Dogfight over Heathrow and Gatwick runways has a logical landing

Fasten your seatbelts. A big test of the Labour government’s growth, environmental and competition policies is looming: how much expansion of London’s five main airports is Sir Keir Starmer going to allow?
Two easy decisions have already landed. In August ministers gave London City airport the go-ahead, with caveats, to lift its annual cap on passengers to nine million from the present 6.5 million: all a bit symbolic really, as it only handled 3.4 million last year, but still pro-growth.
Then, amid the planeload of reheated announcements from last week’s investment summit, the transport secretary Louise Haigh hit upon the £1.1 billion terminal extension project at Stansted that’ll lift passenger capacity to 43 million a year, up from 29.3 million in the latest 12-month period. No matter that the airport had already got planning permission for the scheme about a year ago, Haigh went out of her way to sound all pro-expansion. As she put it: “Transport is central to this government’s core mission of growing the economy.”
True, messages have been more mixed at Luton, where the airport wants to build a new terminal as part of a £2.4 billion project and lift the annual passenger cap from 19 million to 32 million. Last month Haigh pushed back a decision on the development consent order for a second time to January next year.
A bigger decision awaits at Gatwick, where the airport hopes to bring its existing relief runway into routine use: a £2.2 billion scheme that’ll give it scope to handle 75 million travellers by the late 2030s versus last year’s 40.9 million.
And, then, out on the horizon is the jumbo itself: Heathrow’s third runway, the project Britain’s been failing to build since 1968. At its last flypast in 2020, Heathrow was aiming to raise passenger capacity to at least 140 million, versus the 82.8 million it expects this year. It said it would cost “£14 billion”: a vast underestimate. Indeed, it would be lucky to build it for twice that.
Is Labour planning to allow all of these? Before the election, the chancellor, Rachel Reeves, said she had “nothing against expanding airport capacity”. But Labour has also said projects must satisfy four tests: complying with noise and air pollution limits; meeting carbon emission tests; and delivering growth across the nation. Yes, the schemes are privately financed. But, green-light all five and that’d be extra capacity for more than 120 million passengers: roughly one and a half times the present Heathrow. Could Labour really square such bold expansion with Britain’s obligations to be net zero by 2050?
Still, if the UK doesn’t do all five, which misses out? City and Stansted are already going ahead. Luton adds up to 11,000 jobs to a region that needs them, while also helping with another key issue: spreading the environmental burden across the capital, including travel to and from airports. So that leaves Gatwick or Heathrow. And that is a no-brainer.
In making the most of its existing facilities, a two-runway Gatwick could be delivered for a fraction of Heathrow’s third, with none of the downsides: demolishing 750 homes, diverting five rivers and bringing London to a halt for years by rerouting all 12 lanes of the M25. Neither would Gatwick’s owners need a jack-up in landing charges to fund the project, while expansion would engender competition — unlike a third runway, which would embed a fresh Heathrow monopoly.
Still, the UK’s premier airport won’t accept that outcome without a fight. With Heathrow’s ownership still up in the air, its boss Thomas Woldbye has focused on getting the most out of its two runways. And he should be able to handle 100 million passengers a year just from them. But, as a sop to Heathrow, could the government lift the cap on flights above today’s 480,000 a year, while stalling a pricey third runway?
It’s the logical move. London can add space for 60 million more passengers, regardless of any extra from Heathrow’s existing facilities, without the hassle of runway three. And all while promoting growth and competition, with air and noise pollution shared out across the capital. Labour doesn’t need another go at an intractable project that, for half a century, has failed to take off.
Some Goldman Sachs forecasts can be wide of the mark. Take the 2014 World Cup, where it gave the hosts, Brazil, a 50 per cent chance of winning. It put the chances of the eventual victors at 11 per cent. Who they? Germany, the lot that beat Brazil 7-1 in the semis.
So, who knows if the bank will have as big a miss with its view that UK interest rates are heading for 2.75 per cent by November next year: quite a drop from the present 5 per cent. To get there, it’s used five ways to crunch numbers around the “neutral real rate of interest”, at which “the UK economy is at full employment with 2 per cent inflation”: a metric it admits is difficult to calculate. Anyway, having employed such things as the “Laubach-Williams approach” (don’t ask), it’s concluded that the Bank of England’s present rate is “notably restrictive”. And maybe it is, at least compared with Brazil’s 2014 defence.
Few are as influential as Kim Kardashian: the sleb fined $1.26 million by US authorities for promoting a crypto asset without letting on she’d been paid $250,000 for her efforts. Still, that hasn’t stopped the Financial Conduct Authority interviewing 20 so-called “finfluencers” under caution. As the FCA’s Steve Smart puts it: “Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt”. Fund managers can be similarly taken in by Wall Street bankers touting overpriced floats. But they really should know better.