Economic case for Heathrow expansion 'flawed'

10:28am Thursday 24th July 2008

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The economic case for expanding Heathrow is flawed, a new report claims.

Independent international research body the Stockholm Environment Institute was commissioned by Friends of the Earth to examine the UK Government's economic justification for allowing airport expansion.

The Government's case for growth rests on an evaluation of the economic benefits of providing more flights at cheaper prices to an increasing number of people and weighing this up against an evaluation of the "dis-benefits" from expansion such as an increase in climate-changing emissions.

The report found three major flaws in the assessment of these benefits and called for an independent review:

• The passenger demand projections are uncertain - for example they rely on fares falling because the cost of oil per barrel is predicted to fall from an assumed $65 in 2006 to $53 in 2030. Oil is currently around $130 a barrel and experts predict will not fall below this before the end of 2016.

• Foreign passengers changing planes in the UK are counted as a benefit to the UK economy - but this is against HM Treasury guidance on project appraisal. In 2005 nearly 30 per cent of Heathrow passengers were travellers simply changing planes.

• It assumes "doing nothing" is the only alternative to airport expansion ignoring alternatives with less environmental impact like switching short haul passengers to rail travel, investing in video conferencing or limiting transfer passengers.

Friends of the Earth's aviation campaigner Richard Dyer said: "The Government's economic case for Heathrow is fundamentally flawed, based on assumptions which are often highly speculative and biased.

"If it wasn't for this economic sleight of hand the case for airport expansion would collapse."

See the full report here.