The Financial Times has a very strange piece worrying about who is going to pay for the Heathrow expansion to a third runway and how. Some of their burblings are fair enough. The capital structure does look equity light and that’s not really quite how we’d all be interested in someone funding a £14 billion project with substantial engineering and completion risk. We really do want someone, somewhere, to have equity on the line because that’s how projects get completed on time and to budget. Well, OK, they don’t always even then but they never do without.
But there’re a couple of references to something most puzzling:
Who will pay for Heathrow airport’s £14bn third runway?
Fears mount that taxpayers and passengers will be landed with big chunk of bill
Hmm. Well, you can – and no doubt someone will – argue that Heathrow is a strategic asset of value to the entire country. It’s therefore reasonable and even necessary that government, ie the taxpayers, fund the expansion. There will be others who point out that borrowings to do this work will cost 4 – 7%, government can borrow at around zero real rates at present. So, government should finance.
That’s not an argument I would make. Rather, the beneficiaries of the expansion are going to be the passengers who fly through the place, therefore they should pay for it. But then that’s me arguing between passengers and taxpayers. The FT seems to be saying that neither should be paying. And if it’s not either of those then who the hell is it or should it be? I do assume that the FT hasn’t gone quite so gaga-ly left wing to believe that companies actually pay for these sorts of things. A profit making corporation might advance the cash to get ‘er done but they’ll want it back over time. You know, that profit thing?
But there are doubts about Heathrow’s ability to raise the money given the fragile state of its balance sheet and the fear for MPs is that passengers and taxpayers might somehow get stuck with a big chunk of the bill.
Seriously, who other than passengers should be stuck with that bill? And if you do buy the codswallop about essential infrastructure, then who other than passengers and taxpayers? No, who else is there?
“Taxpayers are not funding them directly, but ultimately we will end up paying whether it’s through the price of a beer in the airport or the cost of the ticket.”
But who other than the people who use the thing should be paying for an airport, or any other piece of infrastructure? And who is there to do so anyway?
Has the FT always been this weird?
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Yes; imagine comparing a scheme by which punters pay for their own drinks at the pub, with a scheme where taxpayers pick up the tab, with the vague catch-all, "Ultimately we will end up paying."
"I do assume that the FT hasn’t gone quite so gaga-ly left wing to believe that companies actually pay for these sorts of things"
That's not an assumption I'd make.
"Has the FT always been this weird?"
I'm not a reader, but I doubt it. They were the paper exposing the "sexist" business event and the FT wasn't known for that sort of thing historically. They were about the state of the Malaysian Ringit or bond prices.
I suspect they just can't get the right sort of people any longer. The sort of people who know some economics and can crunch numbers are now writing sector analysis reports for consultancies that cost £1000 a pop. Which means the FT, like all other papers are full of people who are mostly the spoilt upper classes and activist types.