Christmas Adjournment

John Stanley Excerpts

Thursday 18th December 2014 Commons Chamber

[Sir John Stanley (Tonbridge and Malling) (Con)]

For all of us, it is a matter of fortuity as to whether the experience and expertise that we acquire in different ways before we enter the House can be utilised when we come here. I had the good fortune, before I entered the House, to be a member of the financial evaluation team at Rio Tinto-Zinc. Our responsibilities were to evaluate for the board of RTZ some of the most complex and largest capital projects worldwide in the mining and hydroelectric sector. The head of our team was the internationally renowned Mr Allen Sykes, and the book that he co-authored with the late Professor Tony Merrett, “The Finance and Analysis of Capital Projects”, was required business school reading.

That background has been of considerable help to me both as a Minister and on the Back Benches, but perhaps never more so than now. My constituency extends to the western extremity of Kent, and every single aircraft landing at Gatwick airport from the east flies over my constituency, where noise levels for many of my constituents are already intolerable both by day and by night. The House will not be surprised to know that when the Airports Commission produced its latest and final consultation documents on the three additional runway options for the south-east, I went straight to Gatwick Airport Ltd’s financial evaluation of its second runway proposal. To say that I was acutely disappointed by what I found would be a major understatement. In fact, I was profoundly shocked at the level of concealment.

The key elements in any financial evaluation are the crucial lines of financial numbers and the assumptions behind those numbers. Let us consider the key document published by Gatwick Airport Ltd and the appendix entitled “Financial Model”. In paragraph 3.4 on financing, for example, we would expect lines of figures, but instead we have lines of scissors—every single figure has been redacted. When we look at similar paragraphs, the balance sheet or the cash-flow statement, similarly, it is all scissors. In the crucial paragraph on tax—tax payable is a critical element of a financial evaluation—again we find acute disappointment.

The owners of Gatwick airport are an international company, and all the major shareholders are foreign. They are from the US, Abu Dhabi, Australia and Korea. One key policy on which there is complete all-party agreement across the House is that international companies that operate out of the UK should pay their full and fair share of UK taxation. That was stated to me unequivocally by the Financial Secretary to the Treasury, who said in a recent letter:

“The UK is at the forefront of multilateral action through the G20 and the Organisation for Economic Co-operation and Development (OECD) to reform the international tax standards to prevent profit shifting by multinationals. It is essential that these issues are looked at in a comprehensive and co-ordinated manner to come up with effective solutions.”

What do we find in the tax paragraph on Gatwick Airport Ltd’s financial evaluation? There is not a single figure for tax payable by the company during the lifetime of the project. There is an assumption about corporation tax, but not one single figure for actual tax paid.

Having seen that lack of information, when I and some of my colleagues who have constituencies in the vicinity of Gatwick airport met its chief executive, Mr Stewart Wingate, I asked him why he had redacted all that information. His answer was that it was commercially confidential, but I do not accept that that argument has validity. It would be valid if Gatwick Airport Ltd were competing for a franchise over the airport, but it is not. Gatwick Airport Ltd is the owner of the airport, which it bought from the British Airports Authority for £1.5 billion in 2009. In those circumstances, I do not believe that the issue of commercial confidentiality reasonably arises; much more fundamental is that there should be openness and transparency at what is a critical time moment for those living in the vicinity of Gatwick and indeed Heathrow.

It is time-critical because this is the last-chance saloon and the last opportunity for members of the public and their elected representatives to give their views to the Airports Commission about the three available options—after the general election the commission will make its choice. This is a critical moment, and I consider that Gatwick Airport Ltd has failed—and failed scandalously —to be open and transparent about the financial evaluation of its project.

Gatwick Airport Ltd has projected an increase in airline passengers from the current 30 million to almost 90 million by 2050—an extra 60 million travellers. It is self-evident that that will require substantial surface access improvements to Gatwick airport, and particularly rail access. What has Gatwick Airport Ltd said about meeting that need? There has been a deafening silence. Happily, by contrast the Airports Commission has not been silent, and paragraph 3.36 of its paper, “Gatwick Airport Second Runway: Business Case and Sustainability Assessment”, contains a significant one-sentence statement:

“It is likely that Government will need to fund some or all of the surface access requirements”.

In my view, Gatwick Airport Ltd is simply seeking a blank cheque from UK taxpayers, signed on their behalf to provide the surface access infrastructure that will be needed.

In conclusion, on the grounds that Gatwick Airport Ltd has totally failed to be transparent about its financial evaluation, and has concealed the public expenditure implications of the infrastructure needed for a second runway, its proposal should be rejected by the Airports Commission.