Transport and the Economy - Transport Committee Contents

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.


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;


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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