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The Aviation Powerhouse

The Aviation Powerhouse

Stephen Morgan-Hyland & Brendan Edwards 19 Jan 2017
Northern Powerhouse Amidst increasing attention on the Northern Powerhouse agenda, Brendan Edwards (economist) and Stephen Morgan-Hyland (spatial planner) of Lichfields Manchester, talk over the concept of the Aviation Powerhouse. Morgan-Hyland figures that the term ‘Powerhouse’ conjures up an image of combined energy and strength. The blueprint for the Northern Powerhouse is certainly a coalition. It is a united economic voice, working collaboratively to sell the attributes of the Northern Powerhouse to the world to secure a greater share of international investment. It is a brand that allows the North to establish a single identity and compete with a force greater than the sum of its parts. Credited to former Chancellor and MP for Tatton George Osborne, the over-arching Northern Powerhouse mantra seeks to respond to a longstanding recognition that the North lacks a competitive economic edge. Edwards notes that whilst there is a productivity gap between the Northern Powerhouse and the rest of the UK, there is an opportunity to attract a greater share of domestic and overseas investment. Morgan-Hyland agrees that the objectives are to rebalance the domestic economy and for the Northern Powerhouse to be pivotal in strengthening the fiscal position of the UK, particularly in a post-Brexit world. Realising the economic benefits that come from a Northern Powerhouse will be dependent on the success of tackling several strategic challenges: inter-connectivity of cities; improved transport infrastructure; strengthened labour market skills; and a transformation of how inward investment is attracted and secured. Aviation Powerhouse Whilst there are challenges it must address, the Northern Powerhouse boasts many strengths. One of these is the Aviation Powerhouse. The Aviation Powerhouse is a cluster of aviation industry in the North, reaching from Liverpool and Humberside up to Newcastle. Each airport has its own role to play in forming and strengthening this economic cluster. And it’s not just about passengers and cargo. The Aviation Powerhouse extends to all aviation activity, including: business aviation; emergency services; manufacturing and maintenance – as well as its associated training facilities, helicopter operations, military support, and recreational flying. Figure 1:      Aviation Powerhouse airports Source:       Lichfields The Aviation Powerhouse boasts seven international airports operating some 500 routes[1] and handling 36.8 million passengers[2]. Morgan-Hyland notes that these combined scheduled passenger numbers put the Aviation Powerhouse on a par with some of the busiest airports in the world. Manchester Airport accounts for nearly two-thirds of scheduled passengers in the Aviation Powerhouse and 85% of the flights to destinations outside of the EU. Newcastle has a transatlantic offer too and the other five airports provide a comprehensive network of EU and UK linkages, including to European global hub airports in Amsterdam, Frankfurt, London, Madrid and Paris. Manchester also accounts for over 90% of freight by volume, whilst the volume of freight handled at Doncaster/Sheffield is growing rapidly; in 2015 it was over 9-times its 2013 levels. Figure 2:      Aviation Powerhouse Passenger Numbers 2017-2015 Source:     Airports Commission, Civil Aviation Authority, Lichfields Think Tank Figure 3:      Aviation Powerhouse Freight (Tonnes) 2013-2015 Source:   Civil Aviation Authority, Lichfields Think Tank Economic role of the Aviation Powerhouse A key point from Edwards is that the Aviation Powerhouse makes a significant contribution not just to the Northern Powerhouse economy but also to UK plc. In the Northern Powerhouse nearly 20,000 people are directly employed in air transport, supporting services (airport terminals, air traffic control etc.), air cargo handling and warehousing[3]. Significant additional numbers are indirectly employed and the various airports have made important contributions to inward investments. Employment in the aviation sector has ‘taken off’ in the Northern Powerhouse; it grew by 24.5% between 2009 and 2015. This is well above the sector’s national growth rate of 4%. Figure 4:      Direct Aviation Sector Employment (2015) Source:       ONS (northern regions), Lichfields Think Tank Morgan-Hyland adds that the Aviation Powerhouse generates numerous additional jobs through its supply chain spending, aviation manufacturing and tourism. For every job in air transport, 2.32 ‘spin-off’ jobs are created in the economy from supply chain contracts and induced spending[4]. Aviation also helps businesses to grow by improving connectivity to the global economy and facilitating exports. Further growth in freight handling in the Aviation Powerhouse and improved connectivity to Heathrow (part of the Government proposal for handling capacity in the South East) will improve the competitiveness of businesses in the Northern Powerhouse. Edwards continues that growth in the Aviation Powerhouse offers the potential to help rebalance the UK’s economy. As well as supporting the growth of Northern Powerhouse businesses, the aviation sector is highly productive. Average GVA per employee in UK air transport services is £87,700 – almost double the average in the Northern Powerhouse and higher than the national average. Further employment growth across the Aviation Powerhouse would help to narrow the productivity gap between the Northern Powerhouse and UK. Figure 5:      Gross Value Added per job (2015 prices) Source:       Oxford Economics, Centre for Cities, Lichfields Think Tank Morgan-Hyland and Edwards agree that there is clear evidence of the economic benefits resulting from recent growth and success of the Aviation Powerhouse. In addition to experiencing considerable employment growth in recent years, aviation is increasing the output and productivity of the Northern Powerhouse. For example, aviation plays an integral role in ‘Just-in-Time’ manufacturing production, by transporting high value and low volume components and personnel[5]. This is particularly important for some of the world’s leading car manufacturers; Ford, Jaguar Land Rover and Nissan are all based in the Northern Powerhouse. In return, these benefits can generate positive secondary aviation impact such as additional business growth, employment, and fiscal benefits locally and nationally including revenue for HM Treasury. The Aviation Powerhouse has significant potential for future expansion in passenger and freight markets, as well as the business aviation and general aviation markets. It has already experienced significant growth in scheduled traffic in recent years. The Aviation Powerhouse is surely a concept for the Northern Powerhouse and the aviation industry to embrace as it drives growth and helps to rebalance the UK economy. Brendan Edwards is a Senior Economics Consultant and Stephen Morgan-Hyland a Planning Director, at Lichfields Manchester. For more information about Lichfields' expertise in Aviation, click here. [1] Lichfields' research based upon published data from the Aviation Powerhouse airports [2] CAA data for scheduled passenger and commercial flights [3] ONS, Lichfields Think Tank [4] Department for Business Innovation and Skills (2014) Employment Multipliers and Effects by Industry [5] Air Transport Action Group (April 2014) Aviation Benefits Beyond Borders  

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New Homes Bonus – a missed opportunity?

Dominic Smith 17 Jan 2017
In December, DCLG published the Government’s response to the New Homes Bonus consultation confirming a number of changes to ‘sharpen the incentive’[1]. Key changes include the introduction of a threshold for housing growth below which the New Homes Bonus would not be paid – and a reduction in the scale of payments from 2017/18. These changes are significant as, based on 2016 figures, 26 local authorities as a result would not benefit from any New Homes Bonus payments, as their housing growth was below the 0.4% threshold. Context The New Homes Bonus was introduced by the Coalition Government in 2011 and provides councils with payments equivalent to the Council Tax raised by new dwellings for a six year period. The original purpose of the scheme was to incentivise a net increase in housing delivery nationwide, through rewarding authorities financially, and to compensate them at least to some extent for funding cuts. The Coalition’s ‘Localism Agenda’ ensured that the monies were not ring-fenced and could be spent as each council desired, in consultation with local communities. Since its introduction over £6 billion has been paid to local authorities through the New Homes Bonus. The New Homes Bonus system has however been subject to criticism since its introduction, which one can assume has in part driven the recently-announced reforms to the system. The UK Housing Review Briefing Paper (June 2014) concluded that the scheme had ‘little impact on new housing supply’. It is apparent from public consultations and Planning Committee meetings that the public and elected members often see the New Homes Bonus as irrelevant and at worst, a form of bribery. The mention of the Bonus is regularly greeted with hostility by objectors, trepidation by councillors and is often not properly taken into account through the decision-making process. DCLG research[2] has found that around 60% of planning officers didn’t think that the Bonus had resulted in officers and members being more supportive of housebuilding, with just 10% of the view that the benefits of the Bonus translated to community support for development. Additional concerns over whether the funding for the scheme comes from ‘top-slicing’ local authority budgets have been prevalent, as its introduction coincided with large-scale cuts to Council funding streams. Immediate changes to the New Homes Bonus The key change being introduced in 2017 is the introduction of a national baseline for housing growth of 0.4% – below this baseline the Bonus will not be paid. This is intended to ensure that the Bonus is paid only where substantial additional growth is achieved and that councils are rewarded for this accordingly. The 0.4% baseline is an increase from the 0.25% originally consulted on but is below the 0.7% ‘average’ growth rate in the 10 years before the introduction of New Homes Bonus. To provide some context, between 2011 and 2015 housing stock growth was between 0.54% and 0.73%, with 2015 experiencing the highest growth percentage. This raises the question of whether the baseline is high enough, particularly in the context of the Government’s ‘1 million homes by 2020’ target. The Government has the option however to amend the baseline in future years ‘to reflect significant and unexpected housing growth’, leaving this incentive as a flexible tool capable of being adjusted. In addition to this, from 2017/18, payments will be reduced to match five years of Council Tax receipts, followed by four years from 2018/19. Cumulatively these two measures are likely to result in less money being paid out through New Homes Bonus nationally, which is designed to hit under-delivering authorities the hardest. The Government also acknowledges that these changes will ‘release funding for other Local Government spending priorities such as adult social care’. This doesn’t necessarily represent a cut to council planning budgets, as the New Homes Bonus can be spent as each authority sees fit, however it’s likely to create holes in Council budgets that will need to be addressed. A missed opportunity? Whilst initially considered in last year’s DCLG consultation, the Government will not withhold New Homes Bonus from local authorities without a submitted Local Plan, or from new homes which are only allowed following an appeal. However, both of these areas will be reconsidered from 2018/19, according to the Government Response. The mooted changes which are not being implemented are potentially a missed opportunity, as withholding New Homes Bonus for schemes won on appeal would provide further incentives for officers and members to ensure that their decision-making is robust. Removing New Homes Bonus for authorities behind on their local plan production would have represented a suitable ‘stick’ to speed up the adoption of plans, on which the planning regime – and the National Planning Policy Framework are dependent. Financial incentives linked to positive planning outcomes would also provide local authority planning chiefs a stronger hand in arguing for a larger share of the budget for their departments. The amendments to the Bonus system are a mixed bag – on the one hand the introduction of a baseline promotes rewards for authorities supporting additional housing growth whilst on the other, the shorter payment period reduces the financial incentive the Bonus previously represented. The measures that are not being taken forward could have been very effective in driving better decision-making and swifter local plan adoption. The New Homes Bonus system has clearly not had the desired impact and the changes made do not go far enough to create the effective tool to encourage additional housing growth and to counter funding cuts that the New Homes Bonus could be. [1] DCLG (2016) New Homes Bonus: sharpening the incentive – government response to the consultation [2] DCLG (2014) Evaluation of the New Homes Bonus

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