Aviation White Paper

– in Westminster Hall at 12:59 pm on 6th February 2007.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury) 12:59 pm, 6th February 2007

I am grateful for the opportunity to lead an Adjournment debate on the aviation White Paper and, in particular, on the issues that relate to Heathrow. This is the second debate on the subject that I have had during my tenure as an MP. In July 2001, I led a debate in which I raised some of the issues that I will raise again today. I introduced a debate at that stage because it was when the third runway was first mooted. We are now closer to a decision on that.

By way of an introduction, I will explain where I am coming from and my broad approach to the issue. I am one of the MPs for Heathrow; Twickenham is part of the south-west London area directly affected by Heathrow. That tends to produce a mix of concerns. Many of my constituents are concerned about aircraft noise and, in a wider sense, pollution and, equally, many are airport employees. I recently brought the highly controversial issue of the wearing of a Christian cross by Miss Nadia Eweida into the public domain. That concerned someone employed by British Airways; as are hundreds, possibly thousands, of other people. In addition, my constituents use the airport for business travel. I get opinions from both sides of the argument, but I sense that the centre of gravity in the debate is shifting towards greater sensitivity to environmental concerns, as opposed to protecting the economic position of Heathrow airport.

It is often argued that there is a tension between economic and environmental objectives. I do not take that view. In the 2001 debate, I argued that it is possible to reconcile those objectives providing we use market instruments in airport policy. There is much evidence that the Government have moved a long way on that argument. My approach is still broadly that aviation should be priced correctly and capture environmental costs. The introductory passage of the 2003 White Paper also places aviation within that context and argues that the aviation sector must fully meet its environmental costs. If that happens, we should get sensible and rational decisions.

I am well aware that there are big decisions in the offing and I do not expect the Minister to anticipate those today. We are expecting a decision on runway three in the next two or three months, but more important for my constituency is the linked issue of runway alternation. In some ways, that matter is of greater concern because it could bring considerably increased numbers and density of flights at a much earlier date. I am aware that the Government are limbering up for a consultation exercise and are not pre-empting that decision. However, I want to draw attention to that particularly sensitive and difficult issue. We are aware that the combination of those two policies, if followed through, would result in an increase in the number of flights from 480,000 to 700,000 in the next decade and a half. That would have a massive impact on the quality of life of people in my part of London.

I will raise a series of fairly broad issues, some of which have more specific questions attached. How far is Government thinking in relation to the quantitative assumptions in the 2003 White Paper on airport expansion being modified to take account of the rapidly developing argument about global warming and CO2 emissions? It is clear that the Government are sensitive to the issue. We have had the Stern report. It is striking that, in the progress report, 10 out of 76 pages are devoted to global warming issues in relation to aviation. Out of the 170 pages of the White Paper, only three pages were devoted to climate change. That is a good measure of the extent to which that issue is becoming dominant, if not pre-eminent.

I want to establish how far the Government have taken on board the issues of carbon dioxide and other greenhouse gas emissions in framing their projections and growth forecasts for airports in the south-east, with particular reference to Heathrow. Clearly, there is an awareness of the issue, but how far has that translated into growth assumptions?

When we look at the broad aggregates, the importance of global warming in the context of airports is understated. At a global level, around 3 per cent. of carbon dioxide emissions come from the aviation sector, which is often used as a reason for dismissing the issue. Britain is a relatively important user of aviation and roughly 5.5 per cent. of Britain's CO2 emissions come from that sector. However, even that is a massive understatement of the importance of the problem because other greenhouse gas emissions are created by aviation; through chemical reaction, NOx creates atmospheric ozone—another greenhouse gas. When taking all those indirect effects into account, the current assumption is that roughly 11 per cent. of greenhouse gases in the UK originate in the aviation sector. Some of the assumptions of the intergovernmental panel on climate change suggest it could be double that. We are talking about broad aggregates and there is a lot of uncertainty, but a substantial share of greenhouse gas emissions originate in the aviation sector.

The rate of growth is much more important than the level of emissions. The Department for Transport's projections suggest that there will be an increase of approximately 10.8 million tonnes of carbon in 2010 to 17.2 million tonnes in 2050. There are other projections on the upside of around 30 million tonnes even from the Department for Transport. In a highly constrained environment in which people are increasingly concerned about greenhouse gas emissions, a virtual doubling of emissions is assumed to be coming from the aviation sector. However, even that is highly conservative. The Department for Environment, Food and Rural Affairs has commissioned Owen and Lee to undertake a separate study of greenhouse gas emissions from the aviation sector and that has come up with much higher figures. That estimates that by 2050 there could be 29 million to 44 million tonnes of carbon—significantly higher than the Department for Transport's estimate.

The rate of growth is important because, based on the Government's assumptions, by 2050, 40 to 60 per cent. or more of carbon dioxide emissions in the UK will come from the aviation sector. That matters not just for aviation, but for the rest of the economy because, if a 60 per cent. cut is to be achieved, as the targets require, there must be a much bigger squeeze on the rest of the economy. The transport, industrial, and power generation sectors will have to make a cut of around 80 per cent. to accommodate the growth from aviation. Those are big arguments that go way beyond the remit of this rather narrow and short debate. However, the fundamental question is: how far are the Government modifying their growth assumptions? That question feeds into the Government's belief in the need for expansion through further runways, or runway alternation. How far are the Government taking factors relating to growth forecasts into consideration?

On a smaller but related set of issues, we know—and the Secretary of State made clear when the White Paper was announced—that the Government are limited in their commitment to a new runway by European Union regulations on pollution, particularly on NOx emissions. The Government have categorically said that they will not allow a third runway to proceed if there is any question of the European pollution rules being breached. That is clear and we respect that. What is less clear is what will happen if decisions are made on ending runway alternation. That would result in increased flights without the necessary safeguards built in that the Government have said would apply in the case of a third runway. Therefore, my question is how far a decision on runway alternation and increasing flights through that route is affected by the NOx limit—how far those pollution limits apply to that decision as well as to the later, more headline decision on a third runway. Is it a constraint? Would it be a binding constraint?

My third question relates to one of the key assumptions in the White Paper, which is the desirability of Heathrow continuing and expanding as a hub airport. That is very much part of the philosophy of some of the airlines, including British Airways, and of the airports authority. Clearly, from the point of view of many users, there are considerable attractions in a hub-type system—a hub business model. For the people who use the airport, there are more destinations, a greater frequency of flights and a reduced need to change, but there is a downside, and I do not get from any of the Government publications any sense of a critique of that type of airport development and the problems that it presents.

One of the most obvious problems with that type of airport development is that it is generating large numbers of passengers through the UK who are in international transit. I believe that the total number is about 12 per cent. I have asked a series of parliamentary questions about that. It is important because, although those passengers are clearly attractive to the airlines—they bring in revenue for them—and they may be attractive to the airports authority to the extent to which they use the duty-free facilities and others, it is difficult to understand how that benefits the UK in a broader sense, because bringing in more passengers increases our carbon emissions and, as I understand it, those international transit passengers generate no revenue, for the reason that they have been exempted from the ticket taxation system.

Have the Government reviewed that policy? In particular, do they not consider that there is a case for including those passengers in the taxation framework? I know that that is predominantly a Treasury question, but the Department for Transport presumably has a view on the extent to which transit passengers might be dealt with differently.

The fourth issue relates to surface transport. I know that one of the Government's aims is to improve surface public transport as a way of taking some of the pressure off the roads around Heathrow and thereby contributing indirectly to the reduction of NOx emissions. There is the proposal for Crossrail, which does not directly affect my part of London, but there is also a proposal to introduce the AirTrack concept. AirTrack would flow through my constituency and others in south-west London. That proposal is often presented unambiguously as a positive, but I am concerned about it. Will the Minister agree to have a careful look at it? I ask that for one simple reason. The rail companies are now arguing that there are so many pressure points in the rail network generally and, particularly in the south-west London area, our trains are so congested, that AirTrack could be accommodated only by cutting conventional commuter services, with a deterioration of services following from that.

In other words, AirTrack would not be an additional facility, but would be at the expense of others.It is possible that those people have got that wrong or have some interest in promoting that argument, but will the Government examine carefully the interaction between the AirTrack proposal, which is seen as an unalloyed good, and existing public transport services and the possible dangers that the proposal would undermine the quality of the public transport service from the south-west London area? I do not think that that question has ever been properly examined.

I shall finish where I started, by saying that I broadly support the philosophy, which the Government have been identified with, of trying to use market instruments as a way of helping to manage demand as well as to capture the environmental costs of the aviation industry and airport expansion. Where are we withthe various approaches to that problem? Market instruments can be employed in different ways. One is by having economic landing charges. The Government have shifted policy on that in the past few years. I believe that there is now a growth factor of 6.5 per cent. a year in landing charges, bringing them up to a more serious economic level. As I understand it, however, the revenue is linked to terminal 5 expansion; it has not been used as a mechanism for managing demand, which it should be.

The process of auctioning landing permits is apparently not an option because of legal problems in the European Union. I believe that the Government are introducing secondary trading, but not the auctioning of the permits themselves, which would be one mechanism that could be used for managing demand. I just want to be clear on whether that has been ruled out.

There is a proposal to incorporate aviation within the European trading permits scheme. The Government are keen to press ahead with that proposal, but there are problems, not least American objections, German lack of enthusiasm and the fact that it will not take effect for some years. A brief statement on where we are with that would be useful.

We have the existing mechanism, which is the use of taxation and of the airport passenger tax. That is the Government's chosen mechanism. I shall refer to this briefly, because the Minister will know of the enormous annoyance that it has caused in the air travel industry. It just so happens that I have in my constituency the headquarters of the Association of Independent Tour Operators, one of the main groups of operators that face that retrospective tax. The AITO does not object to the principle of the tax on economic or revenue grounds, but it objects enormously to the way in which it is damaging its industry because of the retrospectivity. Of course, that is a Treasury issue primarily, but I know that this Minister will have received many representations on it.

The other point that the AITO makes, which is perfectly valid, is that the existing tax applies to passengers and not to aircraft. That is a rather inequitable and inefficient way of trying to manage demand. With that point, I shall conclude to give the Minister ample opportunity to reply to at least some of the points that I have made.

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport 1:17 pm, 6th February 2007

I congratulate Dr. Cable on securing this debate on the important matter of the Government's air transport White Paper. I am delighted to have the opportunity to discuss that, particularly at a time when there is increasing public interest in aviation's impact on the environment and its contribution to climate change. I am glad that the hon. Gentleman has taken such a positive and balanced view of aviation and the White Paper in particular. His view compares interestingly with those of others on the Liberal Democrat Front Bench. I am sure that the House would appreciate some clarity about Liberal Democrat policy on aviation but, for today, I am delighted to welcome the consideration that the hon. Gentleman has given to the issue.

The Government published the White Paper in 2003. That was the first time in 20 years that a Government had set out a national long-term strategy for the sustainable development of airports across the UK. In my response to the debate, I would like to deal with the main policy and assessment criteria. The White Paper was based on extensive research and consultation. It was widely welcomed at the time, and still is, as it brings clarity and direction to the aviation sector and more widely. In my experience, it has been very much a working document.

In December 2006, we published a progress report, reaffirming our commitment to the strategy and the progress that has been made. At the heart of the White Paper's strategy is the recognition not only of people's growing aspirations to travel and the economic benefits that aviation brings, but of the need to tackle environmental challenges, as the hon. Gentleman said. Sir Rod Eddington's recent review of the development of transport infrastructure confirmed the White Paper conclusion that international connectivity is important in boosting national economic performance. The Stern review on the economics of climate change makes it clear that there is no contradiction between economic growth and tackling climate change, and that clear international action is required.

On an international level, I welcome the EU's recent announcement on the inclusion of aviation in the EU emissions trading scheme in 2011 and 2012. The Government have led the debate in Europe on that issue and will continue to work on the detail of the proposal, including its earlier introduction. We are also committed to modernising the International Civil Aviation Organisation, and are working to ensure that it focuses on the challenges of the 21st century, most notably on climate change and the need to ensure security in global aviation. In the UK, we have recently announced the creation of a new mechanism—an emissions cost assessment that will allow the Government to track whether the aviation sector is meeting its climate costs—on which we will consult.

The Government's approach to airport development follows two important principles: making the best use of existing airport capacity, and ensuring that any new capacity that is required is provided in line with our environmental obligations. To put things into perspective, some 15 runway options were considered in 2003, of which only four were supported in the White Paper. Two of those options are for after 2016—in Birmingham and Edinburgh.

I assure the hon. Gentleman that our policy is informed by extensive and robust modelling of the likely future demand for air travel. The demand forecasts assume that aviation will start to meet its full climate change costs after 2010 through either the inclusion of the sector in the EU emissions trading scheme or the adoption of a national policy to achieve that goal. Even taking full climate change costs into account, we expect the demand for flying to double by 2030.

Pressure on capacity is clearly greatest in the south-east. That is why we support the development of Stansted and Heathrow if stringent environmental conditions are met. A second runway at Stansted would be the first new runway in the south-east for 50 years and would provide a substantial increase in new capacity there in the next decade. It would also contribute to the £17 billion in net economic benefits that Sir Rod Eddington identified would be generated by having two new runways in the south-east.

Having a new runway at Stansted alone will not satisfy demand in the south-east. That is why the development at Heathrow is also a crucial part of our White Paper strategy. Heathrow has played a central role in the country's aviation sector for several decades, and our commitment to managing the impact of airports is nowhere greater than there. We set out our position on Heathrow very clearly in the 2003 White Paper, in which we noted that demand there far exceeds supply; that additional capacity would generate substantial net economic benefits; and that failure to secure capacity would cause its route network to shrink over time. We also noted that if nothing is done, traffic will be lost to continental airports, and access to Heathrow from UK regional airports will be diminished.

None of that has changed since 2003. If anything, it is more true today. Recent events have shown just how finely balanced operations at Heathrow are now that it is running at capacity, and how quickly they can be upset by adverse weather, for example. We continue to support the building of a third short runway at Heathrow, but it is qualified support.

Many people in London are overflown by aircraft today, but things were a great deal worse when the hon. Gentleman bought his house in Twickenham 33 years ago. The number of people significantly affected by noise has more than halved since then. However, I assure him and his constituents that we remain committed to bearing down on noise. In June 2006, the Secretary of State announced a new night-noise regime that will bring a progressive reduction in the noise quota between now and 2012.

Adding a third short runway would theoretically allow Heathrow to handle around 720,000 movements a year, compared with the current cap of 480,000. In 2003, we said that development at Heathrow must be subject to a stringent limit on noise. I confirm that, despite what has been reported in the press recently, we are not prepared to contemplate any worsening in noise from that in the summer of 2002, as measured by the 57 dBA Leq noise contour. That is a tough test, but we must set it if traffic is to grow at Heathrow. It is a fair test and we stand by it. Technology will help, but the noise limit that we have imposed will constrain the rate at which Heathrow can grow. That is part of our sustainable strategy.

We have also said that a new runway can be supported only if we can be confident that mandatory limits on air quality can be met. We take that second key condition seriously, and are exploring what measures are needed to meet our obligations in that area. Again, our commitment to sustainable development means that traffic volumes will inevitably be constrained by what can be delivered within environmental limits.

We acknowledge that we will need to deal with the additional pressures caused by the greater numbers of people travelling to and from the airport. Further work to review how those conditions could be met—with a new runway or with more intensive use of existing runways—is now in its final stages. When it is completed, we will report on our assessment in detail and conduct a full public consultation, in which the hon. Gentleman's constituents will, I am sure, want to have some input, before reaching any final decisions.

I recognise the real concerns of local communities around the airport. The pre-conditions that we have set out ought to provide considerable reassurance in that regard. I am also well aware of the importance that is attached to runway alternation and the periods of predictable relief from aircraft noise that it gives to local communities. Introducing mixed mode either in its own right or as an interim measure before any third runway is built would involve losing alternation for at least part of the day. We will address that in the consultation and will want to take careful account of responses.

As the hon. Gentleman has acknowledged, we must also take into account the benefits that a thriving Heathrow has on local employment and the regional and national economy. Balancing competing interests will not be easy, and that is one reason why we are determined to review the matter thoroughly. When we consult, we will do so with the best possible information, and the responses that we receive will help us to take a decision that is informed by the fullest appreciation of the issues.

The hon. Gentleman asked about AirTrack. No final decisions have been taken on that. The AirTrack scheme appears to offer benefits, especially in providing new rail services in areas that are not well connected, and BAA has agreed to take it forward to a transport and works application. We are examining its contribution to improving the public transport share of airport trips, which is important.

The hon. Gentleman asked how far we are modifying growth assumptions. I emphasise that the 2003 White Paper already took account of aviation meeting its environmental costs. Even though forecasts assume that that will have some impact in depressing demand, we still forecast substantial upward pressure. I am sure that he will have taken the opportunity to look at the progress report.

I conclude by saying that our overall approach to airport expansion strikes a responsible balance between the economic importance of the industry and the global and local environmental challenges that it poses.