Infrastructure challenges

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As the new Heathrow runway debate shows, building large infrastructure in a democratic, densely populated country like the UK is always going to be hard work, says Nuno Gil, Professor of New Infrastructure Development

“The government’s decision to finally authorize a third runway at Heathrow comes after decades of indecision. This should not surprise us. The UK is a pluralistic society, and there were as many voices in favour as against the expansion in the court of public opinion.

In favour were those who argued that more capacity was vital for the economic growth of London and the UK more generally. Opponents argued that more flights over London would deteriorate the quality of the environment to levels not commensurate to the expectations for a global city in an advanced economy.

The two views were incompatible, and yet both were legitimate. Rational economic analysis, however, leaned towards the expansion of Heathrow insofar the airport puts in place measures to mitigate the negative environmental impacts. I personally doubt that the government’s decision can be overturned in court.

What was clear was that whatever the outcome the decision would create winners and losers. Were Heathrow not allowed to expand, the business community would portray itself as the victim and local politicians would claim victory on behalf of Londoners, and vice-versa.

The decision was ultimately a judgement call rooted in a substantial amount of evidence, and this is the way planning large-scale infrastructure should work. I will thus not comment here whether this is the right or wrong decision. That is the job of elected leaders.

What I think is worth commenting on though is the sheer length of time it took to arrive at this outcome. Whilst lobbyists have long chastened government for dragging their feet, I personally have sympathy for government.

These decisions are hard to reverse and their impacts are long-lived. And, crucially, these decisions involve compulsory land acquisitions and property blight. As such, they impair property rights, a sacrosanct institution in a robust democracy. If the stakes are so high, and the consequences will be felt for centuries, waiting two decades or more for this choice seems a bargain we should gladly take.

Arguments suggesting that the uncertainty around the expansion of Heathrow impair their business are also not entirely correct. When the consortium led by Ferrovial bought Heathrow around 2006, they knew the previous airport owner had made capital-intensive investments to safeguard the option to expand by building tunnels under the taxiways to make it cheaper to connect to the third runway. And to mitigate the environmental impact of an eventual expansion, the former owner had built additional platforms in the T5 train station, which will open once the third runway becomes operational.

These capital-intensive safeguards increased the attractiveness of the asset for the new owners. But the premium that the new owner paid for this option to expand was heavily discounted attending to the surrounding uncertainty on whether it would ever happen. Of course, now that the uncertainty has been resolved, the new owners will reap massive rewards. This is the paradox of infrastructure development in robust democracies. The harder it is to get things done, the more valuable the ideas become once they get to fruition.”

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