1
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Speaker 1
Sure. So essentially, what's happened in the modelling is that expansion at Heathrow has effects on other airports and terminal capacity. There's terminal capacity constraints in this runway constraints. And with some of the changes that we've made, terminal capacity constraints at some other airports become more important. And some of the benefits from expansion of Heathrow actually occur at those airports because it relieves pressure on them. And so what we've found is that there is a significant chunk of benefits at Gatwick Airport that are relieved that appear, and those constraints are relieved by the expansion of Heathrow.
And that was not included or not captured in the initial analysis. And that's because we've had to sort of fundamentally change some things about how the analysis is done for this exercise. So apologies for missing that. We're not we haven't still finalised exactly the scale of this. Okay. We hope to do so in the coming days and write to you about what the.
And that was not included or not captured in the initial analysis. And that's because we've had to sort of fundamentally change some things about how the analysis is done for this exercise. So apologies for missing that. We're not we haven't still finalised exactly the scale of this. Okay. We hope to do so in the coming days and write to you about what the.
09:28
09:28
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09:29
09:29
Alex Mayer
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Alex Mayer
Okay. Thank you very much. Right. Let's let's get back to the main question. So I'm going to start to each of you in turn, same order that you introduce yourselves, please. So the draft HNHEMS states that the the analysis shows Heathrow expansion could add up to 0.05% to GDP in 2056. Has the economic case for a third runway at Heathrow diminished over the time since the airports commissioned reported.
And if yes, why? Ian.
And if yes, why? Ian.
09:29
Speaker 1
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Speaker 1
Thank you, chair. So I think in order to consider whether the economic case has deteriorated, we. We have to consider both the GDP modelling and the. And the appraisal, which takes into account welfare the full set of things that people might value, not just the GDP bit. And I think it is fair to say that there's been significant changes since, you know, the last decade when we looked at this most closely, that have made the case somewhat different to what we looked at then.
Most obviously, there's significantly greater capacity in the rest of the South east. We also have a more graduated expansion plan here from Heathrow. It takes a number of years before the full programme is delivered, and that means capacity comes on, on, on stream slower. A third issue is that business travel is significantly lower as a proportion of passenger flights than it was back in sort of 2018 time post Covid.
And the final thing that weighs in the economic case overall is how we as government value carbon emissions has changed since 2021, and now we place a higher value on carbon emissions. So that's not an underlying change in the case, but it is how we look at it. It is significantly different. One thing I would say is that one way to think about this is that the the airport system in the south east eventually fills up.
And by the 2040s and 50s, you're really starting to see benefits coming through. So there's a question in a sense about when do things fill up as much as has the economic case deteriorated in absolute terms?
Most obviously, there's significantly greater capacity in the rest of the South east. We also have a more graduated expansion plan here from Heathrow. It takes a number of years before the full programme is delivered, and that means capacity comes on, on, on stream slower. A third issue is that business travel is significantly lower as a proportion of passenger flights than it was back in sort of 2018 time post Covid.
And the final thing that weighs in the economic case overall is how we as government value carbon emissions has changed since 2021, and now we place a higher value on carbon emissions. So that's not an underlying change in the case, but it is how we look at it. It is significantly different. One thing I would say is that one way to think about this is that the the airport system in the south east eventually fills up.
And by the 2040s and 50s, you're really starting to see benefits coming through. So there's a question in a sense about when do things fill up as much as has the economic case deteriorated in absolute terms?
09:31
09:31
Speaker 2
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Speaker 2
I mean, obviously the frontier economics work didn't look historically at the previous work, and the previous SEG work was done by PwC in ten years ago, and it was a completely different modelling set up there. I also peer reviewed that. What I would first say though, I mean, you introduced it by talking about 0.05% GDP. I would say that is actually quite a material and significant impact from a transport project. I'm estimating that that is equivalent to about a 4.8% real rate of return.
And if you compare that to a government gilt, which stripping out inflation, that's about that compares to about 2%. So this is actually for a transport project, 0.05%. GDP is actually really quite large. It's not as large as what the PwC model did ten years ago, but I was highly critical myself and others who did that, who did the peer review were highly critical of what they did. So I wouldn't say that the other than for the reasons that Ian has said, which I won't repeat, I won't say that the the case has been diminishing.
It was possibly overstated in terms of the SCG work, not the the welfare analysis. It was overstated before , and I think a 4.8% real return is still high for a mature economy with a very well connected already. So again, we would probably want to look at that. And I'm sure we're going to come on to that further.
And if you compare that to a government gilt, which stripping out inflation, that's about that compares to about 2%. So this is actually for a transport project, 0.05%. GDP is actually really quite large. It's not as large as what the PwC model did ten years ago, but I was highly critical myself and others who did that, who did the peer review were highly critical of what they did. So I wouldn't say that the other than for the reasons that Ian has said, which I won't repeat, I won't say that the the case has been diminishing.
It was possibly overstated in terms of the SCG work, not the the welfare analysis. It was overstated before , and I think a 4.8% real return is still high for a mature economy with a very well connected already. So again, we would probably want to look at that. And I'm sure we're going to come on to that further.
09:33
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09:34
Scott Arthur
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Scott Arthur
So the 0.0.5 percent, you compare that to other transport projects. But normally when I think about transport projects they're delivered by the government. And that's a different context. This isn't a government. This won't be a government funded project will it. It's a private investment. So is transport projects a correct? I know it is a transport project, but is that the correct comparator in this context?
09:34
09:34
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09:34
Speaker 2
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Speaker 2
Part of part of the the overarching process within the government is, is we're looking at it from a wellbeing or a quality perspective, which is the economic case. And there is also an interest in the economic performance of a the economy or the nation as a consequence of the infrastructure. So we look at that as well. Now, generally speaking, transport is something that contributes across the piece to quality of life and to the economy.
So we would always expect the rate of return on a transport investment to be lower than something that was maybe purely focused around business. Okay.
So we would always expect the rate of return on a transport investment to be lower than something that was maybe purely focused around business. Okay.
09:35
09:35
Speaker 3
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Speaker 3
Yeah, so I mean, I personally think the primary driver is this decline in business passenger demand. I mean, just for context, you know, back at the time of the Airports Commission assessments, the DFT was forecasting something like 93 million business passengers in the UK aviation system in 2050. That's now dropped down to somewhere around 50 million, which is essentially implying more or less no growth between now and 2050 in business passenger demand. And that feeds both into the welfare assessment and the ticket fare savings that drive the appraisal and the GDP assessment.
So that is a fundamental change in terms of our expectations about the future. But I would just add that I think what we're what we need to investigate here is not just the question of is there a beneficial GDP impact? But is that impact, you know, worthwhile relative to the cost of the scheme, social and otherwise? And there have been some material changes in the way that we look at those costs. So even just looking back, for example, to the period since the jet zero strategy, you know, the government has now changed its position such that it's expecting residual emissions from aviation of 41 million tonnes in 2050 instead of previously only a few years ago, 15 million tonnes now, why is that relevant to today? Well, of course, under a net zero legal obligation, the plan is to pay to capture those emissions.
And that's a cost of this intervention. So, you know, the scheme will be responsible for expanding the envelope of the number of emissions that will have to be paid and bought back, you know, potentially by the state or otherwise. But what we don't have is any kind of mechanism to secure that. What we have in the appraisal is a recognition of that of that loss, which is why there's such a negative overall appraisal assessment here, because there's no way of dealing with that, that future cost.
But that needs to be weighed against that that scheme. And that's something that we didn't have, partly because we didn't have the net zero commitment back in 2017, alongside the other changes that we've seen, including things like use of remote communication technologies, Brexit and all the rest of it. That's a material consideration here.
So that is a fundamental change in terms of our expectations about the future. But I would just add that I think what we're what we need to investigate here is not just the question of is there a beneficial GDP impact? But is that impact, you know, worthwhile relative to the cost of the scheme, social and otherwise? And there have been some material changes in the way that we look at those costs. So even just looking back, for example, to the period since the jet zero strategy, you know, the government has now changed its position such that it's expecting residual emissions from aviation of 41 million tonnes in 2050 instead of previously only a few years ago, 15 million tonnes now, why is that relevant to today? Well, of course, under a net zero legal obligation, the plan is to pay to capture those emissions.
And that's a cost of this intervention. So, you know, the scheme will be responsible for expanding the envelope of the number of emissions that will have to be paid and bought back, you know, potentially by the state or otherwise. But what we don't have is any kind of mechanism to secure that. What we have in the appraisal is a recognition of that of that loss, which is why there's such a negative overall appraisal assessment here, because there's no way of dealing with that, that future cost.
But that needs to be weighed against that that scheme. And that's something that we didn't have, partly because we didn't have the net zero commitment back in 2017, alongside the other changes that we've seen, including things like use of remote communication technologies, Brexit and all the rest of it. That's a material consideration here.
09:38
09:38
Speaker 3
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Speaker 3
I mean, to put it simply, I suppose for me it isn't specified. The the reality of the test is that to be able to judge, you would need to have some sort of benchmarking of what would be an acceptable level of beneficial impact relative to the costs of the scheme, both economic and environmental and otherwise, and social. And actually, the thing that I find most shocking about the way that it's currently written is that at two points, I think it's paragraphs 5.92 and 5.99, the test asks the applicant to assess beneficial effects.
It mentions that at one point, a break to provide a breakdown of wider benefits, and at another point to provide information on expected benefits without reference to costs, which sort of suggests that the intention is to ask the applicant to provide a essentially a puff piece or a propaganda piece about their own scheme, which doesn't actually appraise the full system. Who would have.
It mentions that at one point, a break to provide a breakdown of wider benefits, and at another point to provide information on expected benefits without reference to costs, which sort of suggests that the intention is to ask the applicant to provide a essentially a puff piece or a propaganda piece about their own scheme, which doesn't actually appraise the full system. Who would have.
09:39
09:39
Speaker 3
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Speaker 3
I mean, clearly it does, I think. But if you refer back to what we've seen recently with the Luton and Gatwick decisions whereby, you know, sort of initial recommendation was, was, you know, opportunity was given to the planning inspector to make their recommendation. And in both cases, their initial recommendation was actually that the economic benefits were not sufficient to outweigh the environmental costs. But then later on, the government has overturned those recommendations anyway. I think it leads to some skepticism as to essentially how what the value of of that of this process really is likely to be.
The government has set its intention here. It's asked the government, the provider, to present their benefits. Whatever level those may be, seems likely that they will be deemed to be acceptable or overturned if they are not.
The government has set its intention here. It's asked the government, the provider, to present their benefits. Whatever level those may be, seems likely that they will be deemed to be acceptable or overturned if they are not.
09:40
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09:40
Speaker 3
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Speaker 3
Well, it's also important to note that the figures you quoted are only for the UK side impacts. There's a there's a subsequent assessment further down which identifies, I think, around -80 billion to -120 billion when considering the the global impact sphere, I suppose. And I don't think we're a society in the habit of only considering impacts that occur within the domain of our borders. I'd like to think that we're we're better than that.
I would I mean, I'd be interested to hear from the DFT on this, but I would be I wouldn't be surprised to hear that. That's potentially the worst net present value appraisal outcome that a government scheme has ever delivered in history. I, I can't prove that point. It is. It is quite extraordinary. And as I say, it reflects a number of different factors, but particularly the inadequate sort of policy infrastructure in place to deal with the climate emissions and climate damage of the scheme.
I would I mean, I'd be interested to hear from the DFT on this, but I would be I wouldn't be surprised to hear that. That's potentially the worst net present value appraisal outcome that a government scheme has ever delivered in history. I, I can't prove that point. It is. It is quite extraordinary. And as I say, it reflects a number of different factors, but particularly the inadequate sort of policy infrastructure in place to deal with the climate emissions and climate damage of the scheme.
09:41
Jacob Collier
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Jacob Collier
You also did some analysis of jobs created, and I think your forecast said that 15,200 jobs would be lost in the wider regions of the UK, either in or by 2050, and a further 6400 displaced within London and the South east. Can you elaborate on that? Because obviously, one of the great principles behind this was this is going to create jobs. And yet you're telling us that actually the wider effect of this is is going to be negative on jobs.
09:42
Speaker 3
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Speaker 3
Yeah. So I mean, what we've what we've done there, the government has presented in its analysis the the jobs impact, what that impact actually is, is just a local impact within the sort of bounds of the supply chain of the, of the airport. So it's not a system level jobs impact, it's just a sort of supply chain of, of the at Heathrow itself. And that is more or less derived by multiplying the number of passengers you've got by the number of jobs you expect as a result.
But what the government haven't provided is the equivalent for the airports around the country that will lose passengers as a result of this expansion. It's the same multiplication. It's not something particularly sophisticated. It's still only relates to the sort of aviation supply chain as opposed to the the nation. But yes, it shows losses around the country.
But what the government haven't provided is the equivalent for the airports around the country that will lose passengers as a result of this expansion. It's the same multiplication. It's not something particularly sophisticated. It's still only relates to the sort of aviation supply chain as opposed to the the nation. But yes, it shows losses around the country.
09:43
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Speaker 3
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Speaker 3
As far as I'm aware, there's no there's no read across there, but I don't know the details of what they produce, but it sounds like what they're probably talking about. There is more airfare ticket savings to to passengers flying at Gatwick as a result of the competition, which which probably has limited impact in terms of jobs.
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09:44
Speaker 3
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Speaker 3
I think it clearly not. And I think you don't have to just look only at the appraisal report to see that. But you can also open up the appraisal of sustainability, where another consultancy has had another look at the same question and where they've been, where they've taken an opinion on the national impact of this, which of course is not limited to just the cost benefit analysis in the appraisal, but is their view of the broader profile of the scheme, which the government intends to rely on to ignore their own appraisal, they conclude that the national benefit is uncertain, and they also include several points that the impacts are unequal across groups and places of the UK.
09:44
Jacob Collier
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Jacob Collier
You also talked, I think, in your analysis of the reliance on carbon capture and storage to address the residual emissions, but there was no funding mechanism put in place for that. Now, if this is going to be paid for by the the proposers themselves, don't we need to know how they're going to put that in in place and how that's going to be funded?
09:45
Speaker 3
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Speaker 3
Yeah, absolutely. So the Whitehead Review is has been published and suggests that the the cost of capture could be anything from sort of £169 per tonne to well over £400 per tonne. We are legally obliged to meet our targets and therefore , someone will have to pay that fee to deal with these emissions. Currently, under the the policy landscape as we have it, there is no mechanism for that to deal with it. We have to assume, given the lack of mechanism as it stands, that the government will pay that and it falls upon the people of Britain to pay that cost, which, as it happens, we estimate, could run to the sort of 1.67 billion, which is roughly or similar to the GDP impact that has been claimed as a benefit from the scheme.
So that could be wiped out quite quickly. Of course, there is a world where future policy puts this on the airlines, but if if that were to happen alongside the actual astronomical costs of this scheme, which are likely to also fall on the airlines, and we're going to hear from them about that later in this process. Of course, what we might find is that if that cost was passed through, there would be no need for this scheme because there wouldn't be the demand, because it would increase the airfare price, and therefore you wouldn't have the demand to generate passengers and expanded Heathrow, particularly given it's the most expensive airport or one of the most expensive in the world already.
So that could be wiped out quite quickly. Of course, there is a world where future policy puts this on the airlines, but if if that were to happen alongside the actual astronomical costs of this scheme, which are likely to also fall on the airlines, and we're going to hear from them about that later in this process. Of course, what we might find is that if that cost was passed through, there would be no need for this scheme because there wouldn't be the demand, because it would increase the airfare price, and therefore you wouldn't have the demand to generate passengers and expanded Heathrow, particularly given it's the most expensive airport or one of the most expensive in the world already.
09:46
Jacob Collier
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Jacob Collier
Indeed, your modelling said that the new runway will not be commercially viable if required to pay for itself from the users of the new infrastructure because of the impact on on landing fees. So will there be cross-subsidy? There are users of the existing infrastructure going to have to to pay what, between 940 and 1.8 billion a year?
09:47
Speaker 3
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Speaker 3
Yeah. So the the current CAA regulatory model would , unless radically changed in the coming months, which looks unlikely, would lead to a position where all users of the of the airport, including runways one and two, would pay towards the cost of this expansion, probably much of it paid before the new runway ever opened. That that principle of cross-subsidization subsidization is actually quite strongly recommended against by ICAO, the international or the UN body on aviation, because it produces perverse economic outcomes where non-viable schemes can be essentially promoted nonetheless.
But it it is necessary to run this scheme in that way, because it would never stand up on its own two feet. It's so astronomically expensive, running over 50 billion if you include surface transport access, that the users of the new runway would never be able to pay enough to for it to be commercially viable to pay that fee, and hence why others will be asked to pay it. But I think the airlines actually are also concerned that even if you do that cross-subsidization, you still don't have a viable project.
And the Dft's own forecast analysis, which includes the pass through of aero charges. Strangely, for me, the the central analysis doesn't assume that pass through, but that would be the basic assumption that it will be passed through shows a 20 million passenger drop in the 2030s. As a result of the higher fees they have to pay to pay for the new runway. So we could actually end up with a Heathrow in the 2030s, which is smaller than it is today because of passengers being lost to pay for this scheme.
But it it is necessary to run this scheme in that way, because it would never stand up on its own two feet. It's so astronomically expensive, running over 50 billion if you include surface transport access, that the users of the new runway would never be able to pay enough to for it to be commercially viable to pay that fee, and hence why others will be asked to pay it. But I think the airlines actually are also concerned that even if you do that cross-subsidization, you still don't have a viable project.
And the Dft's own forecast analysis, which includes the pass through of aero charges. Strangely, for me, the the central analysis doesn't assume that pass through, but that would be the basic assumption that it will be passed through shows a 20 million passenger drop in the 2030s. As a result of the higher fees they have to pay to pay for the new runway. So we could actually end up with a Heathrow in the 2030s, which is smaller than it is today because of passengers being lost to pay for this scheme.
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Speaker 3
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Speaker 3
I mean, I would imagine if the scheme proceeds, there will be some profit to be had because that would suggest it's commercially viable, although that seems doubtful. But if it is the final question for us to ask as to where that profit arises, the DFT recognise in their impact in their here impact appraisal, that we also have to consider the the domicile of ownership. And of course, Heathrow is predominantly owned overseas and therefore the airport's profits are likely to flow overseas.
The. The GDP numbers also need to be considered in that light that. Those are sort of independent of exactly who is gaining that additional value created. A portion of it likely is not to UK domiciled entities.
The. The GDP numbers also need to be considered in that light that. Those are sort of independent of exactly who is gaining that additional value created. A portion of it likely is not to UK domiciled entities.
09:51
Jacob Collier
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Jacob Collier
Okay. Thank you very much. The National Policy statement states that the scheme promoters will be required in their applications to provide credible evidence of the economic impact across the country. What more, I'm addressing our our panel in the room now, Mr. Chapman, what more credible evidence do you think they can provide?
09:52
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09:52
Speaker 1
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Speaker 1
I mean, from the department's perspective, what we really mean by credible evidence is we're looking for scheme promoters to identify supply side benefits that will flow from their intervention. What we have in the appraisal report is quite a high level analysis, particularly on, say, the regional distribution of benefits. What we'd be looking for is more detailed supply side impacts from those scheme promoters. So that's what we mean by credible evidence.
09:53
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09:54
Rebecca Smith
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Rebecca Smith
I can perhaps say what would I consider to be credible economic evidence if that's helpful for the the panel. So I would look at economic evidence as being credible, where it corresponds to real world observed consumer and commercial behaviour. So it's consistent with the behaviours that we would expect to see in the real world is, and I agree with the point made by Alex around, considering the costs and the benefits of a particular policy, or in this case, expansion and the trade offs which come with that is complete in that it captures the whole range of costs and benefits and does not seek to say, we will focus either on the costs or on the benefits, or on things that we can quantify precisely at the cost of things which are harder to estimate but may be material.
And then based on a set of economic principles, clearly explained and with proportionate sensitivity analysis. Thank
And then based on a set of economic principles, clearly explained and with proportionate sensitivity analysis. Thank
09:56
Jacob Collier
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Jacob Collier
you, Mr. Sheppard. So looking to take everything into account, providing a balanced view, which then prompts me to ask Mr. Mulhern in the communication on the. Hence, the government says the scheme could deliver over a 40 billion of benefit to the UK, but that figure actually derives from the. Here the assessment report and the government has actually cherry picked the upper bound estimate of the benefit side of its own cost benefit analysis.
That doesn't seem to conform to what Mr. Sheppard was saying would be a reasonable way to proceed. Does it?
That doesn't seem to conform to what Mr. Sheppard was saying would be a reasonable way to proceed. Does it?
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10:00
Speaker 2
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Speaker 2
On the credible evidence side of things. I would echo the the views of Doctor Chapman and, and Matt Sheppard. But what I would add a little bit to give a bit more flavor to it is that if we are making statements about claims about jobs, for example, I would I would expect to see some evidence about what the job market is like in these respective places. So, for example, it does appear to me on reading the the here assessment report from the Department for transport, and Doctor Chapman appears to have interpreted it the same way that jobs are moving from regions into the local Heathrow area.
So, for example, a credible piece of analysis that would support that would be that the housing market can support an extra 6000 workers in Heathrow. Where are these workers going to live? The next thing is, is that and again, the strength of the model that frontier have built is that it's able to handle these changes in the job market. Now, in an economy like ours, we're operating pretty much at full employment. I know there's sections of the labour market which are not, which are dysfunctional and aren't working very well.
But in the main, the economy works very well and these jobs will sort themselves out. And that is what we see that comes out of this model. So we would only be expecting to see job losses if the parts of the parts of the economy where the jobs move from are operating very well. So I would expect to see a piece of analysis that either shows that where these jobs are leaving is functioning well or not functioning well.
So, for example, a credible piece of analysis that would support that would be that the housing market can support an extra 6000 workers in Heathrow. Where are these workers going to live? The next thing is, is that and again, the strength of the model that frontier have built is that it's able to handle these changes in the job market. Now, in an economy like ours, we're operating pretty much at full employment. I know there's sections of the labour market which are not, which are dysfunctional and aren't working very well.
But in the main, the economy works very well and these jobs will sort themselves out. And that is what we see that comes out of this model. So we would only be expecting to see job losses if the parts of the parts of the economy where the jobs move from are operating very well. So I would expect to see a piece of analysis that either shows that where these jobs are leaving is functioning well or not functioning well.
10:03
10:03
Daniel Francis
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Daniel Francis
Thank you. Chair. So as the chair said, there's those two pieces of analysis. So firstly, how should they be read together? And secondly, the here notes that the economic growth results from the frontier work are not wholly additional to the welfare estimates. So how do how do we consider them together in that context?
10:04
Speaker 1
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Speaker 1
I start on that. So thank you for the question. I mean, I think we are clear that you shouldn't see these two things as entirely complementary, that you can't add the two numbers together. But I think the the hear the appraisal report is not the tools that we have in conventional appraisal are not really able to capture some of the key things that the primary focus of the work that frontier has done.
So in particular, the trade impacts and the productivity effects of that higher connectivity. I would also point out that what we have in that report is a sort of an impact on GDP, an annual figure by the sort of 2050, 20, 55 point that is different from the net present value figures that we've just been talking about in the here, which is a some a discounted sum of values over time. So they're not quite comparable in terms of the scale of the number that you're looking at.
If you standing back and looking at the two together, I think while we say these are not wholly additional, I think it is fair to say they are there's a significant amount of additionality in what we find in the CG modelling, because it's tackling those effects on trade and productivity, which are not captured in the here. So the here is not entirely a complete picture, and you need to look at it together with the GDP benefits to get the full picture of the benefits and costs of the scheme.
So in particular, the trade impacts and the productivity effects of that higher connectivity. I would also point out that what we have in that report is a sort of an impact on GDP, an annual figure by the sort of 2050, 20, 55 point that is different from the net present value figures that we've just been talking about in the here, which is a some a discounted sum of values over time. So they're not quite comparable in terms of the scale of the number that you're looking at.
If you standing back and looking at the two together, I think while we say these are not wholly additional, I think it is fair to say they are there's a significant amount of additionality in what we find in the CG modelling, because it's tackling those effects on trade and productivity, which are not captured in the here. So the here is not entirely a complete picture, and you need to look at it together with the GDP benefits to get the full picture of the benefits and costs of the scheme.
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Speaker 2
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Speaker 2
I would echo Ian's point. The the the two analyses are producing two economic metrics, but they're different ones a welfare well-being, quality of life metric. And the other is a pure monetary term. And. The what's quite the frontier analysis doesn't include the direct use benefits of the. Using the air services and therefore which is which very much is the focus of the analysis. So there's quite a lot of complementarity, but you can't add a GDP number to a welfare number.
So you have to you can adjust the the frontier number, the GDP number from there. I think primarily getting into the technical nature of, of, of GDP of what how you measure GDP. But broadly speaking, you, you would take out the investment part of the GDP and you would also have to adjust the, the, the GDP associated with new workers who are coming into the, into the, into the economy. But, but mainly that that that they are , you can quite easily bring the two things together.
So you have to you can adjust the the frontier number, the GDP number from there. I think primarily getting into the technical nature of, of, of GDP of what how you measure GDP. But broadly speaking, you, you would take out the investment part of the GDP and you would also have to adjust the, the, the GDP associated with new workers who are coming into the, into the, into the economy. But, but mainly that that that they are , you can quite easily bring the two things together.
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Rebecca Smith
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Rebecca Smith
Yeah. I think just to build on that. So there would need to be an additional amount of analytical work before you could add the two together. I would just emphasize in general, as the other ones have said, you can't. These are two different ways of looking at the the challenge, because of the focus of the work that we did being around trade and investment and productivity, there is being the primary focus.
There are other factors as well that and those factors not being captured within the. Here in this specific example, that's what leads to them being largely complementary. It's not a universal rule. It's something that's quite specific to this case.
There are other factors as well that and those factors not being captured within the. Here in this specific example, that's what leads to them being largely complementary. It's not a universal rule. It's something that's quite specific to this case.
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Speaker 1
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Speaker 1
I think the. The, the primary reason for that is that conceptually, it is hard to know for certain what we try to do with a transport analysis. Guidance. The department's guidance on how to assess transport schemes is to try to delineate different effects so that there aren't overlaps between them, and we're not double counting benefits. We want to avoid doing that as much as possible. And because these are fundamentally different ways of looking at things, one is a welfare basis.
The other one is a GDP basis. It's we can't be 100% sure that there aren't overlaps in some of the benefits. And empirically, it is hard to be certain that you've got rid of that overlap by adding them together. That's not to say an attempt couldn't be made to do that, but it is complicated. There's a lot of judgment involved. And so at this stage, we've we've we've kept them, kept them separate.
The other one is a GDP basis. It's we can't be 100% sure that there aren't overlaps in some of the benefits. And empirically, it is hard to be certain that you've got rid of that overlap by adding them together. That's not to say an attempt couldn't be made to do that, but it is complicated. There's a lot of judgment involved. And so at this stage, we've we've we've kept them, kept them separate.
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Speaker 3
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Speaker 3
Just very briefly. I mean, the the GDP analysis is, is, is a very, very thin assessment of whether this is a good policy, that there are many ways to create GDP, GDP. You could you could chop down every tree in Britain and sell it and you'd probably gain GDP. But that doesn't mean you want to do it. So, you know, the the fundamental question that the welfare based appraiser asks is actually, you know, who gains and who loses and why.
And, you know, there's so many things that the GDP assessment is blind to. I the others on the panel can correct me if I'm wrong on this, but, you know, the sort of the carbon debt that it builds up that has to be paid off by government that runs into tens of billions over the period, is not captured in any way in that GDP assessment. You'd need to, you know, completely reform the way the model works to capture that.
Where I'm disappointed in the in the appraisal, is that what it needs to do is it needs to look at the distribution of welfare and costs and benefits. And actually, you know, it promotes these airfare savings as, as the as the primary benefit of the scheme. But really to actually understand if this is something good to do a good policy, you need to look at the distribution of those benefits, who gets them. And that was a huge focus of the recent government commission.
Green Book Review was to start asking this question, why is it we're always favoring London in the South East? The answer is basically because, you know, we're not considering the kind of broader social benefits of scheme investments. But it's really disappointing to see then that this appraisal doesn't use any of the tools it has available in the in the Green Book system to actually ask those questions. All those airfare savings, who gets them? Is it the wealthiest in society? Is it residents of the southeast, or is it those living in the wider parts of the country on lower incomes? I can hazard a guess at the answer to that question, but that's what a welfare assessment should do.
But actually, in this case sort of doesn't.
And, you know, there's so many things that the GDP assessment is blind to. I the others on the panel can correct me if I'm wrong on this, but, you know, the sort of the carbon debt that it builds up that has to be paid off by government that runs into tens of billions over the period, is not captured in any way in that GDP assessment. You'd need to, you know, completely reform the way the model works to capture that.
Where I'm disappointed in the in the appraisal, is that what it needs to do is it needs to look at the distribution of welfare and costs and benefits. And actually, you know, it promotes these airfare savings as, as the as the primary benefit of the scheme. But really to actually understand if this is something good to do a good policy, you need to look at the distribution of those benefits, who gets them. And that was a huge focus of the recent government commission.
Green Book Review was to start asking this question, why is it we're always favoring London in the South East? The answer is basically because, you know, we're not considering the kind of broader social benefits of scheme investments. But it's really disappointing to see then that this appraisal doesn't use any of the tools it has available in the in the Green Book system to actually ask those questions. All those airfare savings, who gets them? Is it the wealthiest in society? Is it residents of the southeast, or is it those living in the wider parts of the country on lower incomes? I can hazard a guess at the answer to that question, but that's what a welfare assessment should do.
But actually, in this case sort of doesn't.
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Speaker 1
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Speaker 1
So the department's been involved in CG modelling and CG modelling in many different domains over many years. We in this case, we've worked very closely with frontier, provide working with them to understand the model and particularly with the centre of Policy Studies that owns the model. So we've met with them, interrogated the workings of the model, and throughout we've involved Professor Laird as our peer reviewer to challenge and provide a constant stream of notes and discussion with frontier to make sure that we were all content with the way the analysis was proceeding.
So this isn't something that's just been done and handed to us. It's been something we've been very closely engaged with quality assurance throughout the process.
So this isn't something that's just been done and handed to us. It's been something we've been very closely engaged with quality assurance throughout the process.
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Speaker 3
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Speaker 3
So the I mean, the DFT has a a well-developed model. I'm not going to sort of sit here and critique it. And I, I don't know all the ins and outs of it. The there are potentially some questions about the the veracity of the elasticities and things like that. And it. But I'll leave that to others. My biggest concern with the forecasts sort of package that we have in front of us is the scenarios that we've been offered.
So the as as we've discussed, the, the, the high likelihood is that actually, in order to, for this scheme to ever get off the ground and indeed for aviation more broadly to, to, to be compatible with our climate targets,
So the as as we've discussed, the, the, the high likelihood is that actually, in order to, for this scheme to ever get off the ground and indeed for aviation more broadly to, to, to be compatible with our climate targets,
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Speaker 1
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Speaker 1
Proposal itself does not seem to grapple with a sensitivity test, at least, or a scenario of higher carbon prices. So just to give you a concrete example, at my is that the. assumed carbon price paid on. international long haul flights beyond the EU in 2050 is only. £30 per tonne, which is. dramatically lower than both the sort of social cost of carbon and the levels that have been that are required to manage demand.
So I'm concerned that what we've got here in front of us is an unrealistic scenario in terms of the pass through of how carbon is going to be dealt with in the future and why that matters. It goes back to this point about whether there actually is demand for the scheme, because what we've got right now is a scenario in front of us, which assumes that flying is going to be really, really cheap, and therefore there's going to be lots of demand.
And in that world, maybe that's true, but how realistic is that? Is the government going to independently pay for all of the carbon offsets that it's expecting the system to need? I think the the people at large would probably be quite unhappy with that. I think the expectation is that passengers will need to, but that's not the central scenario that's in front of us here. And the second point is sort of similarly, the, the , the scheme is incredibly expensive.
And as a result, it's very likely that high charges to the passengers at Heathrow Airport will be needed to pay for it. But actually, the the sensitivity scenario in the. forecasts where they look at the impact of the pass through of those. charges is a separate sensitivity. It's not the core scenario. So the core scenario assumes that there is no pass through, which I again find unusual.
But the bigger. question is not those two things.
So I'm concerned that what we've got here in front of us is an unrealistic scenario in terms of the pass through of how carbon is going to be dealt with in the future and why that matters. It goes back to this point about whether there actually is demand for the scheme, because what we've got right now is a scenario in front of us, which assumes that flying is going to be really, really cheap, and therefore there's going to be lots of demand.
And in that world, maybe that's true, but how realistic is that? Is the government going to independently pay for all of the carbon offsets that it's expecting the system to need? I think the the people at large would probably be quite unhappy with that. I think the expectation is that passengers will need to, but that's not the central scenario that's in front of us here. And the second point is sort of similarly, the, the , the scheme is incredibly expensive.
And as a result, it's very likely that high charges to the passengers at Heathrow Airport will be needed to pay for it. But actually, the the sensitivity scenario in the. forecasts where they look at the impact of the pass through of those. charges is a separate sensitivity. It's not the core scenario. So the core scenario assumes that there is no pass through, which I again find unusual.
But the bigger. question is not those two things.
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Speaker 3
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Speaker 3
Thank you Matt. Thank you. I'll perhaps leave it to Ian to comment on the sort of totality of the the passenger forecasts. I should say that the analysis that we did took those passenger. forecasts as as an input. So we haven't reviewed those. I would like to pick up just one of the points that Alex is making around the degree of cost pass through and how the how that perhaps works, because I think that speaks to one of the key mechanisms within the department's forecasts.
So Alex, I think is right in, in a standard.
So Alex, I think is right in, in a standard.
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Speaker 3
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Speaker 3
Then you'd. expect the. prices charged to. consumers to. increase above the competitive level at Heathrow so that you balance the. demand for flights at Heathrow with the supply that's available now, the charges that Heathrow can levy for to airlines for landing there are. regulated by the Civil Aviation.
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Speaker 3
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Speaker 3
But that then means that the. prices that end passengers are paying are above the competitive level. And so it's not. clear to me that there would be complete pass through of the cost of Heathrow expansion, reflected in the. charges that Heathrow levies to the airlines would necessarily then be reflected in the charges that the airlines levy on passengers, because those fares are already . Above
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Jacob Collier
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Jacob Collier
I hope that's helpful. In answer to your question about robustness. I think it's it's we have to be clear. These are. forecasts and there's a lot of uncertainty in. forecasts and and the and the department. I mean, what I did do see in the report, I mean, it is a bit later on is that they have got different. scenarios in there. And this is the standard way of dealing with uncertainty.
So there has been quite a bit of discussion to an extent of, of like the. specification of the test and the pass through costs and what these forecasts actually are.
So there has been quite a bit of discussion to an extent of, of like the. specification of the test and the pass through costs and what these forecasts actually are.
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Jacob Collier
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Jacob Collier
is what is the base level of demand that we're working with. And this is uncertain. And the best way of dealing with that is through some form of scenario analysis. And when Mr. Gardner was asking questions about credible evidence, one of the things Matt mentioned was also treatment of. uncertainty and scenario analysis. And this is absolutely critical. And we shouldn't be treating passenger. forecasts as single point estimates.
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Alex Mayer
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Alex Mayer
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Jacob Collier
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Jacob Collier
that? That was to James having not done a review of the forecasts. Right. I'm familiar with the road traffic. forecasts that we use. And in the road traffic system, we generally speaking, they definitely use the word most likely. Do they. Are they. Because I think you need to be careful with this words because generally we present. Often these are presented as.
scenarios and without a probability being attached to them.
scenarios and without a probability being attached to them.
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Jacob Collier
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Jacob Collier
You would it I mean, I I'm an academic and so I have the privilege of not having to. I can advise decision makers and I have the privilege of not having to maybe make that decision and the hard decision. What we would say is that it depends on how risk averse you are. So if you are risk averse, you maybe make the decision off the lower set of forecasts. And if you're a risk seeker, you might use the higher set of forecasts.
Now that is for the decision maker and that is yourselves and. government to to be doing that. And . It's for the
Now that is for the decision maker and that is yourselves and. government to to be doing that. And . It's for the
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Speaker 4
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Speaker 4
When the population changes as well. And trying to factor that all into our projections. Now, these are projections. They are highly uncertain. You we are in our core projection. inevitably somewhat reliant on past trends and past relationships. And that's why we do this scenario analysis, because we know that things can break those past relationships. But that is, I think the sensible thing to do is to say that the most likely is that continuation of recent relationships.
There's one thing I would say , just on the point about risk, I would slightly differ from what James said in the sense that, you know, essentially the risk is symmetrical. If you if you if you are, there's chances of undershooting or overshooting these core projections. And, you know, either way, if you make a decision in the wrong direction, it could be problematic for one reason or another. So it's not like there's a safe decision, if you like, or a safe way to look at it.
You have to sort of think about . The
There's one thing I would say , just on the point about risk, I would slightly differ from what James said in the sense that, you know, essentially the risk is symmetrical. If you if you if you are, there's chances of undershooting or overshooting these core projections. And, you know, either way, if you make a decision in the wrong direction, it could be problematic for one reason or another. So it's not like there's a safe decision, if you like, or a safe way to look at it.
You have to sort of think about . The
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Speaker 4
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Speaker 4
kind of a straight line projection into the future? Well, it's very a very good challenge. I mean, I think we can never we can never know whether we've taken enough account of these things. One of the scenarios is the technology development scenario in our, in, in the, in the business case, which looks at some of the. potential improvements you might get in aviation technology that might make the case. significantly better.
But as you say, there's all sorts of other changes we might imagine would happen across society, which might have further impacts on, say, business travel or, or whatever else. And we can't know for sure. So in a sense, the purpose of the scenario is just to give you a sense of the scale of how the case changes, how the numbers look when you start to play around with the . Future's
But as you say, there's all sorts of other changes we might imagine would happen across society, which might have further impacts on, say, business travel or, or whatever else. And we can't know for sure. So in a sense, the purpose of the scenario is just to give you a sense of the scale of how the case changes, how the numbers look when you start to play around with the . Future's
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10:43
Olly Glover
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Olly Glover
Thank you. Chair. Yes, Mr. Mulhern, I think you've touched on some of this already. Perhaps if you could briefly expand. I mean, some of our written. evidence suggests that there could be wider economic benefits not captured in the modelling and perhaps equally on the negative impact side as well. So in compiling the here, what sort of benefits or negative impacts did the . Department
10:44
Speaker 4
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Speaker 4
particularly struggle to monetise or estimate? So there are some impacts in there. So particularly we spoke before about how in the appraisal report we don't include the trade and productivity effects which are captured by the GDP modelling. So in the appraisal itself those two very. significant benefits are. effectively missing from the appraisal. There are also there's a category of effects that are missing from both of the pieces of analysis, which is.
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Speaker 4
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Speaker 4
You know, what happens because you effectively have lower fares than in the non expansion case and potentially lower costs for freight shipping as a result. So we don't have in either of those the impact of that on GDP or indeed again challenges about overlaps with other other benefits here. But we don't have you know, if households are saving their income because their fares are cheaper. What knock on effects might might that have? So there are some things in there that are.
unquantified some there are also some. environmental costs.
unquantified some there are also some. environmental costs.
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Speaker 4
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Speaker 4
much of that GDP will leave the country? We haven't done an assessment about the GDP versus the knee. So there could be a difference there. It's not immediately obvious how big that would be. But I think you need to put the two together to make a judgement. And it's not as clear cut as saying it obviously .
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Speaker 4
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Speaker 4
plausible scenarios. Do you think that's fair? I would need to look back at all our scenarios and be sure, but I think I would go back to the same point that it is difficult to just look at the appraisal report, given the. substantial benefits and some, yes, some costs that that. misses and to draw a conclusion entirely on that basis.
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Jacob Collier
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Jacob Collier
I mean, there's two pieces of work that have been going on the economic case and the frontier analysis. Now, I do think that they can be brought together and you can get a complete more complete picture. And that's partly in relation. I know Ian said that it wasn't in this case and there needs to be a bit of thought, but we've done it before and it is possible to do. And I think that, you know that that would probably be useful .
And that then sort of helps fill some of the gaps in what the the model that what the model is really good at is, is that it's linked to the.
And that then sort of helps fill some of the gaps in what the the model that what the model is really good at is, is that it's linked to the.
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Jacob Collier
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Jacob Collier
It's linked to the aviation forecast. So it's linked to the model, the, the, the demand forecasts. It's very good at dealing with the. tourism and the, the air. operations and construction. So these are what we think of as demand side impacts. And these are going to be really large. And the model is handling that in a. particularly strong manner. What what we what we do see in the model is that it's quite assumption .
Sensitive
Sensitive
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Jacob Collier
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Jacob Collier
Airport. They have worked for Heathrow Airport in the past in the analysis. Okay, I'll let Matt answer that question. But the but there are in terms of bits that are missing. So Ian mentioned air freight and the. What I see through both the here report and the . And the, the frontier work is we. I don't see the direct costs, the direct benefits to the users of Heathrow.
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Jacob Collier
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Jacob Collier
And, and I'm looking at the both sets of results and, and I'm. And I'm looking at the forecasts and I'm seeing that people. As soon as terminal capacity is made available at Heathrow, people are switching to use it. But I'm not seeing a line in the in the tables of the results showing me the benefit that they're getting from doing that. So I feel that there is a missing direct benefit. I mean, I have said living in the north of Scotland, you know, we export salmon from the Highlands and Islands.
It's trucked into Heathrow. It's it's very price sensitive, you know, in the future with very high air freight charges, it's. potentially that this market is going to be crowded out. We're going to lose customers. And that.
It's trucked into Heathrow. It's it's very price sensitive, you know, in the future with very high air freight charges, it's. potentially that this market is going to be crowded out. We're going to lose customers. And that.
11:00
Speaker 5
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Speaker 5
Benefit is not is not there. So so this this earlier on, if you don't mind, you were quite relaxed about, I think you were saying that jobs moving from regions into Heathrow, you were quite relaxed about that. You said that's just something that might happen and that's going to really affect places like Inverness, Aberdeen, Glasgow, Edinburgh isn't it? But you were quite relaxed about that, but you recognised that as a benefit. More jobs going into an already.
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Jacob Collier
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Jacob Collier
Scotland, from Inverness, I maybe that's a big ask. Maybe I gave the wrong impression about being relaxed. I actually don't believe that where these. That there will be job as much job creation I I the I my my my underlying without without seeing the evidence which there is no evidence. I would say there will be no job creation in the region of Heathrow Airport or the. Well, the the frontier model shows I estimated approximately.
7000 new jobs in in, in the economy, and the rest, I think is .
7000 new jobs in in, in the economy, and the rest, I think is .
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Jacob Collier
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Jacob Collier
another. I used to work in Tesco, sorry, one job to another or one location to another, one job to another. I don't imagine there's going to be a I don't imagine there's going to be a vast migration into London. And unless you people show me evidence that that would actually occur. We see the economy as as at full employment. And, and so, so so there will be so what? But what what where it is relevant is when you are where jobs are being removed from a.
location such as the west coast of Scotland, then there is no other jobs . For people
location such as the west coast of Scotland, then there is no other jobs . For people
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Speaker 4
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Speaker 4
So those missing things. So I just thought Ian wanted to come in on that. Yeah. I just thought it might be helpful to add some context to that because the way the. passengers are. allocated across different. airports is that airports that are much closer are much more likely to be substitutes for one another. So in large part, the. passengers who are switching to Heathrow are coming from the rest of the southeast.
So there's a lot of movement within the rest of the south east by the end of the forecast period. I think most non. southeast airports are .
So there's a lot of movement within the rest of the south east by the end of the forecast period. I think most non. southeast airports are .
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Speaker 5
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Speaker 5
Yeah but but limited impact for those. But the the concern I have is that in. Despite from Vienna, you know. Well let's not go into the holidays, but the what I don't want is, oh, whenever I want to go somewhere is I'll have to go via London just now. I've got a fantastic point to point flights from Edinburgh. I don't want to lose that.
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Alex Mayer
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Alex Mayer
And so. So I think that's part of the concern as well. And that touches on, you know, I mean , while we're on this. Let's say northern Scotland to Heathrow versus northern Scotland, point to point to somewhere else or to another hub has is that. Potential shifting of passengers and of salmon or goods? Is that is that .
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Speaker 4
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Speaker 4
Incorporated into the into the analysis? So to the extent, as James said, to the extent that people are going to say now Heathrow, because it's cheaper than it would otherwise have been, that benefit to them is not incorporated. The cheaper. freight shipping is not. incorporated in this. So those are benefits that are not directly captured. They overlap somewhat with other benefits that we capture. So we have that problem again of trying to avoid double counting.
But there . Is
But there . Is
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Speaker 5
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Speaker 5
something else there that we don't currently in the case capture. Okay, James, two quick questions for you. The what's missing from the report and your recommendations. If all those issues are addressed. What do you think that's going to the benefits overall? Do you think we'll be looking at higher GDP or lower? You talked about risk earlier. What would you what would you bet on if all those emissions were corrected. Is that correct.
Is the right word in . All
Is the right word in . All
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Jacob Collier
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Jacob Collier
your all your. recommendations were addressed. Where do you think we're heading? Well, in terms of the the actual modelling, I, we kind of the conversation moved on. But one of the things that I, I was concerned about was the, the way that the financing. How the financing treatment was modelled was. creating extra was creating benefits. It appeared to be creating benefits in the model.
And therefore it wasn't clear what the actual test was. Are we testing increased. connectivity or are we testing increased investment in the UK economy through, you know, a higher savings rate? And so, so and when you remove that, you know, because there is a dummy run, the benefits do do fall quite significantly. The, the, the, the, the, the trade cost benefit is, is based on all passengers.
Now as, as Alex has mentioned, it's about the.
And therefore it wasn't clear what the actual test was. Are we testing increased. connectivity or are we testing increased investment in the UK economy through, you know, a higher savings rate? And so, so and when you remove that, you know, because there is a dummy run, the benefits do do fall quite significantly. The, the, the, the, the, the trade cost benefit is, is based on all passengers.
Now as, as Alex has mentioned, it's about the.
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Jacob Collier
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Jacob Collier
The economic mechanism is about business travel, making connections and face to face. You mentioned about direct benefits, direct links. We see this as being quite important. But but the actual. But but it was used. But the total passengers was used as the the measure. Now I've not seen anywhere in the report anything about how what the uplift in business travel is, but ideally I would like to.
One of the sensitivity tests is that we should be using the business travel uplift,
One of the sensitivity tests is that we should be using the business travel uplift,
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Jacob Collier
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Jacob Collier
a sensitivity test from Alex Eller. He's quite cynical about. No, he's talking about baseline. So he's talking about the baseline. So what we're looking at is what Heathrow does to business travel. So if business travel doesn't change in the base it doesn't. That doesn't mean that we're not going to get an uplift in business travel from Heathrow Airport. So so I feel that the.
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Jacob Collier
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Jacob Collier
Yeah. What that meant, just very briefly, very briefly. What that meant was that I, you know, there wasn't any sort of tabling of questions and responses. But I think that generally the way these things have to be dealt with anyway is, is there are is areas of judgment. And you deal with that through sensitivity testing. So I think I'm fairly confident in that it's a good model and that it is the right sort of model to, to apply.
And but I would look . At some
And but I would look . At some
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Speaker 3
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Speaker 3
And then a series of assumptions and mechanisms within, within the model. I think we very much. welcomed the working with, with James and the sort of insight and challenge that that he provided. I think just reflecting on that. conversation and very conscious of time, I think there were five areas that James just. identified which move in different directions. So . Freight
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Olly Glover
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Olly Glover
touched on it, but Ollie got some questions. Yes. Thank you. Chair. So one of the headlines of the government's announcement about Heathrow expansion back in. January 2025 was that. 60% of the economic growth would occur outside London and the south east of England. Is this. substantiated by the analysis published alongside the draft policy statement? Who'd like to start . With that? Any
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Speaker 3
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Speaker 3
And forgive me, I can't remember the numbers off off the top of my head, but the figures are are in the . The report looks at how those. Or makes a a first view and conscious. James made comments. But also we're. We're short of time around how those benefits may be. distributed around the UK. You've given me. I . Haven't got
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Katie Lam
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Katie Lam
So why not? And what weight should we place on them? So the way that with with the way that the data has been put together is my reading of, of, of the report. And this is my reading of it. Is that the, is that the way the, the, the exports and imports are shocked from the frontier model reflects the regional trade shares, regional export, import trade shares , rather than the the shares that are going through Heathrow.
So we. So. I think I've been misquoted in the press as as the press is prone to do. And in that. But one of the. You know, I'm not saying there isn't going to be regional growth, but what I'm saying is that the the the model itself is, is not . Going
So we. So. I think I've been misquoted in the press as as the press is prone to do. And in that. But one of the. You know, I'm not saying there isn't going to be regional growth, but what I'm saying is that the the the model itself is, is not . Going
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Katie Lam
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Katie Lam
you the that regional. disaggregation you would wish because it's, it's. primarily shocking off regional trade. Now, the thing is, is that one of the things about air is that it. benefits what they call contract intensive sectors. So where people are exchanging ideas and knowledge and there's a lot of maybe control. So you want to be looking at the product you're buying. So these are so industry.
So regions which have got more contract intensive. industries are going to gain more. But the actual because that's just what air that's what that's the there's the sectors that air.
So regions which have got more contract intensive. industries are going to gain more. But the actual because that's just what air that's what that's the there's the sectors that air.
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Speaker 3
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Speaker 3
Doctor Chapman's got his hand up. I think yes, very, very brief. I completely agree with the concerns that James has raised there. And just to kind of hopefully provide some context, the committee for that, so that the assumption is that sort of trade at Heathrow looks a lot like trade across the UK, of course, where that trade also involves trade through ports. The multiple of the government's documents contain a figure of something like. £200 billion of trade per year going through Heathrow.
But it's really important to remember that something like 60% of that, or indeed this year to date. 70% is just. gold going backwards and forwards, predominantly to Switzerland, but sometimes other places. And that form of trade has more or less. negligible GDP or wider benefits. And they also have other factors of trade, such as the imports of low value goods from China, which are under the tariff regime, which actually this government is planning to phase out in a couple of years.
But they make up a large number of consignments at Heathrow. Those are the same parcels that are widely sort of considered now to be destroying the British high street. So you have to look very. carefully at actually, what is the trade before you can make conclusions that, oh, yes, this . Is
But it's really important to remember that something like 60% of that, or indeed this year to date. 70% is just. gold going backwards and forwards, predominantly to Switzerland, but sometimes other places. And that form of trade has more or less. negligible GDP or wider benefits. And they also have other factors of trade, such as the imports of low value goods from China, which are under the tariff regime, which actually this government is planning to phase out in a couple of years.
But they make up a large number of consignments at Heathrow. Those are the same parcels that are widely sort of considered now to be destroying the British high street. So you have to look very. carefully at actually, what is the trade before you can make conclusions that, oh, yes, this . Is
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Katie Lam
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Katie Lam
tiny fraction. Very quickly James and Matt want to come in. I just want to make the the. evidence that is, is, is now becoming clear on what the impact of air services are on the global economy or what it has been. And the econometric tests are robust. The business travel, air, the business. travellers are creating trade through.
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Speaker 2
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Speaker 2
air. services will change the amount of trade that goes through our ports. Okay. On regional growth. When we talk about growth, we think that everybody benefits. But the local authorities around Heathrow Airport, who each have different views on, on runway three or or in different ways, talk about the levels of. deprivation in the super output and many of the super output areas around Heathrow Airport. And that deprivation is growing rather than deprivation is growing around Heathrow over the last ten years, rather than in proving as as the businesses airport business has grown, does that those levels of.
deprivation feed into any of your. analysis on growth? Are they are they . Is
deprivation feed into any of your. analysis on growth? Are they are they . Is
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Katie Lam
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Katie Lam
the wider employment impacts across the UK? Well, I mean, I was just I was reading the. report and and therefore, you know, it was my interpretation of the report that matters here and can talk to that in more detail. The, the, the, the model is written, as I mentioned, this, this full employment assumption, which means there shouldn't be any more new jobs other than if the wages. increase in society.
And that brings more people are more willing to. There are people on the margin who who are choosing not to work. Maybe they've got someone else who can support them. And then with higher wages, that brings them into the labour market. So the model that so, so so my, my reading of the, of the report is that there's an extra. 7000 jobs now it and that that that would be.
primarily around the London area.
And that brings more people are more willing to. There are people on the margin who who are choosing not to work. Maybe they've got someone else who can support them. And then with higher wages, that brings them into the labour market. So the model that so, so so my, my reading of the, of the report is that there's an extra. 7000 jobs now it and that that that would be.
primarily around the London area.
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Speaker 4
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Speaker 4
jobs being in London, that is not part of the the model. No. That's correct. So we there are we allow for short term impacts on the level of regional. employment and. But in the longer term, they are held constant. So that's the modelling point. I think more generally, the mechanism by which we expect to actually see economic. impacts on the supply side of the economy is not through material changes in the total number of jobs, but in the.
composition of labour markets in particular areas. As people move either into the aviation. sector or out of it, and the difference in. productivity within those sectors. So from a sort of. broader economic.
composition of labour markets in particular areas. As people move either into the aviation. sector or out of it, and the difference in. productivity within those sectors. So from a sort of. broader economic.
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Speaker 5
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Speaker 5
It's a complex sector. There's lots of variation in the types of products. There's lots of different constraints that happen at airport level that affect freight in different ways. It's very hard to get a grip on from a modelling perspective, not least because a lot of the data around this is proprietary and and held by private companies. So it's quite difficult to actually get the data to do analysis of freight. But also then conceptually I mentioned that lower freight costs is a benefit that's not actually.
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Speaker 2
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Speaker 2
We're unable to say how big, big they are. Okay. I'm afraid that brings us to the end of this panel. We've covered an awful lot of ground, and I'd like to thank our four witnesses very much for that. And as I said, if there's anything you'd like to add, please send in in writing. I'm going to suspend the meeting for a few minutes while our next witnesses take their places.
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Speaker 7
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Speaker 7
in London? John. Well, I think the changes you listed, chair and some of the other geopolitical factors over the past few years have, of course, moved demand up and down. If you look at Heathrow now, I think we see quite a strong rebound in long haul business travel, but not quite such a strong rebound in short haul business travel, which is kind of what you'd expect, I think, given that it's.
easier to do what one might describe as sort of casual meetings online and over Zoom. And that's the experience of the pandemic. So I think the numbers, the sort of case as it were, moves up and down. But what we do know is that Heathrow is. operating at about 5% above its. pre-pandemic peak. And at that level of.
easier to do what one might describe as sort of casual meetings online and over Zoom. And that's the experience of the pandemic. So I think the numbers, the sort of case as it were, moves up and down. But what we do know is that Heathrow is. operating at about 5% above its. pre-pandemic peak. And at that level of.
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Speaker 7
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Speaker 7
It puts all kinds of stresses on the way the airport works. So the airport is a bit less resilient than one might like it to be because it's got so many. flights leaving across its two runways. We also know that there is still, as of today, huge unmet demand for. capacity at Heathrow due to the inability to get more airplanes in and out of the airport. And of course, that's why pairs of slots at Heathrow can be sold for very large sums of money, much higher than at virtually any other.
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Speaker 7
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Speaker 7
so that means two things. One is we are continuing to lose out on the direct benefits of the economic activity. Heathrow. But I think for the rest of the UK economy, outside of. aviation and certainly for the London economy, what really matters is the. connectivity that we're losing out of to the rest of the world. I think. Heathrow is still the world's best connected airport, though not, you know, there are people snapping at its heels and it is, I think, no longer the busiest airport in Europe, having lost that crown to Istanbul over the summer.
So we're losing out on. connectivity that brings. And if you are, as London is an. international business centre on an island, that. connectivity really matters for the growth of. particularly your professional and. services economy. But it also matters to the whole of the country, because we know from other airports and from other. regions that people in those regions value the. ability to transfer via Heathrow, rather than having to transfer .
Via.
So we're losing out on. connectivity that brings. And if you are, as London is an. international business centre on an island, that. connectivity really matters for the growth of. particularly your professional and. services economy. But it also matters to the whole of the country, because we know from other airports and from other. regions that people in those regions value the. ability to transfer via Heathrow, rather than having to transfer .
Via.
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Speaker 8
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Speaker 8
From, from a. perspective that, you know, Heathrow at the moment is, is to its full capacity. And, and obviously it's, you know, we, we're losing out on. connectivity to, to. Istanbul and other. airports across Europe, such as Charles de Gaulle and Schiphol Airport. And, and, you know, because of the.
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Speaker 9
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Speaker 9
third runway. From a British chambers of commerce perspective. We've looked at the case for Heathrow expansion for a number of years, and it's felt that there is a lack of. capacity and that this is the right way forward is to to expand Heathrow. It's the only UK option as a hub airport, as my colleagues have said, that that's important. Otherwise we do lose out to the.
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Speaker 9
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Speaker 9
know that trade is one of the fastest routes to that. So the Chambers of Commerce has a long, proud heritage of supporting businesses to trade more effectively. And when we looked at international trade opportunities and how do we grow exports as a UK economy, if we'd have grown exports last year by just.
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Speaker 9
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Speaker 9
Connectivity as opposed to obviously the benefit of trade. We all know that. We know from our perspective, what we do is we we look across our member businesses. So 60,000 member businesses in the network of the chambers, talking to the chambers locally about what do they get from being part of a supply chain, working with Heathrow, and . What does it
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Olly Glover
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Olly Glover
the benefits and costs. And I'll go over to Ollie. Thank you. Chair. On our previous panel we explored the very well, often very technical appraisal and economic modelling. underpinning the draft policy statement. But there may well be things that those conventional appraisal and economic. benefits can't consider. So what potential economic and employment benefits do you consider are not captured by the usual tools that are used .
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Speaker 9
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Speaker 9
For appraisal and economic modelling? If you'd like to start, should I pick up where I left off in terms of thinking about supply chains and the work of different chambers? So. So a number of the Chambers of Commerce also submitted evidence to to the Select committee, and they could. articulate why there was a benefit in terms of them working with Heathrow. So from the North East perspective, there are around 19 suppliers locally in that area that are working with Heathrow.
That adds. 3.5 million to their work. And if they can increase their capacity, if they can trade more.
That adds. 3.5 million to their work. And if they can increase their capacity, if they can trade more.
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Speaker 9
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Speaker 9
These are businesses that are using the belly hold freight at Heathrow. Absolutely, but they are. But they are whether they are part of a logistics, whether they are. exporting a capacity, there is there is a part of their a whole part of that supply chain. They also might be working in construction. There was a number of different. organizations that were submitting evidence saying that they felt that they could be.
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Speaker 7
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Speaker 7
And quite how that benefit is captured by the modelling seems to me to be important. So to. And I think you talked about this at the end of the previous session a little. Is the is the dynamic effect of improved access to international markets. And there is some modelling that Frontier Economics did, which is now quite old. I think they did it in. 2011 about the benefits of direct as opposed to indirect.
connectivity to markets. And back in.
connectivity to markets. And back in.
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Speaker 7
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Speaker 7
They estimated there was well over. £1 billion of trade that was being lost to the UK because of the lack of. connectivity to via through. viable routes. But those viable routes weren't viable because there wasn't the capacity at Heathrow. So I think there are some. broader issues which it would be useful to build into the. appraisal on the . Benefits side, As well as .
As you've talked
As you've talked
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Alex Mayer
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Alex Mayer
It's not enabling them to grow their. dedicated to to grow their. business because dedicated cargo is squeezed out and there's virtually no dedicated cargo flights at Heathrow. Is the issue. Whether cargo should be going through Heathrow in greater. capacity if runway three goes ahead or. Should there be a more dedicated cargo capacity? And Manston Airport are lobbying for for for.
reopening as a dedicated cargo airport. So, you know, to what. extent is runway three A. logistics cargo.
reopening as a dedicated cargo airport. So, you know, to what. extent is runway three A. logistics cargo.
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Speaker 7
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Speaker 7
to export capacity. Growth is a good thing. Exactly. Okay. Thank you. And I think I would very much agree with that. I mean, it's difficult to see a world where it's somehow bad for exporters across Britain that there is more. capacity and over time, cheaper. capacity at Heathrow, given the the. interconnectivity of Heathrow. Now I can see there's a bit of complexity about where that might lead to a reduction in demand, too, but I'd have thought it was sort of, on the face of it, likely to be the case that it would simply be a good thing for those businesses trying to export.
The Scottish Chambers of Commerce, who I think. described the expansion of Heathrow as a huge opportunity for Scotland, in part because of the impact that would have on the ability of Scottish businesses to export goods through Heathrow. And notwithstanding the conversation I just heard about gold going through Heathrow. I am told that Scottish smoked salmon is the biggest export by weight from Heathrow. I'm not sure how that . Stacks up
The Scottish Chambers of Commerce, who I think. described the expansion of Heathrow as a huge opportunity for Scotland, in part because of the impact that would have on the ability of Scottish businesses to export goods through Heathrow. And notwithstanding the conversation I just heard about gold going through Heathrow. I am told that Scottish smoked salmon is the biggest export by weight from Heathrow. I'm not sure how that . Stacks up
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Alex Mayer
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Alex Mayer
with gold, but one way or another it's obviously a big export. Okay, sorry. I just want to pick up something. John, you just said you said the likely benefits to UK was 50 billion. But the here report says that the. Well, they confirmed that the upper. band of the range is 40 billion. And our other witness, Alex . Chapman,
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Speaker 9
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Speaker 9
To business confidence of proceeding or not proceeding. So I started the evidence today by saying how long we'd we'd spoken about Heathrow expansion. So. So I can find the British Chambers of Commerce talking about Heathrow expansion right back to the early 2000. We know we know from looking at our data, we've we've produced something called a quarterly economic survey for the last 40 years. It gets. 5000 businesses, largely SMEs, to to respond to that every quarter.
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Speaker 9
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Speaker 9
To investment, to growth is what we find. Where we are right now is we are in a situation where many businesses say that the lack of a decision is causing them to pause, take pause for thought, and not know whether to invest or not. We now have only around. 17% of businesses responding to our survey in the last quarter, said that they are looking to invest and grow in terms of their plant machinery, operational equipment.
So that's really low.
So that's really low.
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Speaker 9
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Speaker 9
two sides to the to the same coin, I would say, which is bigger. And I would say the lack of a decision is actually the significant one. And it's not just. And the reason for saying that is it's not just necessarily on this critical infrastructure project. We see it across the board. So whenever we are out and about, talking to members and talking to them about what's happening, if we if we talk about.
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Speaker 7
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Speaker 7
there a specific reason why business confidence is being affected by the decision? Well, I think, as Kate said, it's. 2003 is the first time a British government said we should expand and create a third runway at Heathrow. And here we are in 2026, and who knows, at some point in the next decade, there may be all the paperwork done and you can start digging for a third runway or not. And I think that just. undermines global confidence in Britain as a place to invest, because in so many areas, not just.
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Speaker 7
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Speaker 7
A whole range of areas, you don't really know if you start the process of investing, how long it will take and what the deadweight costs of preparing for that are. Whereas you kind of know, if you want to build a data center in Iowa, how long that will take, and that just. debilitates the UK's competitiveness globally in attracting capital. So that's definitely a thing. I think there is then an issue about.
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Speaker 7
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Speaker 7
About government, commitment to growth, and. governments talk a good game on growth , but don't always quite deliver behind that. And I think, not least because the previous Chancellor of the Exchequer in particular, made such a strong commitment of government support for expanding Heathrow because it would drive growth. Not doing that will have a effect on confidence in investing in Britain. Even that level of support cannot be relied on to deliver projects if that's what were to happen.
But of course, as you say, there's a third impact, which is there are people who aren't flying to parts of Asia in particular, but also parts of.
But of course, as you say, there's a third impact, which is there are people who aren't flying to parts of Asia in particular, but also parts of.
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Speaker 7
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Speaker 7
Because there aren't flights, there aren't flights because there isn't capacity at the hub airport. And that's holding business growth back. Now, it's impossible to quantify that. But it is. And and indeed, and I fear, chair, this may be one of those areas where depending on what answer you'd like to get, your assumptions will get you there. But it is a common sense statement, is it not, that it must be the .
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Speaker 8
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Speaker 8
I've spent probably 16, 17 years working representing members down at Heathrow Airport. And and it's that. uncertainty as the years go on of what business, what businesses need need to do. Because honest perspective of airlines down, down at Heathrow, you know, you know, after speaking to to a lot of people, a lot of companies, a lot of airlines is the. uncertainty that they, you know, they need to have the green light for the, the expansion because the danger is that if if we if we don't, you know, give the green light to the third runway, what will the what will these airlines do already at Heathrow, looking at better connections? What are they going to do if we don't get the expansion.
They'll be looking at other. airports to, to, to look at new routes, you know, across Europe, into Asia, into China, because they are emerging markets. You know, India and China are emerging markets that obviously need connectivity. And again, you know, just reiterate what I said before we're getting left behind. And the uncertainty is that what we've . Got
They'll be looking at other. airports to, to, to look at new routes, you know, across Europe, into Asia, into China, because they are emerging markets. You know, India and China are emerging markets that obviously need connectivity. And again, you know, just reiterate what I said before we're getting left behind. And the uncertainty is that what we've . Got
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Alex Mayer
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Alex Mayer
About them expanding to, to, to, you know, how many of your members fear their jobs are at risk that members who currently work at Heathrow? And I guess you mean among all of Heathrow, not just Heathrow Airport Limited, but among all of the employers at Heathrow. How many of your members who are there now fear that their jobs are at risk?
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Speaker 8
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Speaker 8
people or businesses now operating at Heathrow? It it's those businesses are operating now that want to expand. But but but then I've got the, the, the option of other hub airports that they could take advantage on with their, with their capacity. Like, like I said, chair it, it's obviously not a statistical point of view. It's just that. uncertainty and, and pessimism about . What
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Speaker 7
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Speaker 7
aware of anything like that. Well, can I so John, so I think there's two parts to this chair. One is that there are airlines, a Chinese regional airline, for example, looking to have a base in Europe. Where can I get adequate capacity to do what it will hope to do over time, grow its business? And it's very difficult to do that at Heathrow, for all the reasons we know about capacity constraints. So that's a loss of .
Jobs
Jobs
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Alex Mayer
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Alex Mayer
fill that demand. But but not. necessarily in the long term. Okay. Right. Question to Perry. So do you think the draft MPs strikes the right balance between the interests of those who may benefit directly from new jobs and opportunities, which we've just been discussing, and people who may bear the negative impacts of. expansion and won't be able to access those benefits, and. particularly the many of your members and other people who work at Heathrow, who live in the areas that are going to be.
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Speaker 8
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Speaker 8
Affected by the third runway being built. Yeah, I'm the MPs is a balanced proposal. It is balanced in its assessment. Our caution is different. The benefit it describes cannot simply be assumed. They must be built in the draft wise economic. community and environmental questions together in one framework. That is the . Honest
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Alex Mayer
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Alex Mayer
. thousands of jobs. How many of them? We expect well paid jobs, you know. Yeah. And I mean he's Heathrow themselves in their direct. contracts for a short while. Did. Did commit to the London living wage. I don't know if we're back at that now because that was dropped at Covid. How many of the new staff will be at .
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Speaker 8
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Speaker 8
moment. Because through through the. years obviously negotiated them. Yeah. Yeah. As you know chair through the years that that we've worked we have worked with Heathrow a about employment status and about low wages. And through the years we managed to achieve livable wage, specifically in the direct supply chain. But when we talk about the, the, the Heathrow. expansion and the.
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Speaker 9
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Speaker 9
Employees around Heathrow? Okay. So we think the framework is the right framework in terms of looking at the four tests and making sure that there's equitable treatment across them. And that's really important in terms of this scrutiny from the committee and across the board. One, one of the things that we're very aware of in terms of our membership, which obviously includes Heathrow, they've established a really good. And actually, this goes for the aviation industry more broadly.
They've established good working. relationships and good. collective agreements with unions. They recognise the unions. So so that's been part and parcel of their their modelling over the last few years. It's really important that each and every one of these tests is taken into proper.
They've established good working. relationships and good. collective agreements with unions. They recognise the unions. So so that's been part and parcel of their their modelling over the last few years. It's really important that each and every one of these tests is taken into proper.
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Speaker 7
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Speaker 7
Well, as as as Kate just said, the work Heathrow Airport done to try and make sure that the spend goes through small businesses and medium sized. businesses in London and across Britain has been formidable. And it seems to me that the economic test and those four tests is is. overwhelmingly and clearly met. Now, the other tests do require, I think, serious regulatory.
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Speaker 7
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Speaker 7
In part, but not just because of Ulez, but also because of the work TfL has done, for example, on modal shift. So there's a whole range of. interventions that can be done. And we've seen. already substantial fruit around Heathrow that I think could meet that aspect, the local environmental impact of the test. There's a great deal of regulatory and other intervention that can be done to make sure that the planes that fly into Heathrow are modern planes that emit less and which produce less noise.
And there is also work on carbon, which I think it's important government does, on. creating a strong framework for sustainable aviation fuels. I think I'm right in saying that there are some flights that, over time, might very well be done using batteries and electricity, because they'll be short haul , and who knows quite where that will go. But it's plausible. But it's difficult to see there being a world where that deals with long haul flights.
So I think getting the UK SAF capacity up is a really important . Part of the
And there is also work on carbon, which I think it's important government does, on. creating a strong framework for sustainable aviation fuels. I think I'm right in saying that there are some flights that, over time, might very well be done using batteries and electricity, because they'll be short haul , and who knows quite where that will go. But it's plausible. But it's difficult to see there being a world where that deals with long haul flights.
So I think getting the UK SAF capacity up is a really important . Part of the
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Speaker 9
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Speaker 9
we need to ensure that there is that clear analysis in terms of the costs that there is, that return on investment that is expected. There are a number of organisations I know you're taking evidence from from some of the airlines, for instance, in the coming weeks that have a set of assessments of what they think should be a fair price on this and why they need . To
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Jacob Collier
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Jacob Collier
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Speaker 8
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Speaker 8
anything else that you think should be reflected in the policy statement? Yeah, I think reflected that to the chair. previously that that we expect to be built in. And again, we we over the years we've done a lot of work. The union, the GMB have done a lot of work on, on. Livable wage. salaries because many, many years ago, we, you know, many, a lot of our members were, you know, were .
Working
Working
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Speaker 8
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Speaker 8
That wasn't acceptable either wage that they were on. And we and we were and we worked together really on a collaborative approach to, to, you know, to, to reach those levels in the direct supply chain that's happening now where, you know, a livable wage and beyond is, is, is being paid. So just going back to obviously the statement that we expect that, you know, we expect the commitment built in moving. forward when, you know, when the, the Heathrow expansion gets the green light, you know, we expect livable, you know, decent a decent pensions, decent contracts of .
employment and.
employment and.
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Speaker 7
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Speaker 7
there's anything you think needs to be included? I think the national policy statement as it stands is pretty well balanced. There is more, as we heard earlier, around the economic benefits of Heathrow that I think could be built in. But the local environmental tests around noise and around pollution are sensible, as they are currently set out, and also the importance of making sure that the economic benefits are well. distributed is sensible to.
I guess the only thing I would add, as I said.
I guess the only thing I would add, as I said.
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Speaker 7
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Speaker 7
carbon. implications and it is always worth remembering that there may be more flights taking off from Heathrow, but that may mean there are fewer flights taking off from Schiphol to go to a Sydney or wherever. And I do think we need to think a bit about how, across the UK's aviation sector, the government can play its part in building the UK's . Sustainable
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Speaker 9
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Speaker 9
Aviation fuel. capacity at pace. Okay, the. The one point there is to pick up on what John said is we were very clear in the submission that the nationwide benefits that they need to be absolutely secured moving forward. So so we've we've heard from different chambers in our membership and their and their. organisations in membership about why they work with Heathrow, why they think it's important to their future capacity.
We need we need to ensure that there is that broad base in terms of across across the UK and in.
We need we need to ensure that there is that broad base in terms of across across the UK and in.
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Speaker 9
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Speaker 9
Evidence do you think they should be required to provide? We would like them to take evidence from across the broad base. So. So British Chambers of Commerce, with 51 accredited chambers across the UK, each and every one of them will have a perspective on this in terms of how they can operate in terms of thinking. Working with a hub.
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Speaker 7
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Speaker 7
Any other thoughts? Well, I think the local I mean, I said at the beginning what I thought the principal local benefits were and it's a good thing to do economic modelling, to test and to assess those benefits. But as we have just seen, economic modelling is heavily contested. So it sort of takes you as far as it takes you. But it does seem to me, as I say, for.
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Speaker 9
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Speaker 9
Your view of the impact of it? Different places around the UK is that the. So I think I think there is a wider benefit. Should we should we go back to our Scottish salmon example? Is there is there Scottish salmon today? So we know that 44% of it goes through Heathrow. We know that premium food and drink is a growing market globally right now. We know that there are there are key areas of the world that are looking to to benefit from from the UK's reputation in terms of that premium food and drink.
We think there's jobs to be. created in other areas . As well, and that can come from this.
We think there's jobs to be. created in other areas . As well, and that can come from this.
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Speaker 7
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Speaker 7
That may change. I think it is. absolutely right. There's a regulated airport, the only regulated airport in the UK that the CAA scrutinised carefully and have the resources and capabilities to scrutinise carefully Heathrow's expansion plans, the cost of those plans, the effectiveness of the delivery of those plans and the effect that will have on landing charges for airlines. But I do not think landing charges for airlines is going to.
constrain demand from Heathrow. So I think it's important it's done as efficiently and as effectively as possible. But I really think it's important . It's done. It's the increase . In.
constrain demand from Heathrow. So I think it's important it's done as efficiently and as effectively as possible. But I really think it's important . It's done. It's the increase . In.
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Speaker 7
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Speaker 7
You know, changing costs at one airport may may impact another. It may it may well, I mean, I think given if there are, as it were, concerns about the impact on other airports, then of course, of course, costs at Heathrow going up makes it more attractive to go to other airports rather than less attractive. But in the round I'm strongly in favour of competition and choice. So you can't have effective competition between different runways.
Sorry, different. airports with different catchment areas with different facets and features with different strengths and weaknesses. You can't have effective competition . Between
Sorry, different. airports with different catchment areas with different facets and features with different strengths and weaknesses. You can't have effective competition . Between
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Speaker 9
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Speaker 9
Anything you want to add that you haven't already covered on that? I mean, the thing that we haven't necessarily spoken about is in terms of the surface transport options. And that's that's obviously essential to be part and parcel of this, because if we're going to realise the benefits, then they need to be part of the scheme and understood from . The
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Speaker 9
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Speaker 9
Heathrow from other parts of the country. You'd be just as happy with them being coming in by rail. So I don't I don't know enough about it in terms of what we do know is that we know that there are a huge number of passengers that do go via Heathrow, that are domestic travellers that are using it as that hub airport, and it is the only option that we have for that right now, in terms of what we have heard from.
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Speaker 7
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Speaker 7
Anyone else got anything to add? Well, a very substantial increase in the capacity at Heathrow will make it more viable for there to be more flights from UK airports to Heathrow than is the case now, and that will support wider hubbing through Heathrow and all the arguments we know. I . Think there are
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Speaker 7
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Speaker 7
Access, but because. So. But a sort of long distance surface. So I think Manchester is one of the busiest routes in the UK between Heathrow going into and out of Heathrow. And of course, one of the ways you could get modal shift there is to improve the rail service between London and Manchester, which would make a lot of people in both London and Manchester very happy. And I think that's the sort of, you know, my view is we should be thinking about modal shift by making trains more attractive to.
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Alex Mayer
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Alex Mayer
public transport or indeed national public transport are a function of that regulatory in terms of the more the domestic. flights in and out of Heathrow, because there's. We've had. evidence that the growth at Heathrow could mainly end up going to wide bodied long haul flights . And. Yeah, and that that regional flights may not be able to afford to take the additional.
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Alex Mayer
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Alex Mayer
of thinking about a UK wide perspective. So I think it is worth considering, I suppose. Yeah. Is what your members are your members trying to get to. So when they get to Heathrow they get on a big plane that goes far away. Yeah. Is that the key thing or is or is it just as important that they can get from wherever they are in England to Heathrow? Which bit are they most .
Worried
Worried
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Speaker 9
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Speaker 9
about? They're going on a big plane far away. There's not enough of that. They're worried about three things. They're worried about. They're worried about the domestic city. So in terms of being able to to go on a short haul, they're worried about the long haul opportunities and what allows them to do. And they're worried about cargo and .
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Olly Glover
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Olly Glover
to surface access. Ollie. Thank you chair. I think the as you'll be aware, the ground transport links, particularly from rail perspective from Heathrow, are pretty dismal compared to European competitors. I mean it's great in the London direction, but apart from that it's nothing compared to Amsterdam Schiphol direct intercity train . Basically
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Olly Glover
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Olly Glover
Okay, you've been to all of those places, right? I just want to emphasize the point, chair, because because on the one hand, we say we want Heathrow to be a globally leading airport, and yet we've. consistently persistently. neglected all of that stuff. So a lot of business organisations have emphasised to us in their. evidence that improved surface access is really important for realising the airport's.
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Alex Mayer
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Alex Mayer
Heathrow Airport changed their minds and said, we do want a third runway and and then that. The then government proceeded with that . This time around, Heathrow Airport didn't. It wasn't Heathrow that started the conversation. It was. It was the. Chancellor who said, we need a third runway and . The
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Speaker 7
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Speaker 7
But shall we agree that we've been talking about this very seriously? I would definitely agree with you on that. So I think the question is really one about delivery capability. And this does require, as I said a minute ago, a properly joined up. conversation approach plan and funding model across transport for London and Network Rail in particular. And it is we've been talking about the Western Rail Link and Heathrow Southern Rail for a similar amount of time, possibly even longer than we've been talking about, than we've been talking about expanding Heathrow.
So it would be great if we could just crack on and do it. And there is a distributional question whether . That's paid
So it would be great if we could just crack on and do it. And there is a distributional question whether . That's paid
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Speaker 9
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Speaker 9
question that will need to be studied as part of this process. It's very fair, absolutely fair. And then I think I think the other part of that is being extremely clear in terms of the respective roles, in terms of government, those actors that John spoke about in terms of the promoter of the scheme and their ownership of which is which parties are are involved in this, and how are they very clear in terms of their respective roles? It is a.
frustration in terms of local transport. It is absolutely important that it's factored into all of this. considerations and and it's addressed properly. Just we put it in our evidence just on a national level. It's over 60% of businesses are just.
frustration in terms of local transport. It is absolutely important that it's factored into all of this. considerations and and it's addressed properly. Just we put it in our evidence just on a national level. It's over 60% of businesses are just.
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Speaker 8
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Speaker 8
you calling for in terms of surface access changes? Yeah, I, we we had a lot, a lot of our members had travelling problems getting to work. And obviously the cost of parking at Heathrow. We, we have, we have quite a few members that obviously do do unsociable shifts. We have a lot of members with caring. responsibilities like husband and wife share caring. responsibilities of dropping children off at school to, to, to nannies and things like that.
So they work around each other and, and a lot, a lot of the time chair that, that they, they cannot rely on public transport to get get to work. And there is still a position where the cost of parking at Heathrow as, as an employee employee perspective of, of getting to work is still a concern. There is a lot of companies that actually. subsidise staff car parking.
There's a lot of employees that, that, that, that don't subsidise it. So so that is a concern that when, when our members are going to work, that they, you know, the cost of them going to work is, is considerable. You . Know,
So they work around each other and, and a lot, a lot of the time chair that, that they, they cannot rely on public transport to get get to work. And there is still a position where the cost of parking at Heathrow as, as an employee employee perspective of, of getting to work is still a concern. There is a lot of companies that actually. subsidise staff car parking.
There's a lot of employees that, that, that, that don't subsidise it. So so that is a concern that when, when our members are going to work, that they, you know, the cost of them going to work is, is considerable. You . Know,
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Speaker 8
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Speaker 8
Staff arriving at work on time? What what currently chair do you do you mean currently. No, not not not a not not not a big problem. No. We we have a lot of members that actually, you know, do live in, you know, in Hampshire and Berkshire, not not just around the surrounding surrounding areas like Hounslow and. Southall and Ealing Heston. We, we have a considerable lot of members that, that, that, that live quite, quite far from the airport.
So, so their.
So, so their.
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Speaker 9
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Speaker 9
Your members have raised issues of. congestion around the it's the. availability of the transport options rather than the congestion. So I don't know enough. I don't know about congestion specifically, but we can ask. But it's the. availability and it's about the. unreliability of those transport options that's particularly problematic. and correct. It's the one that it's coming . Into
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Speaker 7
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Speaker 7
From central London to Heathrow. But of course, it's also a good thing that we continue, as the transport strategy is doing, to drive up modal shift and have more people getting to Heathrow using public transport. So again, we're in favour of an expansion. And those options. particularly as we've just talked about for . Commuters
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Alex Mayer
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Alex Mayer
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Speaker 8
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Speaker 8
expansion, which we've talked about. Harry, I'm probably just. reiterating our position as a union and myself being. obviously with with, with the workers for so many, so many years. And, and I, I'd just like to give an example. Chair of I was talking for, for my position, it's jobs, jobs, jobs, good jobs. And obviously the, the, with the Heathrow.
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Speaker 8
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Speaker 8
opportunity to obviously grow the UK, you know. and I was I was across Heathrow a couple of weeks ago and I was and it probably hit home to me because I am passionate about the airport. You know, I was working so many years down there, you know, I was talking to a couple of ground ground handlers, you know, and they were talking to me about the Heathrow.
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Speaker 8
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Speaker 8
You know, guaranteed jobs. You know, a lot of people have been there 30, 40, 50 years. They've spent their whole livelihoods. And again, like me, Ruth, you know, I, I was I came out of school when I was 15, 16, went straight into an. apprenticeship when manufacturing was massive back in the late 70s, early 80s, which obviously declined a lot now. But my experience is as an apprentice, I was an engineering apprentice and I had that opportunity just just like thousands of people, young people leaving school will have this.
opportunity in. aviation to, to, to gain this opportunity for them leaving school and talking to these guys. They were talking to me saying that we would like our, our children, our.
opportunity in. aviation to, to, to gain this opportunity for them leaving school and talking to these guys. They were talking to me saying that we would like our, our children, our.
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Speaker 8
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Speaker 8
Trade skills or whether they just obviously go into a job position that is vacant for them, that's the. opportunity that that because when you look at aviation, Ruth, you look at so many different job positions. You know that that would be the opportunity for young people leaving school to say, you know,
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Alex Mayer
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Alex Mayer
Uncertainty that has created a situation that we would like to see move on. Now, many people have made that point. Okay. Well, thank you very much for your evidence and the time you've spent writing your evidence and preparing for today. If there's anything you feel you didn't get to cover, please do feel free to write . To
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