Up, up and away! New London airport would need up to £30bn public subsidy

MPs asked if any future owners could make adequate returns sufficient to obtain finance

A new hub airport for London would need public subsidy of up to £30 billion, according to new figures published today.

A Commons Transport Committee-commissioned report found that a "substantial" subsidy would be needed.

The MPs wanted to find out if a new hub airport to increase capacity to south east England would be commercially viable for a private investor. They asked if any future owners could make adequate returns sufficient to obtain finance.

Researchers for the economic consultants Oxera found: "Specifically all the scenarios have a negative value at a rate of return that a private investor would require and the analysis implies that substantial public support/subsidy would be needed (in the range of £10-30 billion in today's money for the base-case scenarios examined)."

The report adds that the project could still offer the public good value for money "depending on the scope of the wider benefits that the airport could facilitate".

Different potential situations in which that would have a direct impact on costs were looked into. These included airport design and the number of runways, demand forecasts and construction cost estimates which range across various proposals from £20-£50 billion.

Oxera considered various hub scenarios, rather than any of the actual plans which have been put forward. Researchers did not look in detail at the expansion of existing airports.

The potential impact on Heathrow and other airports were also imagined as this would also have an impact on commercial viability. Compensation to Heathrow needed to be arranged in scenarios where it had to close. Landing charges plus operating costs, all based on current Heathrow usage figures, were also viewed. Policy options towards existing airports was another factor.

The closure of Heathrow was among the potential situations imagined by the researchers which would influence financial viability and demand.

If Heathrow closed, all its traffic would move to the new hub airport. If Heathrow stayed open, the new airport would soak up all unmet traffic and attract some of Heathrow's existing demand.

Forecasts also suggested there could be "a degree of diversion" from London airports to the rest of the UK due to capacity constraints at the London airports.

Researchers also assumed that if there was no capacity constraint at the new hub then the airport could cope with unlimited demand growth.

Transport committee inquiry chairman Louise Ellman said: "The results suggest a new airport would require public investment and have considerable impact on Heathrow and other London airports.

"The research findings also shed significant light on the scale of investment required to deliver essential related surface transport links for any new airport.

"We hope this work delivers something new to a crucial debate."

The MPs are set to use information in their ongoing examination of aviation policy.

The report did not look at whether Government support for a new hub would offer good value for money or to suggest what the overall social and environmental benefits could be.

The Institute of Directors urged a comprehensive overhaul of aviation policy, including the construction of new runways at Heathrow and Gatwick Airports.

Corin Taylor, the IoD's senior economic adviser, said: "This analysis confirms our view that a new hub airport would need substantial public subsidy and probably require the closure of Heathrow.

"Expanding our existing hub airport would be cheaper, quicker and offer far better rail and road connections to the rest of the country."

PA

Start your day with The Independent, sign up for daily news emails
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Practice Accountant - Bournemouth - £38,000

£32000 - £38000 per annum: Ashdown Group: A successful accountancy practice in...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + Uncapped commission: SThree: Does earning a 6 figu...

Recruitment Genius: SEO Executive

£18000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: New Lift Sales Executive - Lift and Elevators

£35000 - £40000 per annum: Recruitment Genius: A challenging opportunity for a...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss