Representation by New Economics Foundation (New Economics Foundation)
- Date submitted
- 4 October 2023
- Submitted by
- Non-statutory organisations
This 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 which represents NEF’s view on matters of public interest. However, alongside this submission NEF has been commissioned by the Gatwick Area Conservation Campaign (GACC) to prepare a short technical report reviewing the DCO application documents. Results of this assessment will be presented at the Written Representation stage. It has proved extremely challenging to adequately digest all of the relevant documentation submitted in relation to the issues of socioeconomic and environmental impacts. Relevant information on socioeconomics is spread across the Environment Statement Chapter 17, the Need Case, the National Economic Impact Assessment (Need Case Appendix 1), the Oxford Economics Economic Impact Assessment (Need Case Appendix 2), and the Local Economic Impact Assessment (ES Appendix 17.9.2). NEF’s comments should be read with due regard to the limitations of our ability to process all of this information. NEF does not support the expansion of Gatwick Airport. The economic benefits are overstated by the applicant, and the economic and environmental downsides are 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. NEF intends to expand upon, and further evidence, the following arguments in its Written Representation. Many of the arguments set out here are supported by evidence set out in NEF’s recent report titled Losing Altitude: The Economics of Air Transport in Great Britain. Our key areas of concern: The benefit-cost assessment submitted by the applicant is unusual and NEF has four key concerns. The final figures of this assessment are set out in Table 9.2.1 of the Need Case Appendix 1. First, NEF is concerned that the user (passenger) benefits claimed, worth £150bn, are significantly overstated. The figure quoted appears to be considerably larger than the benefit figures estimated by the Department for Transport and Airports Commission in 2017, which were produced for a much larger expansion of Gatwick Airport. Second, Table 5.6.1 of the Need Case Appendix 1 reveals that the overwhelming majority (90%) of the scheme’s claimed benefit originates from business passengers. It is highly questionable whether the claimed level of benefit is credible. Such a large bias within the scheme benefit towards better-off business travellers also raises equity issues. This must be stacked against the distribution of the scheme’s costs which will be felt disproportionately by less well-off communities at home and abroad. Third, the assessment fails to disaggregate benefits which arise to UK and non-UK residents. It is likely that a significant portion of the scheme’s claimed benefits arise to non-UK residents. The applicant’s excuse for failing to complete this exercise, at footnote 54 of Need Case Appendix 1 (p. 5-19), is not accepted. Disaggregation has been conducted in a variety of comparable instances. Government is clear in its 2022 Flightpath for the Future strategy document that airport expansion must deliver benefits “for the UK”. Furthermore, if benefits to overseas residents have been included, the environmental costs they experience (particularly via inbound flights) should also have been included. Fourth, we are concerned that the benefit-cost assessment has excluded non-carbon greenhouse gas emissions. These are believed to deliver the majority of aviation’s negative impact on the climate, and would significantly increase the scheme’s costs. Government appraisal guidance provides a simple system for quantifying the value of non-carbon gases. Overall, we are concerned that the benefit of the scheme to business travellers and hence business productivity is grossly overstated and grounded in over-optimistic forecasts of future business demand. Nationally, business air passenger numbers peaked in 2006. A structural change took place following the 2007/08 financial crisis which means total business passenger numbers have never fully recovered. There are strong indications that the Covid-19 pandemic has triggered a second structural shift, which has further reduced business demand. The Applicant’s forecasts do not look credible. NEF’s view is that any new business passengers at Gatwick Airport that arise from this scheme will likely represent passengers displaced from other airports and not newly created. While passengers travelling for business purposes increased at Gatwick Airport between 2006 and 2019, numbers in the London Airport system did not. Business travellers shifted from Heathrow to airports such as Gatwick and Luton. Critically, DfT evidence highlights that when capacity is constrained, business travellers tend to displace leisure travellers and will continue to fly. New airport capacity is not required to serve current, or future, levels of business travel demand. Gatwick 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 the net tourism impact of a scheme 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. Complexity is not an excuse for an impact to be ignored or dismissed. 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 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. Further overseas tourism, incentivised via cheaper air travel, will take more cash away from high streets and the domestic tourism industry. The applicant is right to assume that the employment effects of the proposed expansion will be limited. There has been no net national growth in air transport sector jobs since 2006. Evidence also suggests there has been minimal change in air transport employment in the Gatwick Airport Labour Market area, despite significant passenger growth at the airport. 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. Evidence should be put before the Examining Authority on trends in real wages at Gatwick Airport businesses over the past two decades in order to better understand its impact in the region. The Applicant should provide greater transparency on the environmental costs of the scheme. According with government guidance, traded-sector emissions should be valued and presented. These emissions will create an opportunity cost to other emitting sectors covered by the emissions trading scheme that will see higher emissions permit prices. The value of inbound flight emissions should be presented, non-carbon emissions should be valued. The risks of the scheme to the environment are significant, and approval would run counter to the precautionary principle. No solutions are presented by the Applicant, or in government policy, to the significant non-carbon emissions impacts caused by the scheme. The precise nature of the Jet Zero Strategy must also be considered. The government presents a ‘High Ambition’ scenario, which represents its preferred pathway to net zero emissions in the sector. However, this scenario represents only an “illustrative scenario” (Jet Zero, p.39) which will be used to monitor the sector’s progress (p. 60). The government cannot guarantee that this scenario will unfold as it depends on many factors outside of government’s direct control. Furthermore, many of the policies which will be required to increase the probability of the scenario being delivered are not yet designed or legislated. The risk that future emissions reduction technologies do not scale up at the pace desired should be considered. Finally, it is important to understand that all additional greenhouse gas emissions make achievement of government net zero emissions targets harder, and all additional emissions entail opportunity costs to other sectors and areas of society. The Jet Zero Strategy relies on unproven carbon capture technology to deal with residual sector emissions. 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. Similarly, use of energy and land for the production of additional so-called Sustainable Aviation Fuels (SAFs) comes with a significant opportunity cost.