UNCORRECTED TRANSCRIPT of ORAL EVIDENCE to Be Published As HC 765-Vii

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 765-vii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

TRANSPORT COMMITTEE

AVIATION STRATEGY

MONDAY 11 FEBRUARY 2013

ED MITCHELL and COLIN POWLESLAND

BORIS JOHNSON and COUNCILLOR DANIEL MOYLAN

RT HON PATRICK McLOUGHLIN MP and JONATHAN MOOR

Evidence heard in Public Questions 737 - 846

USE OF THE TRANSCRIPT

1. This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

3. Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.

4. Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.

Oral Evidence

Taken before the Transport Committee

on Monday 11 February 2013

Members present:

Mrs Louise Ellman (Chair) Steve Baker Sarah Champion Kwasi Kwarteng Karen Lumley Karl McCartney Lucy Powell Adrian Sanders Iain Stewart

______

Examination of Witnesses

Witnesses: Ed Mitchell, Director of Environment and Business, and Colin Powlesland, Environment and Business Manager (Health and Emerging Issues), Environment Agency, gave evidence.

Q737 Chair: Good afternoon, gentlemen. Welcome to the Transport Select Committee. Could we have your name and organisation, please? Ed Mitchell: I am Ed Mitchell. I am Director of Environment and Business at the Environment Agency. Colin Powlesland: I am Colin Powlesland. I am an Environment and Business Manager looking after Health and Emerging Issues, also with the Environment Agency.

Q738 Chair: Can the UK’s further airport capacity needs be met while still protecting the environment? Can it be done? Ed Mitchell: There are a number of factors that need to be looked at in terms of sustainable airports, aircraft and air travel—from the carbon emissions from those and the impact on climate change, flooding, water quality, water use, biodiversity, noise and local air quality. There are a lot of aspects to that. Our role in particular in the Environment Agency is as a statutory consultee to the planning process, and we also regulate major industrial processes, including some aspects of airport operations but not airport operations per se. We would explore with any potential developer of an airport the environmental aspects and the constraints to those. It is quite difficult to answer that question succinctly without knowing more about the detail of the airport and where it would be.

Q739 Chair: But you must have an opinion. You hear numerous debates about airport capacity, what might be needed and what the challenges to the environment might be. You must have some view. When you hear these, do you think, “Yes, this can be resolved”? Are you thinking of particular things that need to be done?

Ed Mitchell: If you take, for instance, the climate change aspects of aviation, the Climate Change Committee has been reasonably clear in stating that it believes you could have a 60% expansion of traffic and still meet the 2050 Government targets around climate change. That would require quite considerable reductions in emissions from individual aircraft and individual flights, but the Committee clearly thinks that that is possible. If you take local air quality, the primary issues are particulates and oxides of nitrogen. Again, depending on location and design and, in particular, the interplay between aircraft ground operations and local traffic, you probably can find a sustainable way of operating airports.

Q740 Chair: What do you think the major challenges are? Ed Mitchell: Again, it so depends on location. It is quite a difficult question to answer. Meeting the Government climate change targets by 2050 is a challenge. Meeting local air quality EU requirements is quite a challenge, particularly around oxides of nitrogen. The Environment Agency has a very limited role in noise terms on airports and air traffic, but from what I understand of that, it is a significant challenge. There are undoubtedly challenges. On flood risk, airports can obviously be inundated themselves but they can also affect other people’s flood risk due to run-off from surfaces or changing pattern of water flow depending on location. There are a number of challenges.

Q741 Chair: At what stage of plans or thoughts about developing new airports or additional runways should contact be made with the Environment Agency? Ed Mitchell: Our experience is that the earlier we get into conversation with potential developers, the more likely we are to be able to work with them to find solutions to the environmental issues that they raise. It is not just in this area but across the piece. If we are engaged early, then we are also able to provide a degree of certainty to developers, which helps in terms of their planning, their project management and, therefore, their costs. Frankly, the answer is as early as possible.

Q742 Chair: Mr Powlesland, do you want to add anything? Colin Powlesland: No; that is a very good answer. There is also a need to think about what is meant by sustainable development. It is quite usefully set out in the national planning policy framework. That is a helpful definition.

Q743 Lucy Powell: Following from the Chair’s questioning, when you say that things depend upon location, do you have a view about what would be a preferable location for airport expansion, say, in the south-east? We have had some proposals coming forward for a Thames estuary airport versus expanding existing airports. What do you think would have the least environmental impact of those two? Ed Mitchell: I am sorry if this sounds obfuscating but the issues are very different. If you take Heathrow, other than the noise, which I mentioned earlier but in which we have a limited role, the particular challenge in relation to our role is around oxides of nitrogen and ground level concentrations, which are on occasion already close to or above EU limits. If you go to an estuary site—two of those have been mooted—other challenges are likely to be more significant. Flood risk is a key one, because if you build an island in an estuary, not only do you have to worry about inundation of that island but it can, and probably would, have an effect on the mainland in terms of flood risk. There are also some very important designated habitat sites in the Thames estuary, which would need protecting. It is genuinely difficult to express a preference, particularly when details about the different options are relatively sketchy.

Q744 Chair: There have been a number of proposals mooted for an estuary site. Have any of those been discussed with you? Ed Mitchell: We went to a presentation by the architects of one of those sites and we have had very early discussions—but very early.

Q745 Iain Stewart: The Chair asked almost the exact question I was going to ask, but let me try and come to the same point from a different angle. Is there anything in any of the Thames estuary proposals you have seen that would rule it out from the word go, or do you think that it would depend on the specifics of the design whether the concerns about flooding and wildlife habitats could be overcome? Is there something there to work with? That is what I am trying to get at. Ed Mitchell: My take on it is that some of the challenges are harder to resolve than others. If you take the estuary airport, then probably the habitat protection requirements are quite a stiff challenge. My gut instinct is that it is possible, though not easy or cheap, to find solutions. It is so dependent on siting and detail that it is pretty difficult to draw any firm conclusions at the minute.

Q746 Sarah Champion: Mr Mitchell, you said that the estuary sites are going to create problems with flooding. Could you expand a little on that? Ed Mitchell: The first issue is that obviously you do not want an airport to be subject to flooding because of all the disruption and problems that would cause. An estuary site will have connection to the mainland and presumably to a lot of services on the mainland, most of which is in the Thames flood plain as well. There are flood risks to any possible estuary site, depending on where it is in the estuary. We have a series of flood defences that link with the Thames barrier to protect London, the inner part of the estuary and to a degree the outer part of the estuary. It would be a case of assessing the specific risks, depending on the design, against the protections that are already in place and possible improvements that we could make to those protections. Whatever the model was, constructing an island and reclaiming a load of land on the boundary of the estuary or within the estuary does potentially create an increased flood risk elsewhere that needs to be carefully modelled and dealt with as part of the process of designing and building an airport.

Q747 Sarah Champion: There seems to be a lot of evidence that the sea level is rising. I might be being very naive about this, but my concern is about the long-term impact. We might model it for now and it makes complete sense, but do you share my concerns that we do not know where coastal erosion is going to happen and where silt deposits are going to build up, so potentially we are creating a bit of a time bomb for ourselves? Ed Mitchell: Not surprisingly, given the importance of the Thames estuary and the flood defences there, we have done a lot of work, looking forward in particular to 2100, to what the possible implications are of a sea level rise because of existing processes, such as the fact that the UK is still rebalancing after the ice age, and processes such as the melting of ice waters, climate change and so on. If you are talking about flooding in an estuary, there is both the sea level rise issue and the storm surge that comes on top of the sea level rise. To the best of our understanding, sea level rise is probably between something like 20 cm and 90 cm by the end of the century, with 2 metres of storm surge possible on top of that. We have modelled that right through to 2100. We know that the current defences are good until at least 2035 and probably 2050. In the period 2050 to 2100, you get into the possible need to significantly upgrade those or have

4 a different form of barrier or whatever. We have looked forward that far at least. Any advice or comment we would make on an airport proposal would be in that context.

Q748 Steve Baker: You mentioned that building an estuary airport could cause flood risks ashore. I detected from what you have just said that you were thinking about an airport that is adjacent to the land. Two of the sites look like they are several miles offshore. It seems to me that out there in the estuary, they are still relatively small islands compared with the size of the estuary, and relatively far offshore. Could you elaborate the mechanism by which flood risk would be increased if an island was several miles offshore? Ed Mitchell: There are standard methods of assessing what the increase in flood risk would be from any particular size of island and all the connecting facilities and so on. It would just be a case of running through those calculations and doing a proper flood risk assessment. Clearly, it depends where it is on the estuary, on the size of the island, the exact location and the details, so it is pretty difficult to comment on the level—

Q749 Steve Baker: Without wishing to lead you, is the predominant factor the tidal physics and the way that water flows would change if you interrupt them with an island? Ed Mitchell: Yes, I think it probably is. Colin Powlesland: It would also be fair to say that you may get changes in the sedimentation pattern. That may have longer-term effects as well. If you get sediment deposited more in some areas, then you might be—I stress the word “might”—affecting the flow over a wider area, even though you only have a fairly small central island. I do not think we should forget the onshore infrastructure either, which would at the very least need to be protected.

Q750 Steve Baker: Forgive me, but are these concerns relatively speculative or are there examples of similar construction projects where the environmental impact has been seen? Ed Mitchell: The best example I can currently give you is the London Gateway port development, for instance. As you know, that is attached to the land rather than an island, but we had to go through with the developer the process of understanding what the additional flood risk was, what the effect might be on channel profiles and all the rest of it. We were able to do that with the developer and were able to work with them to find solutions. My feeling is that we would be able to do the same with an estuary development.

Q751 Steve Baker: I am thinking about Hong Kong airport. It is in quite a different situation. It is not a river estuary. Can you think of a river estuary construction project of a similar scale where there is concrete evidence of the kind of changes that you are talking about? Ed Mitchell: No, but my expertise is more on the environmental side than the flooding side. There will be colleagues of mine within the Environment Agency who are particularly expert in that area. If you wanted further information on that, we could happily arrange it.

Q752 Karl McCartney: Is there an equivalent agency to yours in Hong Kong that has provided solutions for Hong Kong airport to be built so quickly? Ed Mitchell: I am afraid I do not know the answer to that. I am sorry.

Q753 Chair: Am I right in saying that you have not looked at any of these issues in relation to any specific estuary airport proposal?

Ed Mitchell: That is absolutely right.

Q754 Chair: Do you have any general views about the problems that such a proposal might bring? Ed Mitchell: As I have indicated, there are a range of challenges that any major development will present. The ones for an estuary development are subtly different from a Stansted or Heathrow expansion. It really is a question of working out the detail of those developments, what the likely impacts are and how you can mitigate them.

Q755 Chair: I want to ask you about air pollutants. What proportion of air pollutants on an airport would be caused by the airport itself, i.e. aviation and vehicles either within or accessing the airport? Ed Mitchell: Roughly speaking, it is about one third, one third, one third. It would be a third from the airport operations themselves, a third from the traffic and travel associated with the airport, and then a third from other background sources such as traffic unrelated to the airport. If you take Heathrow, the airport contribution is slightly higher at around 40%, from memory.

Q756 Chair: What is the figure for Stansted? Ed Mitchell: I do not have the figures to hand, but just because of the location I would expect that the background concentration—the non-airport-related traffic concentration—is likely to be a lower proportion there.

Q757 Chair: From what you know of the work of the Airports Commission, do you think they are going to take environmental factors sufficiently into account? Ed Mitchell: We have had some conversation with them, which Colin is more up to date on than me. Colin Powlesland: The Airports Commission have proposed that they will produce a paper on environmental issues. They have identified a range of issues that they intend to look at. We are quite pleased at the range of issues that they are looking at. We have not yet seen the content of the paper, but we are quite encouraged by the scope of the proposal as it currently stands.

Q758 Lucy Powell: Following on from that, when the previous Government gave the go-ahead for Heathrow expansion, there was obviously a lot of talk about mitigating the environmental impact. What work have you done on that in terms of how that would be achieved and what would be required? Ed Mitchell: As I say, the primary concern other than noise, which is not really our area of expertise, is around emissions of nitrogen oxides. We did quite a bit of work to assess the modelling of what the likely ground level concentrations might be, based on certain future scenarios. To put this in context, the emissions of oxides of nitrogen from Heathrow are roughly the same as from a standard power station. The difference is that a power station emits up a tall chimney and there is a greater dispersal so the ground level concentrations are not as high. As I said before, there are already issues around Heathrow in terms of those emissions.

Q759 Lucy Powell: We heard evidence from airlines and others about the possibility of steeper entry into Heathrow. That may reduce some of the ground level pollution. There are also advances in aviation technology and so on. Have you looked at any of those issues? What is your view?

Ed Mitchell: I do not recall exactly what the basis was of our evaluation of the modelling that we did. As I recall, we did look at proposed increases in efficiency in aircraft. I do not remember that we looked at different landing angles and things like that. Colin Powlesland: No. A significant proportion of the poor air quality in the area is related to ground transport. It is not only access to the airport; it is airside vehicles. There is quite a range of things that could be done to mitigate the impacts, but you do have a very congested urban area, which has quite a high background. You already have that relatively high level of pollution anyway. It is quite difficult to take significant action to remove a lot of the pollution because of that high level of background. Ed Mitchell: I would add that the air quality issues are equally as relevant to new development sites as well. If you build an airport, people will come and you will get development around the airport. Heathrow did not start surrounded by quite so many houses and people, and there has been enormous growth in recent years. Whatever the solution, planning over a reasonably long period, not only for future growth of the airport and its operations but also for the surrounding infrastructure and the people who will come and live there, is important.

Q760 Chair: How do you think that local environmental impacts can be considered in a more integrated way? Ed Mitchell: Having a statement on nationally significant infrastructure around airports would be a good thing, such as we have for other major infrastructure because it allows for those issues to be taken in the round. Obviously, the environmental issues need to be taken in the context of the economic ones and all the others. It needs to be a very rounded decision and the planning needs to consider all those different aspects. Within the existing planning regimes there would be a requirement for an environmental impact assessment and various other things, which, to be honest, give all the necessary mechanisms to enable the environmental issues to be looked at in the round.

Q761 Chair: You said that somebody planning a new airport development should discuss it with you at the earliest possible stage. What does that mean in practice? If somebody has a proposal for a new airport, when should they be talking to you and how much information should they be giving you? Ed Mitchell: Even at the level of an outline plan, we can add some value to their discussions to make sure that they are thinking of all the aspects, so that we are not bringing up things late in the process and then causing difficulty in terms of incorporating them into the design. It is quite wide. To give an example, Heathrow’s water consumption is something like 2.25 million metres cubed a year, which is about the same as Canterbury. It is not just about the climate emissions; it is not just about the flood risk. There is a wide range of environmental implications for a major development like an airport. We can work with developers to make sure they are all considered and factored in.

Q762 Chair: You would expect that from outline plan stage. Ed Mitchell: Yes. Of course, our engagement with them would not be very intensive to start with. It would just be about scoping the environmental issues and how to take them into account. As their plans developed, we would work more closely with them—literally, the earlier the better.

Chair: Thank you very much.

Examination of Witnesses

Witnesses: Boris Johnson, Mayor of London, and Councillor Daniel Moylan, Aviation Adviser to the Mayor of London, gave evidence.

Q763 Chair: Good afternoon and welcome to the Transport Select Committee. Could we have your name and position for our records? Boris Johnson: I am Boris Johnson, Mayor of London. This is Daniel Moylan, my Aviation Adviser. Councillor Moylan: I advise the Mayor on aviation, yes.

Q764 Chair: Mayor, could you bring us up to date with your thoughts about “Boris Island”, other estuary airports and perhaps Stansted? Tell us where your thinking is. Boris Johnson: Of course, Mrs Ellman. I will bring you up to date and put you in the picture about all of that. It is probably worth beginning by saying that all these ideas about the so-called estuary airport solutions and Stansted flow from what I think is a very difficult problem with our principal—our only—hub airport, which is Heathrow. Great airport though it is, as you know, it is running at 98.99% capacity. Planes coming in from all destinations often have to circle for a long time. The slightest perturbation causes chaos at Heathrow. It is a real cause of economic loss to this country. If you look at what has happened in the last few years, the major Chinese aerospace company Comac decided not to locate in London but in Paris because Charles de Gaulle has so many more connections to China than Heathrow does. Similarly, KPMG have moved their European headquarters from London to Frankfurt because Frankfurt is so much better connected with emerging markets. There are many more connections from Paris Charles de Gaulle to Brazil, and there is much more investment correspondingly in France from Brazil than there is in this country. We are facing a real problem of economic competitiveness. We are not able to get our business people to the emerging growth economies of Asia and Latin America in the way that business people from our European competitors are. They are putting on new runway capacity while we have been spending a very long time standing still. That is to say nothing of what is happening in Turkey, Dubai, India or Beijing, where, as you know, they are building new airports, let alone new runway capacity. The objective of the investigation is to find a solution that gives us a four-runway hub and, preferably, a 24-hour, four-runway hub, which is what our competitors are going for and already have in many cases. That is why “Boris Island” so-called, the inner estuary solution and Stansted are the current options that TFL—Transport for London—has so far identified and is looking at just because those are the three that seem best able to produce that solution. That is not only because Heathrow cannot provide a third runway without doing immense damage to the well-being of Londoners through increased noise pollution, but it is inconceivable to imagine that Heathrow could provide a fourth runway without immense political grief, and, as I say, colossal noise pollution slap-bang in the western suburbs of London. That is why Transport for London has produced the proposals that you see. As we announced this morning, we are now engaged in a process of trying to whittle down those three to one or possibly two.

Q765 Chair: Have you had any thoughts that expanding Stansted might be simpler than building a new airport? Boris Johnson: As you say, there are three options in the frame, of which Stansted is certainly at the moment not excluded. Clearly, if you look at the potential journey times, the costs and the connectivity up the Lea Valley, you can see huge potential regeneration benefits

8 from Stansted. It has a lot going for it. I do not particularly want to pre-empt at this juncture the work that TFL is now going to do on trying to come up with the best solution. The last conversations I had with the engineers were that they think journey times to the inner estuary from, say, west and south-west London—that key catchment area—would be even quicker than they would be to Stansted. There are swings and roundabouts.

Q766 Kwasi Kwarteng: People have suggested that in the last six months you have moved away from the “Boris Island” notion and that you are now backing four runways at Stansted. I want to know what your thoughts are about that. Boris Johnson: No; I repeat what I said to Mrs Ellman. On the contrary, we are going to try to come to a view now as among the three, but from where I sit today, there are signal advantages still in at least one of the estuary sites, maybe, over Stansted, though Stansted has many features to commend it too. We are not yet resolved on that.

Q767 Kwasi Kwarteng: Let me get this very straight and clear. Between a four- runway Stansted and an airport in the estuary, you are still favouring the estuary airport. Boris Johnson: No; I think we are equidistant. I am like a tigress with her cubs. I see all three but I will not choose until the last possible moment. Each option has much to commend it. The outer estuary solution—the so-called “island” solution—from the noise and environmental disturbance point of view and the capacity to expand indefinitely has fantastic potential. The outer estuary solution might offer the single biggest scope for regeneration, but as you can imagine, it has an extra time disadvantage and I am not sure how that argument will ultimately play out. Stansted, as people have spotted from the recent conversations we have been having about Crossrail 2, is replete with potential. Clearly, we are very interested in that, but the inner estuary solution also has massive regeneration potential. Councillor Moylan: These decisions have to be based on evidence. We have engaged consultants—the list was announced this morning—who will soon be starting on more detailed feasibility studies of these ideas. That will take a number of months and it will all be submitted to the Davies Commission. It is at that point that it will be fair to ask the Mayor which his preferred option is. It is quite legitimate to have a number of options. The advantage of the estuary and Stansted, being on the eastern side of London, is the tremendous potential for regeneration of east London that would arise from having this massive investment and all the associated infrastructure on that side of the capital. But we will be in a much better position to answer more detailed questions when the work that we have announced has been carried out. Boris Johnson: The Committee will understand that at the moment you have lots of beautiful artists’ impressions and schemes that you will read about in the papers, and lots of fantastic stuff. The only scheme that is really worked up to the requisite level of detail is Heathrow runway three. It is important therefore, and the Prime Minister agrees, that there should be a level playing field in the conversation and that the Davies Commission should be able to arbitrate fairly between the proposals.

Q768 Kwasi Kwarteng: As a follow-up to the remarks that Daniel Moylan made, to what extent are the regenerative ideas of big spending and re-energising a part of London a motivation behind your possible support for an estuary airport? Boris Johnson: It is a secondary consideration, but it is a very important consideration. The most important thing is to stop haemorrhaging jobs and opportunities to our continental rivals because, in the end, Heathrow is just not going to have the space to deliver four runways. The problem with delivering three runways is that even if we started

9 tomorrow, it would take a good 15 years before we had done runway three. We are not going to start tomorrow, as the Committee knows well. The chances of getting the third runway in before 2026 or 2028 are pretty even. That is the problem I see. All you would really be doing by going ahead with runway three is going through an immense amount of political grief. There would be huge agony in west London and protests by every single member of the London Assembly. I can tell you, Mrs Ellman, that every party agrees with me on this. Nobody wants a third runway. No London Assembly member wants it and certainly no Mayor would want it. Certainly Hillingdon does not want it. If you got that through in 2028, you would then have to build a fourth runway, and the difficulty of doing that would be insuperable. Chair: But, of course, all the alternatives have to be assessed, as you say, and you have not done it yet.

Q769 Iain Stewart: If you are successful in lobbying for a new hub airport, at Stansted or in the estuary, do you think it inevitably follows that Heathrow will close, or do you still see some role for it as an airport? Boris Johnson: We have to be clear. I do not think Heathrow will continue as it is. It might have a great future as a business airport, but it will not be 80 million passenger journeys a year; it will be much smaller than that. The advantage would be that you would have all the development potential of at least part of that incredible site in west London. I know that people will raise concerns about employment in west London. Heathrow, in any event, is about 3% or 4% of the west London economy. I think that any jobs lost in the aviation sector would be readily replicated or found again in the new developments that would arise. Don’t forget, the process that we are talking about will span at least a couple of decades in order to get the new airport up and running.

Q770 Iain Stewart: As well as its employment role in west London, Heathrow has a huge hinterland economically. There is the Thames M4 corridor, and lots of businesses locate there because of the relative ease of accessing Heathrow. Will your studies consider that aspect, and would those companies seek to relocate to Essex or north Kent, wherever it is you decide to go? Boris Johnson: Of course we will look at all that. Connectivity is going to be the issue. We are convinced that we can sort that out, as I said, with the journey times that we are proposing either to the Stansted site or to the two estuary sites. We think we can be within the golden 45 minutes to any of the three options. There will be some relocations, but I do not believe that there will be a net loss to west London. The critical point I want to make to you today is that there will be a net gain to the UK economy—a gain that we can’t afford not to make. We need to be doing what our rival economies are doing. We need to equip ourselves with a four-runway hub airport or else by the middle of this century, we will not be competitive with our continental rivals, to say nothing of the emerging economies.

Q771 Lucy Powell: Building on that point, we have commissioned, albeit on a smaller scale, a feasibility study of the estuary options. Even with the closure of Heathrow, the development opportunities thereof and so on, you would still be looking at tens of billions of pounds of investment. Who do you think is going to pay for that? Boris Johnson: That is a fair comment. Tens of billions is roughly right. The overall bill would be in the region of £70 billion or £80 billion, but a large proportion of that would clearly come from the private sector because an airport itself is a thoroughly bankable asset. We think that in the region of £25 billion would have to come, one way or another, from

10 public finance in order to get the road and rail infrastructure right. Again, over time, that would readily pay for itself. To go back to the point I was making to Mr Stewart, the real cost would be not doing it. The real cost would be in not equipping the UK economy with the hub capacity that it needs. That would be a catastrophic mistake. The difficulty with Heathrow, just to ram this point home—I know you have heard it many times but it is worth repeating—is a political difficulty that arises from noise pollution. Already 766,000 people in west London experience noise pollution from that airport in excess of 55 decibels. That is almost 30% of the entire excess noise pollution suffered by people around airports in the whole of Europe—around all of the 76 airports measured by the EU Commission. To build a third runway would be to exacerbate gravely that problem. To build a fourth runway would be unthinkable. That is why an alternative site has to be found.

Q772 Lucy Powell: I agree with you about the cost to the country of not doing anything; it is a shame that we have had some delay in the process. Going back to Heathrow, do you not think it would be wise of you—due diligence of you—to look at other options in relation to Heathrow, potentially environmental mitigation, steeper landing and other aspects? Boris Johnson: Of course.

Q773 Lucy Powell: Lots of people we have had before us at this Committee think that, as a country, we are absolutely mad not to consider Heathrow expansion. Boris Johnson: Of course, and all those mitigations can certainly be considered. What is certain is that you cannot endlessly cram a quart into a pint pot. Even if you go for steeper landings or make the most optimistic possible assumptions about whispering jets and Prius planes and all the rest of it, you are still asking Londoners to accept a phenomenal increase in noise over their homes, not just in west London but in virtually all parts of the city. Yes, certainly, you have to look at steeper descents and all that—and we have; but the view of TFL at the moment, and the view that I am getting back very firmly, is that there are no mitigations that can be put in place that will do anything like enough to address the problem.

Q774 Lucy Powell: In relation to connectivity, do you not see greater problems? A lot of people who use Heathrow are not Londoners; they are coming in from other parts of the UK. Do you not see a problem with moving the airport the other side of London or to Stansted for people coming through and missing the opportunity of high-speed rail? Boris Johnson: No. It is very important conceptually. I agree with you that that is what people will instinctively worry about. People go to all sorts of places; they go to Gatwick and all over the place in search of their flights. We think that the advent of Old Oak Common and the connection between HS1 and HS2 will make a huge difference to this question. You will very rapidly be able to get people out to the estuary site or, indeed, to Stansted. We can demonstrate that. That is one of the reasons why we are working up the proposals that we have today.

Q775 Chair: The figures you quoted in terms of the possible development costs and possible subsidy are rather higher than the range that Oxera produced. Boris Johnson: I saw that.

Q776 Chair: Do you agree with their general view of things on the likely cost and the need for public subsidy? Councillor Moylan: The Oxera report was largely a sound piece of work. Their figure of £30 billion for subsidy is not very different from the £25 billion that we have been quoting

11 for the road and rail infrastructure. Implicitly, on their waterfall chart, you saw that the airport itself was a bankable proposition, maybe with some risk, but all businesses have risk. For the road and rail infrastructure, they said £30 billion and we said £25 billion. We are not going to argue about that number just for the moment. We think the weakness of the Oxera report is that it accepted the cost of a third runway at Heathrow without making any comparable assessment of the additional public transport and road infrastructure that would be needed to support the third runway and the sixth terminal proposed for Heathrow. Our complaint was not about what they said about our proposal but rather that they simply ignored the huge investment in public transport that is going to be required to deal with a 50% increase in passengers coming from the west, who already struggle to get to the airport and have no public transport connections really, apart from bus.

Q777 Chair: Their remit was to look at a range of costs for an estuary airport because there was no specific proposal that has had any work done on it. Councillor Moylan: But they were benchmarking it against a Heathrow option that does not take account of the public sector investment that would be required to support a Heathrow option. That is a quibble for you to consider. You asked about our view of what it said about the estuary. We are not very far from what they said, no. Boris Johnson: I want to come back on one point about mitigations and whether you could improve Heathrow. One idea knocking around at the moment, which it is worth having 10 seconds on, is the idea that you could somehow move the whole of Heathrow and shuffle it off a bit to the west and build it over the M25. Have you seen this thing? We have looked at that in some detail and we do not consider it to be a very good scheme. It would do very little to address the noise. It would be a logistical and technical nightmare to build over the M25, one of the busiest roads in the country. We do not really think that one is a runner at all.

Q778 Mr Sanders: I want to press you a little more on Heathrow. You seem to suggest that if there were another new hub airport, Heathrow would still remain as a functioning but smaller operation. The evidence that we received was that Heathrow would have to close, full stop. There was no question of it being scaled down. Boris Johnson: We have to be clear that it could not be a rival hub, Mr Sanders. That is what it could not be.

Q779 Mr Sanders: And it will never be. If the hub is 24 hours, Heathrow is finished. Boris Johnson: I do not think it is necessarily finished. You could argue the toss about that, as it happens. I think it could have a viable future as a business airport, with all these plutocrats in their jets and so on. You could imagine that kind of thing continuing to happen at Heathrow, but you could also imagine considerable development and job opportunities, tech cities, you name it. All sorts of things could be envisaged on that fantastic site. That is why I am confident about the economic prospects of west London.

Q780 Mr Sanders: Have you conducted any studies into the feasibility of Heathrow closing and you having to find a new economic function west of London? Have you commissioned any work on that? Councillor Moylan: That is included in the work that we have just commissioned. If you see the list of consultants that we have engaged, announced this morning, they include not only engineers and architects but also economists, development economists and people with expertise in regeneration and the environment. That will be very much part of the work

12 that we are undertaking, including the benefits of course. It is not simply loss in one area; there are huge benefits in other areas. Those factors will be assessed as part of that work. Boris Johnson: There is a historic choice for the country, basically, between continuing to compound a mistake, which is the site of our major hub airport in a very difficult position too close to huge numbers of human beings, or going forward with a better, long-term sustainable alternative. It is very good that the Government have decided to get the Howard Davies Commission to work. I hope very much that we will see the right outcome in the next year or so.

Q781 Mr Sanders: There is a perception in the far west, with HS2 bypassing the far west, and with a hub airport going east, that Wales and the south-west could lose out economically from Heathrow no longer being an airport. Councillor Moylan: South Wales would have as good a connection to a new airport in the east as, in practice, there currently is to Heathrow because of Heathrow’s poor public transport accessibility already. At the moment, if you come from South Wales— Boris Johnson: You have to go to Paddington anyway. Councillor Moylan: You go to Paddington and change to the Heathrow Express. Our proposition is that you would come to Old Oak Common on the Great Western line, change on to the HS2/HS1 connector, and at the moment it is 17 minutes to Ebbsfleet from St Pancras.

Q782 Mr Sanders: But how long is it going to be from Old Oak Common? Councillor Moylan: We have worked out that the figure is 27 minutes. Boris Johnson: It is less than half an hour. Councillor Moylan: Within half an hour is an extremely good offer. All the experience of airports round the world is that one needs to be under 45 minutes and, ideally, under 30. We are in the 30-minute ball park for that. The point you make in general, though, is terribly important. This is a national proposition in many ways. It is not just London and the south-east. It does have to work for the rest of the country, and we are very conscious of that. We have really looked at these transport links and we will look at them much more closely, but I am confident that we will be able to serve south Wales and the south-west of the country better than at the moment. How do you get from Guildford to Heathrow at the moment? Drive to Woking and take a bus is what I was told by someone who lives in Guildford. That is not actually very attractive. If you could come into Waterloo and have a connection straight through to the airport, that would be a great deal more attractive in public transport terms.

Q783 Mr Sanders: That works for Guildford, but it does not work for the west of England. Boris Johnson: Your point is a very good one, Mr Sanders. Councillor Moylan: Your point is a good one. We have looked at this and it depends how far south-west you want to go. The fact is that you cannot get to Heathrow by train from the west at the moment. There is no proposal that you should be able to do so. Public transport accessibility at Heathrow is extremely poor by comparison with Schiphol, Charles de Gaulle and Frankfurt, where they have railway stations under the airport. You drop down and there is a station on the main European high-speed network. You can go from Schiphol to Milan on a train, if you want, without ever going near Amsterdam. What we have is something that just brings you into the centre of town and does not serve the west, Wales or anything like that at all. We can do very much better if we have a purpose-built hub that is a true multi-modal logistics hub. The best location for it is certainly not Heathrow. We would say it is to the east of the capital and we will be doing detailed work to refine that.

Q784 Chair: Mr Moylan and Mayor, the reality is that you are full of enthusiasm and you have grand ideas, but the reality is that there has been no assessment whatsoever of any individual project at the moment. You are in a pre-assessment phase. You do not actually know if any of these ideas would work or not. They may. Boris Johnson: That is not quite fair, Mrs Ellman. This conversation has now been going on, as the Committee will be aware, for quite some time, thanks to the glacial speed at which we advance these arguments in this country, which has given us ample opportunity to look at the various options and delve into them in ever greater detail. I can tell you that the repository of learning in TFL about all of these schemes is now very great. Clearly, their view is strongly that Heathrow runway three is a flawed idea and that the coalition and, indeed, the Labour Party were right to rule it out. There are, at the moment, three good solutions.

Q785 Chair: We do not yet know if they are viable or not. The work has not yet been done. Boris Johnson: An awful lot of work has been done. I hesitate to contradict you. Councillor Moylan: We have published quite a lot of work, but the establishment of the Davies Commission has prompted us to go over that work and invest at a higher and much more refined level of detail because that is what the Government want. We are not starting from scratch.

Q786 Chair: We will come back to that. The fact is that we have been told only this afternoon by the Environment Agency that it has not had any discussion with you, apart from the most minimal discussion, about any specific project. As you are about Stansted, Mayor, neither in favour nor not in favour of it, I am neither in favour nor not in favour of your proposals. We simply do not have the information yet. Boris Johnson: No, that is not quite true. I am in favour of Stansted as one of the three options. Councillor Moylan: We have held several discussions with the Environment Agency.

Q787 Karen Lumley: What do you think of Michael O’Leary’s proposal to put a new runway at each of our London airports? Boris Johnson: That is an interesting suggestion, but it is what you would expect from somebody who typically runs lots of short-haul journeys for holidaymakers. The difficulty is that it does not address the need for a hub. What I was trying to get across to the Committee earlier on is that we are losing through not having sufficient capacity at our hub airport. It is only by having a hub capacity that you can provide your business community and the punters—the people who want to fly—with the wide range of destinations that they need. I mentioned Brazil. Heathrow has half the flights that Charles de Gaulle has to Brazil, and you can see the consequences. It is taking us ages to develop adequate links with China. One of the problems is that as we develop and as airlines take the risk of going for a long-haul route, because of the capacity constraints at Heathrow, commuters—people who want to fly to destinations within the UK from Heathrow—find they are losing their service because there simply is not room to do everything. You need to expand the hub in order to compete. The difficulty with the Heathwick solution, which is what Mr O’Leary is proposing and which I do not think has much support across the board, is that you are failing to address the problem of the lack of hub capacity because nobody really believes that you can create a dual hub in that way.

Q788 Karen Lumley: To follow on from that, do you have faith yourself that the David Davies Commission will provide a solution for us? Boris Johnson: I do not know what the David Davies Commission is on, but the Howard Davies— Karen Lumley: The Davies Commission. Boris Johnson: I have utter faith in David Davies and Howard Davies—and virtually anybody called Davies. I know that Sir Howard will do a first-rate job and will work very hard. What I cannot promise to do is agree with everything the Davies Commission comes out with if I don’t agree with it.

Q789 Karen Lumley: Do you also agree that we have to have cross-party support here to deliver an acceptable solution? Boris Johnson: Yes. This is one of those things that should be above party politics. It should be possible for everybody to see the arguments in favour of doing something that is brave and right and is in the long-term interests of the country. When you look at the alternative solutions that were mentioned, the capacity to expand at Heathrow and the gradient for aviation demand, even though it has been slightly revised downwards recently because of the recession and the fall in GDP, we are still going to need a six-runway hub by 2050. So we need to get on with it.

Q790 Karen Lumley: How confident are you that you can actually deliver a new airport for London? Boris Johnson: Extremely confident if only I was Mayor of the south-east, but I am not. But I am confident that the case for boldness is increasingly being heard. Funnily enough, one of the game changers has been not only the Government’s conversion and interest in infrastructure as a way of taking the country forward—there is a very good book, “Britannia Unchained”, which addresses some of these issues very well—but also the Olympics and people’s sudden realisation that mass transit could deliver huge numbers of people to east London rapidly, in comfort and in style. That has got people’s minds whirring and they are starting to see real possibilities.

Q791 Steve Baker: Mr Johnson, you said that it would be a technical nightmare to build over the M25, but you seem to be proposing a four-runway airport several miles offshore. I have just been looking at Hong Kong, which seems to be operating two runways close to shore. Can you name a successful four-runway offshore airport island project? Boris Johnson: First of all, on the LSE proposal for building over Heathrow West, as it were, that is not the only objection. I am not against massive and brilliant logistical solutions to problems if you can find them.

Q792 Steve Baker: I used to be an engineer so I tend to ask hard questions. What about four runways? Boris Johnson: The other point is that you would have to taxi 7 km from the terminal to the runway, which I do not think is sensible. There are good examples of offshore airports. The Singapore solution is much praised. What they have done in Hong Kong is very interesting. I do not see any particular logistical problem. I am told that by the experts and I defer to your engineering expertise.

Q793 Steve Baker: Which marine civil engineers have you consulted? Boris Johnson: Since you ask, at a very early stage we had long conversations with Doug Oakervee, a great civil engineer, who I am sure you know. He was instrumental in both

15 the Singapore airport and Hong Kong offshore airport. It was his view that the Thames estuary site, which he identified, would be technically much easier to do, but I would be happy to—

Q794 Steve Baker: It would not be a technical nightmare like building over the M25. Councillor Moylan: No; I do not think it would be a technical nightmare. It would probably be a great deal simpler. Boris Johnson: I think it probably would be simpler. It would probably be considerably less hazardous. As I said, building over the M25, attractive though that is in many ways, would have lots of other defects and disbenefits, not least the fact that you have to taxi 7 km from the terminal to the runway. You would not really ameliorate the noise problem. You would infuriate Her Majesty the Queen. I suppose certain members of the Committee might not care about that, but it would be a consideration anyway, I imagine, for somebody. In my view, it is not a brilliant scheme.

Q795 Steve Baker: You also said that a new estuary airport would be a bankable asset for private investors. We have all broadly agreed that between £40 billion and £50 billion of private investment would be needed, yet your plan would also shut down Heathrow, despite the massive capital investment in Heathrow as an airport. What estimate have you made of the capital that would be squandered if Heathrow was shut down? Councillor Moylan: That is not a realistic question and not one that we would care to answer.

Q796 Steve Baker: It would no longer be a hub, would it? Chair: Have you considered that? Councillor Moylan: One does not look at what you have squandered. If there comes a point when you have to replace an old car or part of your house, you don’t sit there considering what you have spent on it before if you have to move forward. Some costs should not be—

Q797 Kwasi Kwarteng: But there is an issue. Councillor Moylan: There are issues but that is not the issue. Boris Johnson: If I may be so bold— Councillor Moylan: There is an issue.

Q798 Chair: Just let me stop this a moment. Let us take out of the question the word “squandered”. What attention have you given to the issue of the implications for Heathrow and the amount of money that would be involved? Councillor Moylan: We know that the regulated asset base at Heathrow is estimated at approximately £15 billion, financed roughly one third by equity and two thirds by debt holders. If Heathrow were to be capped in its operations by some regulatory measure, there would need to be a measure of compensation paid to the owners of Heathrow for doing that. This is included in the figure that we gave you of £70 billion. We have made an estimate of that. In the course of that, as the Mayor said, if Heathrow were to continue operating at a much smaller level—say, a London City airport of the west—it would allow the release of very considerable development potential on the site. That, of course, would be part of the price, in a sense, that you would be paying to the owners of Heathrow. You would have the development value there as well to help compensate that. We know roughly the regulated asset base cost. One of the things we have to work on yet is what the development value of the residual site might be that would help to net off

16 against that cost. We have been completely up front about that all along. If Heathrow is required by regulation to run itself down, there will be a cost in terms of compensation, but there will also be opportunities in respect of regeneration.

Q799 Chair: What would that cost be? Do you have a figure on that cost? Councillor Moylan: We know that the regulated asset base is approximately £15 billion. There was an article in the Daily Mail a couple of months ago quoting Heathrow where they said that, basically, they wanted £18 billion. They were putting their stall out at £18 billion. As I say, that does not include how much you can generate from the site, which would reduce, in our view, very significantly, if not to zero, the total compensation value. That latter question we are not yet in a position to put a number on. Boris Johnson: It is a huge, huge opportunity.

Q800 Steve Baker: The point I was driving at, Mr Johnson, is that you would be asking private investors for £40 billion to £50 billion of capital in an environment surely of considerable political risk. If you do recognise those political risks— Boris Johnson: Sorry. Where is the political risk?

Q801 Steve Baker: Here you are, a politician, looking to shut down Heathrow as a hub and therefore there is a considerable amount of capital which is not going to reach, presumably, the end of its lifetime as expected by private investors. There must be a political risk associated within this investment. Do you imagine that the taxpayer would be required to underwrite the return on that £40 billion to £50 billion? Councillor Moylan: I am not sure where the £40 billion to £50 billion is from.

Q802 Steve Baker: I took the £70 billion to £80 billion, which you said, and subtracted about £30 billion, which we agreed was needed in subsidy. Councillor Moylan: But not all of that is part of the airport. Some of that is compensation to Heathrow, as I explained, which we would expect to recoup in large measure from the development value of the site. Indeed, they may be interested in doing so. Also, you don’t just step in and say to Heathrow, “We are closing you down.” Any decision to reduce Heathrow’s scale of activity would happen over a minimum 15-year period. If the Government made the decision, then Heathrow would know what was expected of them. Their investment plans over that period would be scaled back appropriately. They would not, presumably, carry on building new terminals and so on and so forth. They would have a lesser scale of investment, a clear investment plan and a clear exit at the end of it. I think this would be commercially as acceptable to them as other outcomes, because the owners of Heathrow are effectively fund managers from sovereign wealth funds.

Q803 Karl McCartney: We are both probably optimists at heart, but unfortunately, airport security and, maybe, aircraft security are quite a major issue. With your three favoured options, how high up your agenda is that security and have you employed any security consultants? Boris Johnson: I am sure that security will be factored into our considerations. British airports do a fantastic job at the moment with security and keeping us safe in the air. One factor that I do not think is irrelevant is that with a huge increase in the number of aircraft movements over a massive conurbation like London, there will be an increased risk, no matter how small, of a plane coming down. That risk is much lower in the sites that we are proposing.

Q804 Iain Stewart: I would like to return to the question that Karen Lumley asked about the proposal to expand Heathrow plus Stansted and Gatwick. Boris Johnson: To do all of them? Iain Stewart: Yes, the O’Leary triple is the shorthand. Boris Johnson: As I say, this will suit the carrier of—

Q805 Iain Stewart: Forgive me, but your argument, which you have made very forcibly, is that we need a single hub capacity, and that is where the demand is going to be for aviation, yet other witnesses have said that while there will be some hub demand, there will also be a growth in point-to-point need. I am trying to ascertain whether you have looked at the forecast demand growth and the split of what is going to be hub and what is point to point. If there is not an option for both expanding, and the other option— Boris Johnson: I might ask Daniel to answer. What I think will happen is this. Yes, I think Mr O’Leary is right and there will be an increase in point-to-point flights. People will continue to fly from Gatwick and Luton or wherever. Depending on the economy and all the rest of it, that will continue to expand. What you won’t get, unless you have the four-runway solution, is the ability to deliver the wide range of long-haul destinations that business passengers need. That is the key thing I am trying to get over. For instance, on a flight from Heathrow to Hyderabad or from Heathrow to Mexico City, about 80% of the passengers on the flight from Heathrow to Hyderabad are transfer passengers. In other words, that flight would not have been economically viable unless there were lots of other flights coming into the hub. Are you with me? It is perhaps even more acute with destinations in Latin America, where the operators have found it difficult to put on more slots—also in China. Councillor Moylan: There is something of a misconception here. Nearly all flights in one sense are point-to-point flights. A plane takes off in one place and lands somewhere else. It is the passengers who are point-to-point or transfer passengers. You have to look at what the passengers want to do. There are huge numbers of passengers who transfer through European hubs, who should be coming to London. You might say, “We don’t care about them because they only spend 35p on a cup of tea.” But what they do, as the Mayor has just said, is fill up planes that allow a wide range of destinations to be served at higher frequencies, which are then of benefit to people who are in London. It is not just passengers, but businesses that want to open up their headquarters in London. They say, “Can I get to the places that I need to go frequently?” You can only do that if you are attracting those transfer passengers into a hub. It is true that you might want to make provision for point-to-point travel somewhere else, but actually Mr O’Leary might want to fly his planes into a proper hub. Even his passengers—he knows more about his passengers than I do, of course—may want to transfer. There is already a huge amount of transfer traffic that is unticketed, where people make their own transfers. They book a Mr O’Leary flight somewhere and then they buy another ticket to carry on and make their own transfers. Boris Johnson: Look at what our rivals are doing. They are not relying on a constellation of smaller airports to soak up the increased demand. They are going for the hub solution because that is the way to be more competitive.

Q806 Kwasi Kwarteng: We are missing something about the O’Leary proposal. It was essentially trying to open up and let the free market decide which the hub would be. It was not a proposal simply to expand point-to-point flights. It was saying, “We are going to expand capacity” and then we are going to see. Boris Johnson: I’m as free market as all-get-out, but the one option I think is not going to work is to continue to sink cost and investment into the cul-de-sac of Heathrow

18 expansion because you already have a major environmental problem, which you are going to exacerbate. The state has to have a view about that. That being so, it is only commonsensical for us to look at where the extra capacity can be found. All my experience tells me that you have to have public sector investment in these projects. You cannot simply leave this kind of thing to the market. You have to invest; you have to decide. We have to work out as a country where we are going to find our solution. Chair: The issue is what happens next in the studies you are about to look at.

Q807 Iain Stewart: I have one simple follow-up question. I have not yet made my mind up on the hub solution versus increased capacity elsewhere. I am finding it very difficult to find reliable evidence and forecasts of future passenger demand on which to base a decision. What are you basing your figures on? Councillor Moylan: The DFT published its own updated demand figures about a week or so ago. Whether they are reliable, Mr Stewart, is for you to decide. There are also forecasts assembled on a global basis that are pretty robust. What they show is that, overall, as incomes rise, especially in countries that are reaching that tipping point of getting to a certain level of income where they want to fly, there is going to be a very substantial increased demand for air travel from passengers. But there is also freight. If you look at the supply chain for the phone you have in your pocket, that is a typical piece of global manufacture that depends on aviation. That is likely to grow as well. There are pretty reliable figures for that out there. I would start with the DFT figures that were published 10 days ago, and we can happily send you links to the place where you will find the American equivalent, the EUROCONTROL equivalent and so on.

Q808 Chair: These are things we will all have to consider and eventually make a judgment on. Finally, could you summarise for us exactly what is going to happen now in relation to your own proposals and the time scale of that? Boris Johnson: As you know, we are working with the Commission of Sir Howard Davies and trying to be as useful to him as possible by feeding into his agenda. Personally, I think that agenda could be accelerated and it would be possible by early next year to come to a pretty clear view about what is the right way forward. We are content to be as useful as we can for the time being. With the work that we have announced today, we are going to try and whittle down the three options that we are currently looking at to one or two, and make the case for that option or those options to Sir Howard Davies. My personal view is that it is a great shame as a country that we cannot get on and do this. We are falling behind other countries. This is crying out for a decision. The parties could get together and agree a way forward. We intend to be as useful as we can in helping that to happen.

Q809 Chair: When will you reach a conclusion about it? Councillor Moylan: The feasibility studies, which we hope will start in March, we are aiming to have concluded in October and certainly well before the Howard Davies interim report is due at the end of this year.

Q810 Chair: So, until we know the results of those studies, we are not in a position to make a reasoned judgment about— Councillor Moylan: Those are our studies. Sir Howard is also going to be carrying out studies, and I am sure others will as well. Boris Johnson: Mrs Ellman has a very fair point. The positive thing that has happened recently is that the Prime Minister has recognised that Sir Howard cannot get on with his

19 work without funding available to be fair to all the options. As I understand it, his Commission will now be knocking out some of the wilder solutions and working down perhaps to five or three solutions and then to one and coming forward with the answer. That is what they are proposing to do. The unfortunate thing is that owing to the electoral timetable, politics and all the rest of it, they have been told that they cannot tell anybody the answer until after the election because it would be too shocking.

Q811 Chair: On that note I think we had better finish. Boris Johnson: I think myself that a great country like this could get on and take a decision like that a bit faster.

Q812 Chair: You think we could take it. Boris Johnson: I do, yes.

Chair: Thank you very much.

Examination of Witnesses

Witnesses: Rt Hon Patrick McLoughlin MP, Secretary of State for Transport, and Jonathan Moor, Director of Aviation, Department for Transport, gave evidence.

Q813 Chair: Good afternoon, Secretary of State, and welcome to the Transport Select Committee. I am sorry we have kept you waiting. We just had a few questions to ask the Mayor, who mentioned that he might like to be Mayor of the south-east, but maybe I am paraphrasing it. Lucy Powell: Or wider. Chair: We did not pursue that further. Would you like to introduce your team? Mr McLoughlin: This is Jonathan Moor, who I think you know is the Aviation Director at the Department. Thank you for my weekly attendance, Chair.

Q814 Chair: The Department is due to publish its final aviation policy framework in the next few months. Can you tell us what sorts of issues will be covered there and whether the Department’s recent predictions on lower airport capacity are going to affect what is in that statement? Mr McLoughlin: As you rightly say, we will be publishing the aviation framework. It is due for publication in the spring, but I cannot give you an exact date. Obviously, we gave a draft publication, which was published by my predecessor before she moved Departments. It is a fairly wide-ranging document. It will cover many issues, one of which is to take forecasts for the next number of years, but they are always difficult to give. In the last 40 years we have seen annual growth in the aviation industry in the region of 5% per annum. Growth is expected to continue over the next 20 to 25 years but not at such a level as we have seen in the past. This is always difficult, and one of the things that the Davies Commission will want to do is to look very carefully at some of those figures and ideas.

Q815 Chair: What is going to be included in the policy framework? Mr McLoughlin: The draft aviation policy was already published, but there is a huge amount in it, including capacity, possible growth, and also climate change, noise and various other issues. The draft is there and in circulation. It is a public document. We will be coming forward with our responses, and we will be dealing with the responses we have had to it in more detail when we publish the final report.

Q816 Chair: The work of the Davies Commission is very prolonged. Do you feel confident that it is going to be able to reach a conclusion that will be accepted? Mr McLoughlin: I hope so.

Q817 Chair: What is going to be different this time? Mr McLoughlin: What I would like to say is that the Davies Commission was something that I thought of and was able to announce within two days of being in office, but government does not work like that. The idea of a commission to look at aviation, the impacts of aviation and how we meet the challenges of aviation was something that the Government were clearly looking at before I arrived at the Department for Transport. One of the things I am personally very pleased about is the way in which now that we have announced the rest of the Commission, there has been very little criticism that it is not a very well-balanced Commission representing all the various interests that you would expect a Commission of this nature to be able to look at and address. There has been nobody saying that somehow the balance of the Commission has been inadequate. I am rather encouraged by that.

Q818 Chair: What are you doing to try and build cross-party support, or are you? Is that something that is just too hard to achieve? Mr McLoughlin: I am relatively pleased that there has not been an open attack on the fact that we have set up the Davies Commission and that it has started its work. Sir Howard, in looking at what he is trying to do, is well aware of the controversy around the whole issue of aviation capacity. I hope that when his work is finally presented to the Government in the summer of 2015, it will be seen as a serious and proper piece of work that enables the Government of the day to take a decision, and whoever is the Opposition at that time sees that a proper piece of work has been done on it, which hitherto has not been the case. There has always been controversy about what you do as far as aviation capacity is concerned in the south-east. There is not the same problem in other parts of the country with aviation capacity as there is in the south-east.

Q819 Lucy Powell: On that point, there was some speculation when you were appointed that you were given the job of Transport Secretary because you were slightly more sympathetic to Heathrow expansion than your predecessor. Is that something you discussed with the Prime Minister? Are you more sympathetic to Heathrow expansion? Mr McLoughlin: I think any discussions that I may or may not have had privately with the Prime Minister or Chief Whip before I was Transport Secretary are matters between me and the Prime Minister. So no, that is not the case. The Government’s position on Heathrow is very clear—and that is no expansion in this Parliament—and the Commission was being set up. I do not think one should read anything into that. I have read a number of things about my appointment, some of them wild beyond the mark and others hopefully true, but we will wait and see.

Q820 Chair: We will not ask you which were which. Mr McLoughlin: I think we had better wait and see on that one.

Q821 Kwasi Kwarteng: Mr Johnson of “Boris Island” fame said just now that he thought that the Davies Commission’s timetable in terms of when it would report was conveniently placed after the next election because he felt that the findings might be too shocking for the electorate. What is your view on the timetable of the Davies Commission?

Mr McLoughlin: What I would say is this. We wanted the Davies Commission to do a proper piece of work. To publish it a month or two months before a general election would not enable the kind of consideration that properly needs to be taken once a report is done. We will have an interim report at the end of this year. I do not yet know what is in the interim report. I certainly do not know what is going to be in the final report. That is the point of the Commission. Once you set up a Commission to the degree and with the eminence of the Commission we have set up, I think it would be foolish of me or anybody else to try and prejudge what they are saying.

Q822 Kwasi Kwarteng: So you think that is a reasonable timetable. Mr McLoughlin: It is just over two years. It is a reasonable timetable. Once it got started properly and the Commission were finally appointed, they got their work programme and their call for evidence is starting to take place. We will see an interim report at the end of this year and then further work thereon. I think that is a reasonable time scale, bearing in mind the overall time scale they are talking about.

Q823 Chair: Has the Department undertaken any assessment of the economic implications of the shortage of hub capacity in the UK? Mr McLoughlin: The one thing the Department is not short of is numerous reports that come to us on this particular issue. One of the interesting things, if I sit slightly back, is the way in which different airports are now coming forward with their own proposals. You had Gatwick announce, once the 2019 deadline was proposed, that they would like to put in an application for a second runway. You have Heathrow already having developed terminal 5, and terminal 2 coming on stream next year, with a huge amount of investment going into those particular areas. One of the things we have seen as a result of the sale of Gatwick, and also now, when it concludes, the final sale of Stansted to the Manchester airport group, is those airports competing with each other to make the case for their own set-up. That is an interesting development in aviation policy.

Q824 Chair: Has any work been done or commissioned by the Department looking at job losses or economic problems because of the lack of hub capacity here? A number of witnesses have said to us that there are economic consequences because we do not have sufficient hub capacity here and that unless we deal with the hub capacity issue quickly, they will get worse. They have spoken about losses of jobs or companies locating outside the UK that otherwise would have come here. Has any work been undertaken looking at those things? Mr McLoughlin: What is certainly true is that, if you look at Heathrow, as far as the services it provides, it is far better connected than either Charles de Gaulle or other neighbouring airports in relation to our connections to the United States, China and other parts. Is Heathrow a huge provider of jobs? Yes, it is, but so are Gatwick and Stansted. Airports do provide a huge amount of jobs for the future. As I say, there are all sorts of arguments about the problem of what alternatives might be found in other countries if we do not have sufficient capacity to allow the hub airport to do what it wants.

Q825 Chair: Some airports outside the south-east are developing hubs in other parts of Europe or with the middle east. Is that something that concerns you? Mr McLoughlin: I am not sure it is for me to direct where services are provided. I want to see services provided from different airports. They give different opportunities. It is not really something that I am against. One of the first things I ever said, before I came to the

Committee, was that I did not want to see airports like Birmingham or Manchester referred to as regional airports. They are very important airports in their own right, and local people in Manchester, Birmingham and other areas look at their own local airports to see if the service that they want can be provided locally.

Q826 Lucy Powell: Can I turn to the issue of air passenger duty? You have just talked about the growth of regional airports in particular. One of the issues we have heard time and again as a barrier to the development of some of the regional airports is the high rate of air passenger duty. What are your thoughts about that? I do not know if you saw the recent PwC report proposing the abolition of air passenger duty. Equally, there are other arguments about regional variations to help drive some of the traffic through other airports. What is your view on that? Mr McLoughlin: Yes. One of the other great opportunities I had was to appear before the Northern Ireland Select Committee just a few weeks ago; they also wanted to talk to me about APD and various other things. I am interested in the Pricewaterhouse report, which I understood argued that, if we got rid of air passenger duty completely, we would increase revenue and the Exchequer would get more money. There are lots of schemes put forward like that. I am very grateful it is not my decision to take it, but is a matter for the Chancellor. He did freeze APD last year. I fully accept that APD is a big issue, but finding the economic resources to run the Government is something we have to bear in mind, and we have to bear in mind how much APD raises. But there are challenges made to us on that and no doubt the Treasury will take all these into account when the Chancellor comes to make his Budget announcements.

Q827 Lucy Powell: Certainly, some of the airlines indicated to us that a cost-neutral way of doing it might be to increase APD into Heathrow, while reducing it at other airports to help drive out traffic, and given the high demand at Heathrow, that could be swallowed. Is that something you think could be explored? Mr McLoughlin: I think that is a matter for the Chancellor of the Exchequer to take a view on. It is not something I am going to express a view on. I am always interested in how people tell us that if you take tax away from them and put it on somebody else, it will somehow even out the system. That is an interesting debate.

Q828 Chair: But you must have expressed a view, surely, to the Treasury about the impact of air passenger duty. There must be discussions. What views are expressed on your behalf in the Department on the impact of air passenger duty on aerospace? Mr McLoughlin: As you would expect, Chairman, any representations that the Department makes to the Treasury are made on that basis. They are made to the Treasury for decisions to be taken. Air passenger duty is an important part of the revenue that the Exchequer raises each year. If I was to say to the Chancellor, “Take away this revenue”, I would have to give him another revenue stream, and that would be very difficult.

Q829 Chair: But what assessment has the Department made of the impact of air passenger duty on aviation? There must be a view in the Department. We have heard representations during this inquiry and we have heard them in previous inquiries. There must be a view taken in the Department about the impact of air passenger duty. Mr McLoughlin: The Government froze air passenger duty last year and made some adjustments as far as the APD in Northern Ireland was concerned because of the unique position that the Northern Ireland airports found themselves in. As I say, it is an important

23 raiser of a huge amount of revenue. To give that up is something that we cannot afford to do at this stage.

Q830 Chair: But what view has the Department for Transport taken on that issue? Mr McLoughlin: I am not sure we have taken a view on it. It is there, it exists and, therefore, it is an important part of the element of raising money for the Exchequer. There is no point in taking a view on something that is an important part of the economy.

Q831 Chair: Are you telling me that the Department has not taken any view on the impact of air passenger duty on aviation? It is very difficult to accept that there is no view expressed. Mr McLoughlin: The view is that it raises in excess of £3 billion a year. It is a very important raiser of finance.

Q832 Chair: That is a Treasury view, but a Transport view might be something else. Mr McLoughlin: I am afraid the Treasury and the Department are one and the same issue. I get quite a lot of money out of the Treasury to spend on Transport matters.

Q833 Karl McCartney: Secretary of State, do you think that if the Department for Transport had commissioned PricewaterhouseCoopers to come up with the report, they might have given a different answer from the one that they gave to the airlines? Mr McLoughlin: I do not know; it all depends on what questions you ask them. We provide information to the Treasury on the modelling. At the end of the day, the amount of money and the modelling is a matter that the Chancellor takes into account when he comes to those conclusions. You are quite right; I dare say that if one commissioned certain reports and wanted certain conclusions, companies that provide this evidence would try and work to the brief they are given.

Q834 Iain Stewart: Going back to the Davies Commission, whatever solution they decide upon is going to have significant implications for surface access to that airport, whether it is an expanded Heathrow, an estuary airport or whatever. Those new rail or road links in themselves are going to be quite controversial projects. What preparatory work can you do to ensure that when Davies reports there is not then another delay of many years while the access options are assessed? Mr McLoughlin: Mr Stewart, I am very reluctant to try and prejudge what Davies says. We have not just asked Howard Davies to come up with the solution and answer as to aviation and where the airport and capacity would be. We asked him to address some of the issues that you have just raised in your question. Partly that is what will take some of the time. Once a solution comes up, we expect it to be a fuller solution as to what the answers to some of those questions are. That is why we have other people on the Commission who will naturally be able to delve into those subjects. The point you raise is a vital one. If it was a brand new airport, obviously that would be very much part of the questions that would need to be answered.

Q835 Iain Stewart: But you are future-proofing current decisions. For example, if the decision is to expand Heathrow in some way with the proposed High Speed 2 route, the legislation is going to be framed in such a way that the Heathrow loop could easily be put back into the project if that was the decision on the extra airport capacity. Mr McLoughlin: Yes, that is true. That is something that is being developed. The vast impact that Crossrail is going to have on future urban transport across the whole of London is

24 also something that will come into being. As I said, with the whole development we are doing in other areas too, it is a matter of utilising the best of what we have available to us and trying to iron out any pinch points in the system.

Q836 Chair: We have heard from airports outside the south-east that bilateral agreements are a major constraint on them being able to develop new routes. Is that something you are aware of and is it something you are addressing? Mr McLoughlin: I would like to ask Jonathan Moor to comment on that, but I would very much hope that we are trying to do everything we can to facilitate other airports in providing services from their particular destinations. That is certainly something I want to encourage. When I went to Birmingham I was at pains to talk about it. When I was at Manchester airport, I was at pains to talk about the way in which they were developing services with those airports. Jonathan, can you add a bit more to that, please?

Q837 Chair: Mr Moor, could you tell us what, if anything, is being done about that? It seems to be a major issue. Jonathan Moor: Certainly. Generally speaking, service agreements are not a constraint to access to UK airports. In fact, only seven of our air service agreements have any constraints written into them about which airport they can go to. For example, Bahrain and Lebanon have constraints around the location of London. To be honest, one of the issues is around slot availability. I know that from my own negotiations with a number of different countries. It is not about constraint in the bilateral air service agreement; it is about their access to slots, and a lot of those at Heathrow are about the cost of access to slots. Countries like Nigeria would like to fly to London more, but they cannot get the slots at the price allowed. Generally speaking, it is not the air service agreements, apart from in some particular countries. The other issue that has been raised is around freedom rights. This is the right of a country to land in the UK and then fly on to another country. This right has been available for regional airports for a large number of years, but I think I am right in saying that only one of these is operating at the moment. That is a Pakistan International airlines flight, which comes in from Islamabad to Manchester and then on to New York. That is available to regional airports, but so far people have not taken those up. The reason they have not taken those up is because it is a commercial decision for the airlines to decide where they want to fly to and where it is commercially viable for them to do so.

Q838 Chair: Have you assessed the impact on airports outside the south-east of the Government—the Department—unilaterally opening up access to airports, including the fifth freedom rights? Is that something that has been considered? Jonathan Moor: In terms of fifth freedoms, what we proposed in last year’s draft consultation was to extend fifth freedoms to airports within the south-east apart from Heathrow. That is something that would allow airlines to put on more direct flights from London and provide more choice for consumers, and therefore more choice for networks to operate. For example, a company like Etihad or Emirates might choose to fly into Gatwick and then from Gatwick to a third party. That is something that we consulted on. The Secretary of State will make a decision on that in the aviation policy framework, but it will probably require further consultation before any final decision is made.

Q839 Chair: But we did hear very strong views from airports outside the south-east, who said that they felt the Government should be doing more to promote them and that other

Governments in other countries were promoting equivalent airports more. Is that something the Department is aware of? Jonathan Moor: It is. My team do a lot of promotion for airports in all our bilateral air service agreements. In fact, we spend a lot of time with other countries asking them to consider other airports in the south-east rather than just simply Heathrow, and also to consider regional links. At the end of the day, it is a commercial decision for the airline concerned.

Q840 Chair: Would the Government be willing to subsidise a new hub airport, Secretary of State? Mr McLoughlin: I think I would need to know where you are talking about. We do not generally subsidise airports. A new hub airport would depend on the circumstances. I am not looking for ways of spending extra money on something that is already provided by the private sector.

Q841 Chair: The Mayor of London has a number of possible proposals about developing a new hub airport. In all of those, there is the likelihood of a need for public subsidy. It may be for infrastructure or other things. Is that a concept that you would find acceptable? Mr McLoughlin: As far as infrastructure is concerned, we would always want to service the major hub airport of the country, but with regard to looking for extra kinds of subsidy, direct or not, I saw an interesting story in tonight’s Evening Standard saying that the Mayor was looking for an extra £80 million. The Evening Standard got the £80 million confused with £80 billion as to the figures that we are talking about. We would be talking about very substantial figures indeed. Jonathan Moor: I would add one extra thing around state aid. State aid is a European law requirement, and any subsidy for any airport would have to go through a consideration by the European Union in terms of its state aid rules. That is certainly something that would need to be taken into account. All of these issues will need to be taken into account by the Airports Commission when they bring forward their advice.

Q842 Karl McCartney: Secretary of State, do you think it is an impossibility that the Government might regulate to provide £15 billion—something that the Mayor and his colleague were talking about—to the people who currently own Heathrow, if it was to be taken off their hands and developed if there was another brand new hub airport elsewhere? Mr McLoughlin: Mr McCartney, you are tempting me to pre-empt what the Airports Commission are going to say. One of the things that I am not going to do today or at any time in the future, despite what might have been reported when I was appointed, is to try and prejudge what the Commission will say. We have a serious Commission doing serious work. They are being given the resources they need to do that work. I very much want to see the outcome of that work, and so would any Secretary of State, before making a decision. We are seeing huge investment in the airport system at the moment. Look at what Gatwick is doing and what Heathrow is doing in what it has developed as far as terminal 5 is concerned, and also their development at the moment of terminal 2, which comes on stream next year. What we are asking the Commission to do is a piece of work that talks about the long-term future of aviation capacity in this country.

Q843 Chair: Are the Government committed to improving rail links to Gatwick and Stansted? Mr McLoughlin: As far as I am concerned, I look at anything we can do to improve the infrastructure links to our current facilities to make them easier for people to use. Sir Alan

Haselhurst has made certain representations to me about Stansted. He has watched it develop over many years and the way in which it is connected into the City; likewise the connections from Gatwick, Heathrow and, for that matter, Luton. Once the Thameslink project is finished, that will have very important benefits as far as Luton airport is concerned as well.

Q844 Chair: Does that mean that the Government are committed to investing in improved infrastructure? Mr McLoughlin: We have said that, and we have outlined a number of areas where we have invested into the infrastructure that serves airports. As I said, it is not just what we have done as a Government but what our predecessors have done as far as the Thameslink project is concerned. That will have important benefits as far as Luton is concerned. Jonathan Moor: The Government are currently supporting investment of £1.4 billion on road and rail schemes, which will either directly or indirectly benefit airports across the UK.

Q845 Chair: What are the Government doing to assist the aviation industry in becoming more environmentally friendly? Mr McLoughlin: If you are talking about the whole matter of ETS, the aviation industry is very well aware of the need to improve its environmental performance. The new aircraft are a lot more environmentally friendly than their predecessors were. It is one of these areas where one has to act within international negotiations. We have seen that at the European level. It is no good trying to do this solely as a one-off. We can do certain things throughout the European Union, but international organisations and agreements are very important as well.

Q846 Chair: Looking ahead, do you think there could be a conflict in funding for HS2 and a potential new hub airport? Mr McLoughlin: I hope not, no, and I do not think there should be. The plans we have set out for HS2 are there and stand alone as far as the issue of capacity is concerned, which is one of the most important elements of HS2 as far as I am concerned, and also better connections between our major cities. Those plans stand alone and separate from anything that may or may not happen as far as aviation development in the future is concerned.

Chair: Thank you very much.