Heathrow's flawed flight plan: Labour's third runway scheme means high costs and poor delivery, says ALEX BRUMMER
There should be no dispute about the economic value of a third runway and new terminal facilities at Heathrow.As one of the world’s busiest passenger and freight airports, a lack of capacity condemns it to losing traffic to better-placed European competitors such as Schiphol in Amsterdam, which is served by six runways.Heathrow, after all, is a gateway to the City’s world-beating trading, insurance and professional hubs.Labour’s decision to embrace Heathrow expansion on the eve of the Budget, at a projected cost of £49billion, is part of a long-term strategy to invest in infrastructure.The Government, civil servants and regulators have made a poor ruling. They selected a gold-plated scheme backed by Heathrow’s overseas owners, which involves moving one of the UK’s most congested motorways, the M25, and threatens years, if not decades, of chaos for airport users and motorists. Third runway: Labour’s decision to embrace Heathrow expansion, on the eve of the Budget, at a projected cost of £49bn is part of a long-term strategy to invest in infrastructureThe better choice was the alternate £25billion blueprint from one of Britain’s wealth creators, Surinder Arora. He has a reputation for delivering construction projects in and around Heathrow on budget and on time. Political backers of the chosen scheme, Chancellor Rachel Reeves and Transport Secretary Heidi Alexander, should have learned lessons from HS2. Over-specification of the project created a capital spending nightmare. It is gobbling up £7billion a year, or some 0.25 per cent of national output, squeezing out other projects.The value-for-money Arora scheme would deliver a two-mile runway, which can accommodate all types of modern aircraft, a new Terminal 6 west of Terminal 5 and firmly rooted in private sector expertise. Main contractors would have been US engineers Bechtel, which delivered the Channel Tunnel and have constructed 150 airports across the globe.Moreover, the Arora scheme is supported by British Airways chief executive Sean Doyle, Virgin and American Airlines.Instead, Labour has gone with a state-knows-best solution exemplified by high cost and poor delivery. The promised refurbishment of the Heathrow access tunnel has ballooned from £84million to an estimated £320million. Arora constructed smoking shelters at its airport hotels for £40,000 each. At a nearby terminal, the shelter cost £1.1million.Arora Group is giving qualified support to the outcome of the contest because it has little choice as the primary provider of hotels, and a big landowner in and around the airport.The Government’s selection is badly flawed. It will make Heathrow less competitive by sending landing fees and the cost of flying for consumers rocketing. Hardly a feather in the cap for a Chancellor committed to tackling the cost of living.Price controlsAs part of her effort to woo back voters today, Reeves will include several measures designed to bear down on inflation.NHS prescription charges are to be frozen or capped at £9.90. Rail fares will be held at current levels next year in an inevitable relief for commuters. There was even talk that the Government was ready to cut the VAT on energy bills from 5 per cent to zero. That would come as a huge relief as winter sets in though it may not happen.History tells us that seeking to slash inflation by bearing down on administrative prices rarely is successful. Policies in Britain and the US in the 1970s and early 1980s were a dismal failure. It took the adoption of monetarism by Margaret Thatcher and the Bank of England in the UK and Paul Volcker at the Federal Reserve in the US to deliver disinflation.There is no free lunch for administered prices. The cost of frozen prescriptions and rail fares will come out of NHS and transport spending.Services and investment will suffer at a time when resident doctors and railwaymen demand ever higher wages.Lower fuel prices would be a good thing. But creating another exemption in a colander-like VAT system is not ideal.Cheer upDespite the doom and gloom from the CBI this week, FTSE 100 firms prosper.There is an upgrade from catering behemoth Compass on the back of its thriving US operations. Better-than-expected third-quarter sales from home improvements are reported by Kingfisher and a profits beat from no-frills airline EasyJet.Private-sector Britain is robust.DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
