Charles Wright: Khan, Reeves and the London politics of Heathrow

In the run up to the government’s much-anticipated comprehensive spending review, now due in June, might we see Sir Sadiq Khan shifting his position on the expansion of Heathrow airport?

He has always insisted that the big prize for London, now we have a Labour government as well as a Labour Mayor, is the long-term funding deal the capital needs to maintain its status as global city and national engine of economic growth. Topping the priority list are the Bakerloo line extension to Lewisham and the Docklands Light Railway extension to Thamesmead, which between them would unlock thousands of new homes.

There were early grounds for optimism in the autumn budget: £485 million of capital funding for Transport for London in the coming year, almost double the previous government’s 2024/25 allocation; £100 million extra for affordable housing and Whitehall cash to get HS2 to Euston. And December’s  devolution white paper committed the government to developing a plan to ensure “long-term financial sustainability” for TfL from 2026/27.

There wasn’t so much for London in Rachel Reeves’s recent “go for growth” speech, though. The term itself may have been dropped, but her words had a decidedly “levelling up” feel. Even when effectively giving the green light to Heathrow, Reeves was at pains to stress that 60 per cent of the growth forecast to be generated by the airport’s third runway would go to areas “outside London and the south east”.

That may explain the tenor of the Mayor’s latest pitch: that money spent by TfL is good for the whole country. A new City Hall report shows the transport agency spending more than £12 billion over the past two years with 3,000 UK suppliers, two-thirds of them based outside London, from Falkirk and Ballymena to Goole, Derby and the Isle of Wight. That investment supports 100,000 jobs a year, with almost a third of the spending providing economic benefits outside the capital, the analysis says.

Is the message getting through? As negotiations continue between TfL, the government and City Hall there seems to be some anxiety. Khan says only that he is “looking forward” to working “constructively” with Whitehall on that long-term funding deal, suggesting nothing is settled. A big concern is that Reeves’s support for the airport could prove fatal to Khan’s own plans, especially if the government, already expected to sign off expansion proposals for Gatwick and Luton airports in the next four weeks, looks keen to avoid a possible regional backlash if it agrees further big allocations down south.

Even while predominantly privately funded, Heathrow could nevertheless make calls on the public purse, diverting money from other projects, Khan has warned. “The runway would be built across the busiest motorway in the country, the M25. Who is paying for a tunnel under the M25? Who is going to pay for the A4 to be re-routed? What about the new trains required for the Piccadilly line, the new trains required for the Elizabeth line? I would rather that taxpayers’ money was used on other infrastructure where all of us agree…rather than this one where there is a city that is divided.”

So far, Khan is betting on Gatwick’s expansion being a “slam dunk” argument against the Heathrow plan. It would boost passenger capacity from 40 million to 75 million a year by the late 2030s, while Luton’s plans, along with the Stansted upgrade already approved, will add millions more. But that won’t be enough to counter the imperative of maintaining and enhancing Heathrow’s global hub status.

The Mayor may still have a few cards to play, particularly if, as LCA director Nick Bowes, previously Khan’s policy chief for some five years, suggested in an insightful piece last week, he is prepared to ease off on his opposition to Heathrow expansion. With one legal challenge already rejected, there may be limited scope for another, Bowes says. Instead, he conjectures, in return for “muting his disquiet”, Khan might secure funding for a “swathe” of transport improvements in and around eest London”, especially if pitched as mitigation of the scheme’s impacts on air quality and congestion.

That could include the capacity-boosting Piccadilly line signalling upgrade, revisiting plans for southern and western rail links to the airport, and even resurrecting Crossrail 2. Khan wouldn’t be alone – MPs in Reading and Slough are already arguing the case for the western link.

Would that approach be the death-knell for the Bakerloo and DLR extensions? TfL chief Andy Lord, while still describing his talks with Whitehall as “positive”, wasn’t over-optimistic at his board meeting last week. A “great outcome” from the spending review, he said, would be securing “at least one” of the proposed extensions.

Is there another way? A new report from lobby group BusinessLDN suggests revisiting the “tax increment financing” model, which saw City Hall fund the Northern line extension to Battersea, by borrowing against future increases in Business Rates among the firms benefiting.

Taking a similar approach, it says, could raise £4.5 billion over 25 years for the Bakerloo and DLR extensions as well as the West London Orbital, unlocking more than 100,000 new homes and creating over 10,000 new jobs. It would reduce the need for public investment in London, making the capital less dependent on government largesse and freeing up spending elsewhere.

Maybe that won’t happen this year – there are complexities to be resolved. But it’s a proposal whose time may be about to come.

OnLondon.co.uk provides unique coverage of the capital’s politics, development and culture. Support it for just £5 a month or £50 a year and get things for your money other people won’t. Details HERE. Follow Charles Wright on Bluesky. Aerial image of Heathrow from Heathrow Airports Ltd.