Written evidence from Manchester Airports
Group (MAG) (TE 97)
1. This submission is made by the Manchester
Airports Group (MAG) in response to the Transport Select Committee's
call for evidence. MAG welcomes the opportunity to respond.
2. MAG is the second largest UK airport operator
and comprises the airports of Manchester, East Midlands,
Humberside and Bournemouth. 24 million passengers travelled through
MAG airports in 2009-10 (across all four airports) and the Group
handled 409,000 tonnes of air freight. MAG generates around £3.2
billion for the UK economy and supports over 130,000 jobs nationwide.
3. UK airports are run entirely as commercial
enterprises, and, unlike other parts of the public transport road
network, with no input or investment from the Government. Our
response shows how private enterprises such as airports can support
economic recovery, and how Government policy can help them do
so; as well as examining how the Government can obtain best value
for wider transport spending.
4. Part 1 of our submission gives an overview
of the issues, whilst Part 2 responds to the specific questions
in the call for evidence.
PART 1: TRANSPORT,
THE ECONOMY
AND PRIORITIES
FOR ECONOMIC
GROWTH
Addressing the pinch points
5. Eddington (2006) clearly demonstrated the
inextricable links between transport and the economy. The report
argued that, since congestion is a major inhibitor of economic
growth, measures to address "pinch points" should be
prioritised. He also emphasised the primary "gateways"
since these offer the best return on investment. Key inter-urban
corridors and international gateways (major ports and airports)
were a priority for action. Eddington did not support investment
in large-scale projects like High Speed Rail, concentrating purely
on "fixing" existing transport networks.
6. MAG believes that Eddington's analysis was
broadly correct but did not go far enough. First, his emphasis
on conventional DfT cost-benefit analysis risks a situation where
projects in the South East of England would show a greater "payback"
on investment. This would clearly be contrary to the current Government's
explicit ambition to rebalance the UK economy to avoid over reliance
on the South East.
7. Second, whilst pinch points do need to be
addressed, so too do the long-term strategic investments that
will drive economic growth, such as High Speed Rail.
Current economic climate
8. As the committee has recognised, the economic
climate has deteriorated since Eddington made his report. In the
context of spending cuts, careful prioritisation underpinned by
sound economic analysis becomes all the more important - with
less money to go around, getting best value for money is critical.
9. Addressing the pinch points remains a priority
issue. We believe that easing congestion in central Manchester
(the Northern hub scheme) would provide substantial benefits right
across the north.
10. However, the importance of long-term, visionary
schemes, discounted by Eddington, should not be underestimated.
We believe that the case for High Speed Rail remains a strong
one, despite the current economic climate. If the transport sector
is to play a role in promoting economic growth, then High Speed
Rail to the North of England should be delivered. The focus needs
to be on projects that deliver for UK plc.
11. Government should look at the economic benefits
of transport spending in the widest possible sense. For example,
DfT traditionally assess transport projects in terms of time savings
and agglomeration. Wider benefits, such as improved business productivity,
and growth and concentration of employment, are not taken into
account. Yet when these wider benefits are considered, the case
for High Speed Rail from London to Manchester is compelling.
12. Investment in High Speed Rail might seem
perverse when spending is under review, but the long-term benefits,
and the potential for a realignment of the UK economy should not
be underestimated. In addition, research by Ross and others demonstrates
that the first phase of a London to Manchester route could be
delivered from as little as £6 billion (instead of in
excess of £20 billion).
13. Ross argued that High Speed Rail could be
delivered more cheaply if steps are taken to: adopt EU standards
and specifications, allowing UK contractors to buy "off the
shelf" instead of custom built products; avoid "goldplating"
universal solutions; keep the first phase line as simple and cheap
as possible; and avoid the lengthier processes that mean endless
reviews, analysis and second thoughts. This reflects the poor
record of the UK in delivering a major road and rail schemes in
the most cost effective way. Tackling these issues would still
produce all the benefits but at a hugely reduced cost.
14. Manchester, as the key air gateway outside
the South East is the natural transport and economic hub for High
Speed Rail.
Airports as economic drivers
15. UK airports are commercial enterprises. They
do not seek Government funding for capacity schemes, rather they
can be seen as a free good in terms of generating wealth and promoting
UK economic recovery.
16. All MAG airports have enormous potential
to act as engines of economic growth in their localities. East
Midlands Airport is the UK's largest freight hub and a major driver
of competitiveness, Humberside Airport has a niche role supporting
helicopter services to the North sea and Bournemouth Airport has
a significant role to play locally in the light of constraints
to growth at London Gatwick.
17. The economic importance of Manchester Airport
to the North has been well documented. Access to international
markets connectivity via Manchester has been one of the reasons
for the region's economic success and its ability to attract inward
investment. Eddington himself recognised that "good transport
links, both internationally and domestically, can be important
in attracting, retaining and expanding such business activity
in the UK."
18. The Manchester Independent Economic Review
(2009) independently shared that transport is crucial to accessing
the wider market for labour and supply chains. It recommended
that Manchester Airport be nurtured as a strategic asset for the
region, given its importance to the region's long-term economic
growth, attracting investment and talent. This included "thickening"
routes to Singapore, Islamabad, Dubai and New York and promoting
routes to China. It also recommended that "transport connectivity
with the airport, and the reliability of the services to it, are
big issues that need resolving."
19. The importance of UK airports as economic
drivers, and the Government's aspiration to "rebalance"
the UK economy, mean regional airports should be encouraged to
flourish. This requires no public investment, just policy support,
yet would be a major contributor to economic recovery.
20. Conversely, if regional airports are over
taxed - a very real threat with Air Passenger Duty set to rise
again in November 2010 - then their ability to deliver for the
UK economy will be severely compromised.
Prioritising spending
21. In summary, our recommendations for priorities
in public spending are:
(a) Address pinch points like the Northern hub,
given their importance to economic growth and recovery;
(b) Prioritise long term investments such as
High Speed Rail, but in a streamlined way (as described above);
(c) Undertake proper cost benefit analysis, but
ensure that the widest economic benefits are included;
(d) Public spending needs to avoid the "no
losers" mentality that often hindered the most efficient
use of public funds by Regional Development Agencies and similar
bodies. Projects should be approved and assessed on the basis
of best return on investment (taking into account the widest economic
benefits);
(e) Public bodies that deliver transport infrastructure
(as well as NHS and others) are liable for compensation claims.
Changing the legal process could greatly reduce the costs to
Government;
(f) Lever in private sector investment from key
growth sectors; and
(g) Allow regional airports to flourish: don't
overburden them with tax to the point where they are unable to
deliver for the UK economy;
PART 2: QUESTIONS
Have the UK's economic conditions materially changed
since the Eddington Transport Study and, if so, does this affect
the relationship between transport spending and UK economic growth?
23. Yes. The recession has seen falling passenger
numbers and a number of airline and tour operator failures.
24. Recession does not change the relationship
between transport spending and economic growth. We believe that
national and international gateways remain of critical importance.
Both short term measures such as the Northern hub and visionary
projects like High Speed Rail have a role to play in economic
recovery, and should be considered a priority for transport spending.
What type of spending should be prioritised, in
the context of an overall spending reduction, in order best to
support regional and national economic growth?
25. Projects which deliver the greatest return
(in the widest sense) for UK plc.
How should the balance between revenue and capital
expenditure be altered?
26. We believe revenue funded behavioural change
measures can be very cost effective in reducing car use.
Are the current methods for assessing proposed
transport schemes satisfactory?
27. The process of assessment, analysis and prioritisation
has become more and more complex in recent years, and created
a small industry in its own right.
28. By contrast, private sector transport investment
is made on a generally simpler and broader business case criteria.
We believe that huge savings could be made by a much more robust
and private sector type approach to:
- Identification of the problem;
- Consideration of alternatives;
- Careful briefing and client specification;
- Effective project management and change control;
and
- Smarter procurement of both professional services
and construction.
29 The recent David Ross report on High Speed
Rail demonstrates the difference that this approach can make.
Typical characteristics of the current process are over specification,
over elaborate design, risk aversion, over complex front end processes,
and front end costs which appear much higher than they should
be. Our experience is that schemes in the North West regularly
run over budget (often by a substantial amount) and the budget
then expands to solve the problem. This is wrong.
How will schemes be planned in the absence of
regional bodies and following the revocation and abolition of
regional spatial strategies?
30. Local Enterprise Partnerships (LEPs) are
emerging regional bodies with an obvious interest in transport.
We are cautiously optimistic that private sector involvement in
these bodies represents an important means of leveraging private
sector funding into key infrastructure projects that deliver for
the UK economy.
31. LEPs need to consider how much they can lever
and capture the benefits from of private investment in terms of
the contribution that it makes to improving transport systems
and networks. That requires much greater private sector involvement
in prioritising and delivering solutions.
32. The LEPs need to avoid some of the problems
which dogged the operation of the former regional bodies. RDAs
were arguably guilty of being remote; prone to political compromise;
making decisions on the basis of "no losers" rather
than best value; and protracted economic analysis.
33. Our concern about LEPs is that, with an expected
10 LEPs in the North West region alone, issues which transcend
LEP boundaries might become a lower priority for local decision
makers. We would urge LEPs to ensure that transport schemes of
national and international importance are not overlooked.
34. In summary, MAG believes that transport spending
does need to be carefully prioritised in the light of the current
climate. Priority treatment should be given to the gateways Eddington
recognised as critically important to economic growth, but not
at the expense of long term strategic programmes such as High
Speed Rail and the UK must radically change how it plans, assesses,
prioritises and delivers transport projects.
September 2010
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