Tuesday, November 07, 2006
EDINBURGH AIRPORT LINK - HERALD LETTER
The other letter published is pretty devastating saying that his benefit estimates are not confirmed by his reports from independent consultants.
A previous letter on Saturday also disproved his claim that all other nation's major airports had rail links.
I think I eviscerated the case though this is shooting fish in a barrel in that the tunnel proposal is obviously economically insane but it will be interesting to see if Scott chooses to reply. 2nd Herald letter in a week which feels good after a dry spell in that publication. It was unedited.
TAVISH Scott makes an interesting case for spending £609m on a tunnel under Edinburgh Airport (Letters, November 3) for a return of £1.35bn, but all is not so easy.
First, there is a certain slipperiness in the phrase "transport benefits" to cover the £1.35bn. This does not seem to mean the more traditional profits but merely estimated benefits accruing to somebody or other. All businesses have, or can reasonably claim to have, such benefits but traditionally work from profits. All could equally claim government money to allow them to provide third-party "benefits".
Secondly, the cost-benefit ratio depends heavily on the costs being kept to - the Scottish Executive does not have a good record here.
Thirdly, and most importantly, his assessment of "benefits" is amortised over 60 years. Any accountant will explain that an investment that doesn't start paying off heavily within four years and in full within 10 is, usually, at best a marginal one and not one he could professionally recommend in normal circumstances. This is because of interest rates. To repay 2.13 times your investment (ignoring that that we are talking of "transport benefits", not real money) implies an interest rate of 1.35% over 60 years. If the Scottish Executive offers me £609m on such terms, I could repay in pure profit let alone in job creation "benefits". I might even become a billionaire on margin, but would be willing to bear that burden. This long amortisation is reminiscent of the executive's previous argument that the parliament building was very good value if you amortise the cost over about 500 years.
I would be interested to hear of the results of his assessment of the alternative proposal put forward by a number of people, of instead building stations on the existing Glasgow & Aberdeen lines which pass within hundreds of yards of the airport & provide a moving walkway or other connection. This would be likely to cost in the hundreds of thousands of pounds rather than hundreds of millions. The Transport Ministry might be able to confirm that it would also have a comparably improved cost benefit ratio. It would also leave £600 million which, if used to cut business taxes, in the Irish manner, would result in several times that investment in the productive economy. It is not the grand white elephants of government policy which create a successful economy so much as the unencumbered day to day work of ordinary businesses.