The economic case for Heathrow’s Third Runway doesn’t add up.The economic case for Heathrow’s Third Runway doesn’t add up.John Maynard Keynes said, famously, that ‘practical men’ were usually ‘slaves to some defunct economist’. Something similar is true in futures work. There are some views of the world that are so embedded that no amount of good futures analysis can dislodge them from the minds of their adherents. Indeed, the futurist Jamais Cascio has coined a term for this, “legacy futures“, which describes futures that are trapped in a moment that has already passed, a “now” that is already history.

These thoughts are prompted by the latest wave of lobbying by British business interests for a third runway at Heathrow. I get weary writing about this: I went through the relevant trends at length a couple of years ago and found that in terms of air transport in the richer world almost all the trends were headwinds. More recently Chris Goodall at Carbon Commentary has noted that demand for business air travel from the UK was declining for some years before the crisis. (Since then he has returned to the subject, most recently using Civil Aviation Authority data to lay into the misleading numbers deployed by the campaigns that promote the expansion of Heathrow.) It’s worth noting that all that stuff about flights to China, trotted out again by the CBI in the past month, is more or less just plain wrong. It disregards the huge number of flights to Hong Kong from Heathrow, compared to the negligible numbers from other European hubs, which expansionist advocates contrive to overlook.

The capacity myth
As the environmentalist Conservative MP Zac Goldsmith pointed out, the idea that Heathrow’s capacity is full is something of a myth. Or at least: it’s only true while flights to destinations such as Malta and Cyprus continue to take slots at the airport rather than being moved to Stansted or Gatwick. There’s an evident market failure there.

Despite my weariness, it is worth noting a couple of recent reports – from opponents of Heathrow expansion – that have taken on the economic case for the Third Runway.

The first is a paper (opens pdf) from PRIME, the economics consultancy, written by Ann Pettifor and Jeremy Smith. They took the underlying argument made by the expansionists – that expansion is essential to sustain the continued growth of the British economy – and tested it against data. (Who knows? This wild idea might just catch on.) If the claim is correct, it should be possible to see changes in national or regional economic performance as a result of aviation expansion.

Whilst Heathrow has grown only modestly in passenger numbers over the 11 years from 2000 to 2011, and Frankfurt not very much more, Schiphol and Paris CDG have both expanded by over 25% in passenger numbers. Can we notice any impact on GDP? The answer seems to us to be negative.

If a decade of major growth in passenger numbers was to have any significant impact, it should be in favour of France and the Netherlands. In fact the differences are marginal and the variables so many that it is impossible to assign cause and effect – other than to note Germany’s strength in 2010 and 2011 which no one has suggested results in any significant way from the steady growth of Frankfurt airport. And so far in 2012, the economies of France, the Netherlands and the UK are all around or below zero, while Germany’s early-year growth seems to be ending.

They also note that although expansionists often talk about the impact of an airport on the regional rather than the national economy (as if the UK needs London to be any more dominant than it is today, but that’s another story), it’s not possible to find data that would allow this claim to be tested.

No Social Return on Investment
The second report is from New Economics Foundation (disclosure: I am a Supporter) which takes the Department of Transport’s own model, but updates the input data on economic growth rates, exchange rates, carbon prices, fuel prices and other variables. They also estimated the costs of a new runway to the local community near Heathrow, re-visiting and re-evaluating the DfT’s estimates for this. Small changes in assumptions pretty much demolish the expansionist case. Whereas the DfT’s calculations suggest the third runway would produce a net benefit of £5.5 billion to the British economy, nef’s point towards a net cost of £5 billion.

In the foreword to their report, Ian Cheshire of the B&Q group writes:

“the case for a third runway at Heathrow is at best incomplete and at worst completely flawed… By taking an approach based on Social Return on Investment (SROI) analysis, nef has produced a more rounded and realistic analysis of the costs and benefits of Runway 3.”

Predict and provide
Of course, it is worth remembering that one of the data claims that underpins the whole expansionist case – that aviation demand will double by 2030 – is itself a shockingly simplistic piece of forecasting. It assumes (forecasts are always assumptions) that the rapid growth in aviation seen during the 25 years to 2000, during years of relatively cheap energy, a benign global economic climate, and a rapid increase in globally connected trade, will continue out to 2030. It is a classic example of the predict and provide model that bedevilled domestic transport planning in the UK from the 1960s to the 1990s. Typically, eventually, such approaches lead to under-used infrastructure which is being paid off for decades afterwards. I’m going to guess, by the way, that little of these competing perspectives will be found in the work of George Osborne’s hastily convened commission, to be chaired by Howard Davies. Davies is an intelligent man, but his career suggests something of a tin ear for views which run against those of the current political or business mainstream.

The normalisation of aviation
One of the things that’s striking about the whole debate is the extent to which aviation has been normalised as part of our culture, with all of the infrastructure and noise that it entails. I got a sense of this last year when I was working on a scenarios project for a client. It turned out that a member of the client’s board was concerned that the scenarios needed to be ‘plausible’, and mentioned as implausible a scenario for 2050 in which the Heathrow site was used as a reservoir. I’d written the scenario, as it happened, and the purpose of it (as part of a set of scenarios) was to provoke people into imagining a world in which water resources were more important to the working of the city than an airport. (The argument for the location: Heathrow is poorly positioned as an airport, upwind of the city it serves; the geology and topography are ideally suited to water courses; and because it is a large site with a single owner it is relatively simple to acquire.)

One piece of work which tries to disrupt this normalisation is ‘Quiet Skies‘ by the artists Hollingworth & Kyprianou. Their short film is built around video of Heathrow taken during 2010, when the airportwas closed by the Eyjafjallajökull volcano. The soundtrack is from the manifesto of the Italian Futurists, written in the earliest days of the plane. It’s not possible to embed the video here, but is four and half minutes well spent.

The images in this post are from Quiet Skies by Hollington & Kyprianou, and are used with thanks.