Surface transport to airports Contents

5Who pays?

75.Richard de Cani of TfL told us that Government policy provides “a very clear emphasis on modal shift away from private car to public transport”, but that “clearly that has to be matched by commitment to investment to deliver that for airports across the UK”.116

76.Where an airport is privately owned (as nearly every airport in the UK is), there is a well-established principle, reiterated in the Aviation Policy Framework, that the costs of providing or enhancing surface access will be met by the airport operator. In some cases, a degree of public expenditure may be considered. In the case of airport expansion or enhancement, it is assumed that surface access enhancements required to deal with background demand on the transport networks already exist.117 For regulated airports, surface access investment is also subject to CAA price regulation.

77.Leeds-Bradford Airport explained that “local planning policy […] makes airport development dependent on the delivery of major public transport infrastructure and surface access improvements, of which the airport would be one beneficiary”. It adds that, “In practice, the costs of significant improvements in surface access go well beyond the capacity of most small regional airports to provide”.118 Several airports including London City and Gatwick Airport claim that the policy of ‘operator pays’ risks “unfairly burdening airport users with a greater share of cost than is appropriate as it leaves doubt as to how dual beneficiary schemes would be funded”.119

78.Several pieces of evidence to our inquiry highlighted the role of airports as “key enablers” nationally and locally.120 Leeds Bradford Airport added:

“There is a fundamental issue around how surface access schemes are viewed and delivered. The focus should not be around identifying the impact of an airport and requiring it to mitigate that impact, as set out in the Aviation Policy Framework, but instead on identifying the key conditions that will support airport growth and its wider economic benefits of which surface access is a critical element”.121

79.In response to these arguments, the Minister warned that airports “will of course be working very hard to make the case for the wider economic benefit to the area, because every penny that comes in from central Government, a local enterprise partnership or a combined authority is a penny less that comes from the airport”.122 The Minister’s view was supported by East Sussex County Council, which argued that “Government needs to ensure that airports should bear the responsibility of covering the majority, if not all, of the costs of transport schemes which are required (in part or in their entirety) as a result of airport expansion”. It added that “an over-reliance on the public purse to fund transport schemes attributable to airport expansion is likely to be to the detriment of funding towards local authority, LEP or Highways England/Network Rail promoted major transport infrastructure schemes which are equally important at supporting growth, creating jobs and providing new homes”. East Sussex Council concluded that “the DfT should liaise with the relevant LEPs to identify which transport schemes are linked to airport growth, and engage with appropriate local authorities to ensure that a joined-up approach between these transport authorities is undertaken”.123

80.The Aviation Policy Framework sees a limited place for “dual beneficiary” scheme development insofar as it recommends that, at airports outside the South East, “scope exists for LEPs to develop local strategies to maximise the catalytic effects of airports to attract business and support growth”.124 An example of this would be Manchester Airport, where an £800 million business park is to be built, to take advantage of the excellent air, road and rail links in the airport’s vicinity. However, evidence to our inquiry shows that the practical application of this policy is often extremely complicated. A further complication arises in the form of what constitutes ‘state aid’.

State Aid

81.The Airports Commission observed that, if an airport benefits from surface transport paid for by the taxpayer, this “may mean that a contribution from the scheme promoter to these costs is justified.” State Aid rules may also require an airport operator to make an appropriate payment if it benefits from a surface access scheme. The Airports Commission concluded that “the Government would need to reach its own view on the level of public investment that can be justified” for any particular scheme.125

82.The European Commission explains that airports with more than 5MPPA that are planning infrastructure developments can receive state aid only “under very exceptional circumstances”. These “exceptional circumstances” are not clearly defined, but the guidelines explain that these circumstances arise when:

83.The Government’s guidance states that for State Aid to be present, the following criteria must all be fulfilled:

84.A recent judgement of the Court of Justice of the European Union in Leipzig/Halle found that not only the operation of airport infrastructure but also the construction of infrastructure with public funds linked to its later operation constitutes economic activity and therefore is subject to the State Aid controls of the European Commission.128

85.Based on these criteria it is difficult for larger airports to demonstrate that state funding for infrastructure developments are compatible with the law. Evidence from DfT claimed that “where the analysis shows that state funding would result in state aid, compliance with the EU law can usually be achieved with a cost contribution from the airport operator which negates any state funded advantage it would otherwise receive”.129

86.In answer to a question on 16 September 2015 as to whether the Government will introduce a cap on the amount of public money used to fund surface access costs arising from the construction of a new runway at Heathrow and/or Gatwick, the Minister said:

“In terms of surface access proposals, the Government has been clear that it expects the scheme promoter to meet the costs of any surface access proposals that are required as a direct result of airport expansion and from which they will directly benefit”.130

87.Nevertheless, some have highlighted uncertainty in the Airports Commission’s final report as to “whether the taxpayer should pay for some or all of the £5bn or more of surface access infrastructure required as a direct result of the Heathrow proposal”.131 London Stansted Airport warned that:

“Given the potential for surface access improvements to distort competition between airports, the Government should be careful to ensure that any public funding for such schemes is compatible with European State aid guidelines. These issues are of particular significance for the Government’s response to the Commission’s recommendation for a new runway at Heathrow, which could require up to £6 billion of funding for new surface access infrastructure. State aid issues are also of much greater relevance now that London’s major airports are separately owned, a significant change in circumstances since these issues were last considered”.132

88.The Department is understandably wary about falling foul of the state aid rules and successive Governments have held a settled view that where the primary beneficiary of a surface access improvement is the airport, the airport should pay. We recommend that this principle is retained and the Department should develop clear guidance as to how it and other public bodies (LEPs, councils, combined authorities etc.) should assess the benefit of new surface access schemes to (a) airports and (b) the wider community. We accept that there is a lack of clarity about the point at which any improvement can be said to be mainly for the benefit of the airport. We recommend that the Government clarify what constitutes a transport scheme that is primarily for the benefit of a private party, as opposed to providing a benefit secondary to a wider public interest, using real examples to illustrate where, in its view, the boundary sits.

89.We accept the point made in the evidence we have received that suggests that any airport expansion and growth in passenger numbers could have a damaging effect on public transport networks in an area much wider than an airport’s immediate environs. In other policy areas developers can be required to pay towards relief measures under Section 106 agreements or the Community Infrastructure Levy. We recommend that the Government require any airport operator making a successful application to expand their airport to assess the effect of their plans on local transport networks, to work with infrastructure operators on the measures needed to provide relief for any damaging impact, and to make a contribution to the cost of such improvements. In cases where there is compelling evidence that airport expansion would act as a catalyst for significant local economic development, the Government should work in partnership with local authorities and airports to identify relevant surface access infrastructure improvements and help to develop a multi-party funding solution.

Devolution

90.The Government’s devolution agenda has changed the way local transport projects are planned and funded. The first ‘devolution deal’ was announced by the Government and the Greater Manchester Combined Authority in November 2014. Several other deals have been announced since. The Cities and Local Government Devolution Act 2016133 gives a statutory foundation to various aspects of the devolution deals.

91.Dave Haskins of the West Yorkshire Combined Authority spoke in support of devolution, telling us that “in theory, it has become easier in the last couple of years [to drive local decisions through]. With the establishment of combined authorities and their alignment to the LEPs, the strategic economic plan for the region has really come together. Transport and economics are not looked at in silos, and that is really key”.134 Bristol Airport also viewed the devolution agenda as “a potential opportunity to take a new approach, placing airport[s] at the heart of long-term strategic infrastructure planning in order to maximise the value they generate for regional economies”.135

92.Ginny Clarke of Highways England told us that LEPs have been good at holding national transport infrastructure providers to account on this front,136 whilst Paul Harwood of Network Rail added that devolution will help with long term rail planning as “the information is richer and the understanding of what improvements are wanted going forward is richer […] local enterprise partnerships, for example, are a very effective way of working with local authority and local business perspectives”.137

93.Many areas across the country have published bids or ‘prospectuses’ for devolution deals, but this does not guarantee that the Government will agree a deal with them. The Government’s assessment of LEP and combined authority past performance may explain its reticence to devolve power in some cases: in oral evidence to our inquiry, the Minister described LEPs’ performance as “patchy”, and combined authorities as being in their “early days”.138

94.As the Minister acknowledged, “very large amounts of money will be available to the combined authorities”139 and airports will be able to make bids for this funding. However, access to funds and powers will be different in each area, depending on the details of each devolution deal. For example, the Greater Manchester Combined Authority may benefit from legislation which gives powers to its mayor to implement a Community Infrastructure Levy (CIL) to support development and regeneration in the area.140 The CIL—which greatly benefited the building of Crossrail in London—could be a major source of funds for potential major infrastructure projects in the Greater Manchester area. There is no guarantee that other combined authorities will be able to negotiate a CIL.

95.The majority of the devolution deals signed to date will receive their funding in a single pot. This will provide a larger overall budget to combined authorities, but also means that transport projects will be competing against other priorities identified in the deals. The Government has introduced additional streams of funding, including the £300 million Transport Development Fund announced in the Autumn Statement, which will be targeted at “transformative transport infrastructure projects”141 such as Crossrail 2 and proposals emerging from the Northern Transport Strategy, following the advice of the National Infrastructure Commission. It is not clear whether combined authorities will be able to bid for these funds, or submit proposals for how it should be spent. It is also unclear how LEPs will work alongside combined authorities and how they will be funded—if at all—beyond the final tranche of the Local Growth Fund.

96.The Government intends to develop Transport for the North (TfN) into a statutory body by 2017 in order for it to have the permanence it needs to plan for the long term. TfN is in the process of identifying what its full role should be, but will cover the transformation of east-west rail and road connections; the creation of implementation plans for integrated, contactless ticketing across the North; and the production of regional policy to support international connectivity.142 As many transport powers have been devolved to combined authorities (notably smart ticketing), it remains unclear what role TfN will perform in that respect. Given the fact that Rail North has already let the northern rail franchises in partnership with the Department, and—as we discussed earlier in our report—that the provisions of the Buses Bill with regards to franchising are likely to be implemented differently across TfN’s region, the contribution that TfN and the National Infrastructure Commission can make to seamless, integrated transport planning is, as yet, unclear. We are encouraged by evidence from local authorities that speaks positively of the current and hopefully future benefits of devolution. We want to see areas taking advantage of new financial powers to prioritise and fund their own infrastructure projects without having to wait for the agreement of or money from the Department. We want to see local areas use these new powers to help their local airports grow and develop, in a sustainable way, to drive further economic growth. However, we seek guarantees from the Government that those areas that cannot reach agreement on a devolution deal, or do not want one, are not left behind. Some LEPS have been very effective at driving economic development in their areas. This momentum must not be lost. Where devolution deals have been put in place, we recommend that Government conduct a robust post-hoc evaluation to assess the benefits of devolution deals to local transport.

97.In its response to this report, the Government must clarify the roles that Transport for the North and the National Infrastructure Commission will play in improving surface access to airports, and how they will work with combined authorities and LEPs to achieve this. If TfN is to play an effective role, the Government must provide it with adequate powers to ensure that integrated transport planning which benefits airport passengers and local commuters is not thwarted by a lack of cooperation from local areas.

Balancing national and local priorities

98.The Government’s response to the Transport Committee’s 2014 report on local transport expenditure pointed out that schemes that improve access to ports and international gateways are often funded through national road and rail investment programmes (i.e. Highway’s England’s Road Investment Strategy and Network Rail’s periodic review).143 However, as ABTA described, road and rail schemes may be awarded funding, and then become “casualties” of a Spending Review. ABTA cited the Western rail link to Heathrow, which was approved as part of the National Infrastructure Plan but is not fully funded.144 The Thames Valley Berkshire LEP added that “lack of clear commitment, timeline and unnecessary delay [in committing funding and resources to the Western rail link] presents risk to the Thames Valley and UK economies”.145146

99.Surrey County Council highlighted Southern Rail Access to Heathrow, which was excluded by the Airports Commission’s Final Report from the extended baseline of road and rail improvements needed by 2030 to meet background demand. Surrey CC was “very concerned that a view has already been taken that any scheme is seen as being delivered to support a new runway if Heathrow is the preferred choice and that the airport owners promoting this expansion should meet much of the cost – a view the promoters do not agree with”. The Council perceives “a real risk of a protracted impasse on funding”, adding that “a scheme that could have major benefits for Surrey and the regional economy will be hamstrung as a result and expansion at Heathrow could once again take place without it being delivered”.147

100.The longer term delays caused by Network Rail’s recent failings in delivering its programme of electrification and enhancements by 2020 demonstrate the chronic uncertainty local areas face when constructing their economic and development plans. Without strong commitments and guarantees from Government to fund major infrastructure, it is unlikely that local areas will be able to make decisions about large-scale projects for growth, including those affecting airports.

101.The Committee’s 2014 report on local transport expenditure recommended that the DfT should demonstrate how it would balance strategic oversight of spending with locally determined priorities and clarify whether or not it would be prepared to challenge LEPs if they did not prioritise nationally significant, but locally delivered, transport schemes.148 In its response, the Department said that Government was “confident” that the Growth Deals process would not preclude such schemes being prioritised, and that it would “work closely with Local Enterprise Partnerships to ensure this remains the case”.149

102.Improved infrastructure for smaller airports is dependent on local areas and the airports themselves having confidence in a long term strategic plan within which they can take decisions and identify their priorities. This includes a decision on future airport capacity in the South East. Unless the Government identifies priorities for growth—and funds them accordingly—its ambitions to ‘rebalance’ the national economy will be impeded. The five yearly planning cycle for Network Rail and Highways England was supposed to provide some long term security to local areas. It has failed to do so in some aspects of rail electrification. It is early days for the roads strategy but we will be keeping an eye on the key milestones and delivery timetable to make sure it does not slip.

116 Q120 [Richard de Cani]

117 Department for Transport, Aviation Policy Framework, Cm 8584, March 2013, paras 5.11-5.13

118 WYG (STA0015), para 4.2

119 London City Airport (STA0025), para 3; Gatwick Airport Ltd (STA0054), para 6

120 Q5 [Darren Caplan]

121 WYG (STA0015), para 4.9

122 Q210 [Robert Goodwill]

123 East Sussex County Council (STA0013)

124 Department for Transport, Aviation Policy Framework, Cm 8584, March 2013, para 5.22

127 Airports Commission, 13. Cost and Commercial Viability: Literature Review, November 2014

128 Airports Commission, 13. Cost and Commercial Viability: Literature Review, November 2014

129 Department for Transport (STA0037), para 26

130 PQ10490 [on London Airports: finance], 14 October 2015

131 Gatwick Airport Ltd (STA0054)

132 London Stansted Airport (STA0058), para 6.3

134 Q23 [Dave Haskins]

135 Bristol Airport (STA0004), para 2

136 Q77 [Ginny Clarke]

137 Q89 [Paul Harwood]

138 Q225 [Robert Goodwill]

139 Q225 [Robert Goodwill]

140 Devolution to local government in England, Briefing paper 07029, House of Commons Library, January 2016, 2.4

141Department for Transport’s settlement at the Spending Review 2015” Department for Transport press release, 25 November 2015

142 Transport for the North, ‘About Transport for the North’, accessed 5 February 2016

144 ABTA (STA0010), para 24

145 Thames Valley Berkshire LEP (STA0029)

146 The planning application for this link is expected to conclude in Spring 2016: National Infrastructure Planning, ‘Western Rail Link to Heathrow’, accessed 5 February 2016

147 Surrey County Council (STA0046), para 12

148 Transport Committee, Seventeenth Report of Session 2013-14, Local Transport Expenditure: Who decides?, HC 1140, para 40




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Prepared 24 February 2016