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Thursday 4 December 2008

Privatise Manchester airport

The case for privatising Manchester airport

It is 12 years since Tony Blair did battle with the socialist dinosaurs and forced them to abandon their commitment to nationalisation with his celebrated ‘Clause 4 moment’ — the very birth of New Labour.

Manchester airport is a magnificent gateway to this resurgent city and a powerful motor for the economy of the whole northwest of England. While Heathrow is increasingly vilified as a ‘third world’ travel experience, we Mancunians are actually rather proud of our airport. It is at the forefront of efforts to achieve environmentally sustainable growth in aviation and has plans to make its entire ground operation ‘carbon neutral’ by 2015. Passengers consistently vote Manchester one of the world’s favourite airports and it is the third busiest in the country after Heathrow and Gatwick. This is a modern, profitable business — but its anachronistic ownership structure stands as a monument to old-fashioned municipal socialism.

Shares in Manchester Airport Group (MAG) are owned by the City of Manchester (55 per cent) and by the other nine Greater Manchester boroughs (45 per cent). This arrangement would be hard enough to justify even if only our own local airport was involved. Bizarrely, MAG is also the owner of East Midlands, Humberside and Bournemouth airports. At a push, you could make a case for taxpayers holding an indirect stake in the ownership of their local airport, but you might still struggle to find an argument for them having such a stake in an airport 200 miles away.

So who really benefits from the current form of ownership? No one does. In return for their stake in a multi-billion pound asset, local councils receive an annual dividend that is far from generous: the £25 million paid out this year represents a yield of just 0.8 per cent. If the councils sold the airport and put the money in the bank, it would bring in interest payments of £150 million a year. We have a golden goose that lays very small golden eggs. Meanwhile, the company — even though it is well led and run at arm’s length from its local authority shareholders — labours under residual public-sector controls on its commercial activities. It would be better off flying free to take on the competition.

We derive huge benefits from having this magnificent transport hub so near at hand. But local people get virtually no benefit from the fact that we actually own it. For the population of Greater Manchester, this amounts to an enormous wasted asset. The privatisation of MAG would realise up to £3 billion. John Whitaker of property giant Peel Holdings has suggested that this sum could then be used as collateral to borrow a further £4 billion, generating a total of £7 billion to fund a world-class public transport system for the city.

More articles from: Graham Brady MP | this section

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