In the middle of last year, the Government (in the form of the Department for Business Innovation and Skills - BIS) launched the Regional Growth Fund (RGF). The RGF aims to "support projects and programmes that lever private sector investment creating economic growth and sustainable employment. It aims particularly to help those areas and communities currently dependent on the public sector to make the transition to sustainable private sector-led growth and prosperity".
Across the length and breadth of our proud nation, there was a cacophony of snorts and oinks as snouts were pressed to the trough, greedy for their share of the £1.4 billion on offer. KCC was there, looking for a handout to support their crackpot proposal for a Parkway station at Manston, and some free money for the airport. Here's why they failed:
Thanks to the Freedom of Information Act, we can now see what KCC were doing on our behalf (if they had their way, this would still be secret). They were after a total of £10.8 million from the Regional Growth Fund, which breaks down thus:
- £7.7 million towards the capital cost of the Thanet Parkway Station;
- £2 million towards the capital cost of the St Pancras-Ramsgate Journey Time Improvement Scheme (Phase 1);
- £600,000 towards the underwriting of the proposed [censored] air service from Manston (Kent International) Airport to [censored] for three years from summer 2012; and,
- £500,000 towards the delivery of the first phase of the Manston (Kent International) Airport Master Plan, including the training and employment of 11 Airport Fire and Rescue personnel, 9 Airport Security personnel, and 3 Customer Service personnel on a full-time, permanent basis.
The balance of the cost of the Parkway station would be met by Infratil (£560,000) and by borrowing (£1.96m).
The £2m would achieve a journey reduction time of 2 minutes. (Time really is money!)
The £600,000 would be a, er, "sweetener" to persuade an unnamed airline to use the airport.
The £500,000 would be, er, paying Manston to be an airport, and thus returning to them most of the £560k they would have stumped up towards the cost of the station. Nice!
The RGF application form clearly states:
The Regional Growth Fund seeks to encourage sustainable private sector-led growth.
It appears KCC didn't read the RGF guidelines very carefully, as the application is littered with bullets, aimed squarely at their own feet.
The operation of an air service from Manston (Kent International) Airport to a European hub would be unlikely to happen at all without the Airport subsidising the airline operation. In the current economic environment, the Airport, operating as it does at an annual loss, is not in a position to provide that subsidy to the level that would sufficiently encourage the airline to commence operations.
Translation: No airline can be persuaded to operate out of Manston without being paid. The airport is skint and getting poorer, so can't afford the sweetener. Bang!
The alternative funding sources for underwriting the proposed air service from Manston (Kent International) Airport to [censored] are principally either from the airline, the Airport, or external third parties. In this case, the airline would already be making a contribution through the risk level it would take in covering the operating costs of the service. It should be remembered that airlines have completely mobile assets which they are able to deploy at a wide range of airports on a variety of routes. The support that an airport and its community are able to provide towards the start-up costs and risks, is regularly influential in their route development decisions.
Translation: The airport can't afford to pay the airline, and the airline thinks just being there is risk enough. Airlines are flighty, and need to be lured with cash. Bang!
Manston Airport is operating at a loss, and has done so for many years. Whilst Infratil is prepared to invest in the development of the Airport’s infrastructure, and to cover the existing level of losses together with a contribution to the additional costs for the first years of a new service, it would not be prepared to cover 100% of the route support costs for this new route. In addition, the commitment of the local community that would be illustrated by a successful funding bid will be viewed by the airline as a significant statement of support for the route.
Translation: The airport really is skint, the owners are tired of seeing their money disappear, and aren't even prepared to take a punt on this new airline. Bang!
The RGF application form goes on to say:
In order to ensure good value for money for the taxpayer, it is important that the additional economic benefits associated with supporting a project exceed the costs of Government support.
At this point, KCC reloads and blunders on:
While the Thanet Parkway Station will not require ongoing public support once it is operational, as revenues are forecast to exceed operating costs, the initial capital cost results in the scheme not being commercially viable, namely financially positive. The introduction of twice-daily direct air services between Manston (Kent International) Airport and [censored] will create 23 additional direct jobs at Manston Airport. Along with the three jobs created by the opening of Thanet Parkway station, there are estimated to be 26 direct jobs.
To save your calculator batteries, that's £415,384 per job generated by the £10.8 million. Remember that bit at the beginning of this post, about RGF wanting to help make the transition from public sector to private sector jobs? KCC's application was looking for a level of public subsidy that would have embarrassed the British Leyland of old.
In the over-crowded sweepstake that is the Grand National economy, the Government decided not to back this particular three-legged donkey. Quelle surprise!
Dear Reader, you can download your copy of the once-secret KCC Bid Document below, and if you can deduce (or already know) the identities of the airline, or the European hub airport, that are painstakingly blacked out throughout the document, do let me know. Thank you.
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