Aviation

Kwasi Kwarteng Excerpts

Wednesday 4th July 2012 Westminster Hall

[Mark Reckless]

I encourage my hon. Friend to listen to the rest of my speech, and not merely to recycle briefings that I, too, have received. There are many arguments for a hub airport, and I do not deny that some are valid. Many, however, are recycled by industry players with strong vested interests that are not necessarily those of the country as a whole. However, I will address my hon. Friend’s point later in my remarks.

Finally, some estimates suggest that the cost of the proposal will be £40 billion, £50 billion or even £100 billion. The Parsons Brinckerhoff report, a substantive piece of work, argues that

“even the £70 billion being discussed is a conservative estimate.”

Boris tells us that that money will come from private investors. Yes, but they will want a return. Even if we are looking at a 5% interest rate over a 50-year period, a return on that sort of money will add at least £50 to the cost of every plane ticket from the airport. Why would airlines, passengers, the Government, indeed anyone, want to pay that sort of money when the cost of expanding existing airports—including some that Members present may be promoting—is so much smaller?

The coalition Government were right to reverse the policy that the previous Government decided on in 2003. To recap, the then Government’s recommendation was a second runway at Stansted by 2011-12, a third runway at Heathrow by 2015 to 2020 and, following our judicial review, a second runway at Gatwick from the mid-2020s. The strongest reason why we were right to overturn that is that the projections on which the Labour Government operated from 2003 were, as I and many others set out clearly at the time, wholly unrealistic. They were based on a low case of 400 million passenger movements for the UK by 2030, and a high case of 600 million.

[Kwasi Kwarteng (Spelthorne) (Con)]

I am listening with great attention and fascination to my hon. Friend’s speech, but he has not addressed a very pertinent point raised by my hon. Friend the Member for Orpington (Joseph Johnson): at present we do not have access, or cannot fly directly, to those cities in China. I know that my hon. Friend the Member for Rochester and Strood (Mark Reckless) will come to that in his speech, but I am conscious that it is probably one of the most important questions that he could address, and I would very much like to hear his thoughts on it.

[Mark Reckless]

In deference to my hon. Friend, I shall bring forward my remarks on that point.

--- Later in debate ---

[Kwasi Kwarteng]

I am trying to work through the maze of complicated arguments that my hon. Friend is presenting, but I have just a simple question. Does he believe that the United Kingdom as a whole needs more aviation capacity?

[Mark Reckless]

Yes.

--- Later in debate ---

[Mark Reckless]

Yes, I do argue that. The limit on Heathrow’s routes to developing countries is largely because of the fact that those who have the slots find it most profitable to put on vast numbers of flights to New York and almost as large numbers to Hong Kong. It would benefit the country as a whole much more if there were a wider network of routes, rather than just what happens to benefit British Airways and maximise its profits. To get to what my hon. Friend suggests, the treaty we need to rip up is the treaty of Rome, because it is under European directives—[Interruption.] The reason why the slots are organised as they are is that they have been capitalised into property rights for the airlines that historically happen to have used them, and it is because of European legislation that that has been allowed to happen. If we want a more effective route network for our country as a whole, within the existing constraints of Heathrow—of course, others will argue that it needs to be bigger or we need a hub somewhere else and so on—European legislation prevents us from having that. Anyone who wants to set up a marginal route to an emerging market needs to buy out, at vast expense, one of the existing airlines, particularly BA, which has a near monopoly power. They have to give BA a huge amount of money to take the slots they need for those routes. The reason why they cannot do that is cost, yet we have treaties that restrict the amount of access that overseas airlines have into the UK. They could otherwise be flying into Gatwick, Stansted or Birmingham as city pairs, but the routes and slots are at Heathrow, and the regulation creates that monopoly power.

[Kwasi Kwarteng]

Is my hon. Friend seriously suggesting that the key to our aviation problems is ripping up the treaty of Rome?

[Mark Reckless]

It would certainly help. There are other ways in which the issue could be addressed; for instance, the air passenger duty regime. Many lobbyists are against the size of air passenger duty, but in operating conditions where there is an almost perfect monopoly at Heathrow and, at peak and to an extent shoulder periods, a monopoly at Gatwick, what happens through the increase in air passenger duty is that some of the monopolised value of those slots and the power of the grandfather rights are given instead to the public purse. It is not a situation of perfect competition in which costs are passed on. To the extent that costs rise, whether they are landing fees or APD, that will largely be absorbed into the price, giving greater public benefit, and possibly driving some of the marginal leisure stuff out of Heathrow and Gatwick.