Representation by New Economics Foundation (New Economics Foundation)
- Date submitted
- 22 June 2023
- Submitted by
- Non-statutory organisations
About the New Economics Foundation 1. This relevant representation was prepared by Dr Alex Chapman on behalf of the New Economics Foundation (NEF). NEF is a charitable think tank with a mission to create an economy that works for people and the planet. Further detail on our charitable objectives can be found on our website. This is an independent submission for which we received no external funding. NEF’s view 2. NEF does not support the expansion of Luton Airport. The economic benefits are overstated by the applicant, and the economic and environmental downsides are ignored and/or understated. When the relevant scheme costs, benefits, their balance of equity, and the long-term societal risks are taken into account, the scheme’s overall balance is negative and entails unreasonable levels of risk to local, national and international wellbeing. Our core arguments 3. NEF intends to expand upon, and further evidence, the following arguments in a subsequent submission. 4. The benefit of the scheme to business travel and hence business productivity is grossly overstated. Nationally, business air passenger numbers peaked in 2006 and they are highly unlikely to return to that level for decades, if ever. The proportion of passengers travelling for business at Luton Airport fell from 22.0% in 2006 to 12.8% in 2019. National-level data suggests this will have fallen further since the pandemic. New airport capacity is not required to serve current, or future, levels of business travel demand. Any new business passengers at Luton Airport that arise from this scheme will likely be displaced from other airports and not newly created. 5. Luton Airport’s primary service is the sending of UK residents overseas on leisure trips. The absence of any quantification of the impact of outbound and overseas travel and tourism spending, and the net balance of tourism impacts, is skewing the scheme’s presentation. Assessing this net impact was identified in a report commissioned by the DfT in 2018 as one of three “key diagnostic tests” of an air transport intervention’s merit. To exclude this function from detailed analysis flies against the fundamental principles of appraisal and skews the assessment of the scheme. Given the significant resource that has gone into the application it would have been possible to develop a far more sophisticated understanding of the implications of the Airport’s net tourism balance and its wider ramifications. 6. The equity dimensions of the scheme have not been presented by the applicant. The scheme will likely exacerbate inequity and run counter to the government’s levelling-up agenda. Expanding the existing airport capacity is only likely to hurt the UK’s held-back regional economies that consistently face a travel and tourism spending deficit while London sees a travel spending surplus. Furthermore, the question of ticket price savings (consumer surplus) should be considered not just in aggregate terms, but also with regard to which groups in society benefit versus which groups lose out from the scheme’s wider costs (environmental and economic). 7. Job projections are optimistic. There has been no net national growth in air transport sector jobs since 2006. Air transport (and supporting services) jobs in Luton Unitary Authority peaked in 2005, and in the wider Bedfordshire and Hertfordshire area in 2007. Despite a doubling in the number of the passengers seen over the intervening period, jobs in air transport (and supporting services) were around 1,000 below their peak in both geographies in 2019. As evidenced at the 2022 planning inquiry, documentation submitted by Luton Airport associated with a previous expansion application in 2012 dramatically overestimated the scale of employment creation that would result. 8. The quality of the jobs created is also questionable. Wages paid to lower and middle earners in air transport have been declining rapidly in real-terms in recent years. Indeed the Air transport sub-sector has seen the fastest decline in real wages of any sector in the UK economy between 2008 and 2022. Luton Airport’s own data shows that in 2019, pay levels experienced by residents of Luton and Bedfordshire employed by the airport were similar to the average for the county, providing no meaningful value add to worker wages. 9. The detrimental social and economic impact of night flights appear to have been understated. A more holistic analysis is needed to understand how night flights could impact on already-highly-deprived areas of Luton and the surrounding areas, including equity assessment and assessment of health impacts. 10. The applicant’s cost-benefit analysis is selective and follows no standard methodology. Key scheme costs are missing, including monetised noise and air quality impacts, as well as non-CO2 impacts. The approach taken to consumer and producer surpluses is non-standard and hence may be flawed. Airport profits are included, but airline losses resulting from the reported air-fare savings are not. Scheme benefits are overstated, including the assessment of tax impacts which ignores a variety of potential tax losses that are likely to arise, particularly in lost VAT linked to lost spending in other sectors. The equity of impacts has not been considered when one notes that a wealthy few make up a majority of the frequent flyers while the resulting climate costs are borne by society at large. 11. Valuation of greenhouse gas impacts appears not to have been accurately performed in the scheme’s economic assessment. NEF’s initial calculations suggest that the applicant has significantly underestimated the scheme’s greenhouse gas costs. Non-CO2 impacts have also not been quantified. These issues are skewing the results of the applicant’s cost-benefit analysis. 12. The risks of the scheme to the environment are significant, and approval would run counter to the precautionary principle. The applicant assumes that it will be possible to utilise speculative, un-proven technologies to reduce future greenhouse gas emissions, and to capture residual emissions from air travel. The risk that such technologies will not materialise at scale, or will not be affordable is great and should count against the scheme. Furthermore, issues such as the competition between sectors for such technologies, and their optimal use are not addressed. Use of nascent carbon capture capacity to re-capture air transport emissions made from further, non-essential air travel, predominantly taken by wealthy frequent flyers, represents an inefficient use of capacity and should count against the scheme. 13. Furthermore, recent research has evidenced the substantial impact that air travel has on the climate via non-CO2 emissions. These impacts are unmitigated and unresolved in government policy and given the risks involved should count heavily against the scheme. 14. NEF does not accept the applicant’s position that greenhouse gas emissions impacts are out of scope of this appraisal and its cost benefit analysis. NEF does not regard this position to be aligned to government policy. The Making Best Use of Existing Runways policy clearly mandates planning authorities to take account of “all relevant considerations, particularly economic and environmental impacts”. Furthermore, irrespective of whether cumulative warming is ultimately limited to 1.5oC or 3oC, all additional greenhouse gas emissions worsen climate breakdown and all emissions make it harder for government to achieve its legislated Net Zero target. All emissions should therefore count against any scheme in the balance of its appraisal. 15. Robust appraisal practice has not been adhered to by the applicant. Core sections of the application, such as the Cost-Benefit Analysis presented in the Need Case, diverge from best practice in ways which inflate the attractiveness of the scheme. Running throughout the application is a reluctance to address potential negative impacts of the scheme in a fair and robust manner. The decisions to downplay non-CO2 impacts and the implications of the balance of inbound and outbound tourism, two of the primary impacts of the scheme, do not align with the high level principles of government impact assessment guidance. Guidance (TAG) clearly states that “as many of the impacts of a scheme or option as possible” should be presented in monetary terms in the cost-benefit analysis. Where this is not possible “supplementary techniques should be used to weigh up non-monetised impacts”. 16. At critical junctures in the Applicant’s documentation there are an array of serious misrepresentations of data. For example, the executive summary of the Need Case (PDF pg.8 points a. to d.), makes a claim regarding “additional GDP” which is created “across the UK” by the scheme. The applicant’s own economic assessment in fact shows that the figures cited in the Need Case are gross, and not net, and as such are incorrectly identified as “additional”. As presented, the figures are highly misleading. 17. Insufficient sensitivity testing has been performed. A wide array of key model parameters, elasticities, and multipliers, have not been tested. The decision to focus only on faster and slower growth scenarios misses the point of sensitivity testing. The testing of core model input parameters will provide users with far more information regarding the robustness of the Airport’s assumptions.