Adam Smith Institute

If you want to read some confused journalism, try reading Simon Fletcher in The Guardian attacking the recent fare rises in London, introduced by London Mayor Boris Johnson.

Fletcher blames previous Conservative governments for not spending enough on transport infrastructure (most notably Thatcher). He postulates that they “imposed an ideologically driven policy of leaving London's problems to the market to sort out. Unfortunately for London, the market did not oblige.” Pardon? Government underinvestment is not leaving things to the market. Privatization is leaving things to the market.

In the same piece, Fletcher claims that former Mayor Ken Livingstone’s finances were balanced; a cursory look at last years Annual Report shows the truth. In fact you need not dig so deep. Simply read fellow columnist Dan Milmo writing earlier this year:

According to the latest TfL accounts, its operational expenditure was £4.6bn last year - supplemented by a government grant of £2.3bn. Without that subsidy, TfL would face a substantial deficit. Its bus operation runs at a loss of more than £600m and the gap between fares and expenditure on the Underground is £550m.

Milmo celebrates this government bailout. Some journalists don’t seem to know where taxes come from. It is not a good thing that central government has to subsidise London’s transport infrastructure. He should not be celebrating the fact that we pay twice for our journeys around the capital.

Boris is right to try to balance the books. Putting up fares is not popular, but it is presently necessary. Afte rall, those outside London should not be paying for those in the capital to get to work (and that's especially true of the poor of Venezuela). That TfL is not able to break even is surprising given the numbers that travel, but then that’s government run industries for you.

Professor Gabriel Roth has been thinking about road pricing since he was a member of a government committee on the idea back in 1964. He's convinced that motorists should pay for the roads they use – and for the congestion that they impose on others – rather than through taxes such as the fuel and vehicle excise duties. Price road-use properly, he says, and people would use them more carefully, avoiding the morning and afternoon peaks if they could, and maybe deciding to walk or take the bus or the train. Good for smoothing traffic, and good for the environment.

London's road-pricing system is crude, though. You are charged for entering the central zone, not on how much congestion you stoke up while you're inside it. A better system would charge people more for being on the busier roads at the busier times. But that means that some authority somewhere has to know where and when you're driving – yet another form of surveillance and an obvious threat to personal privacy.

Roth's answer is to fit vehicles with GPS devices that transmit only a regular digest of the journeys they log – how many miles you travelled, on what kind of road, in busy or non-busy periods. And you would be billed on that basis. But the details of exactly where and when you were driving stays with you. And Roth has in mind that the regular digest would go not to government officials, but to companies like those who handle telephone billing. (Maybe then you could even have different kinds of tariff depending on exactly how you use your car or prefer to be billed.)

I would also think it quite possible that, after your bill has been settled, you could wipe past journey information from the memory of the device. So you would have more privacy over where you take your car than you do at present over where you take your mobile phone. I don't know that this idea solves all the privacy questions, but it's certainly worth mulling over.

Back in May, things were looking good for London, with the arrival of the excellent Tim Parker as a deputy mayor. However, following his resignation last month, the dreams of major reform in Transport for London (TfL) - which he was supposed to become chairman of this month - feel increasingly distant.

Parker quit because it was decided that the role of chairman of TfL was too political for an unelected official. There are also reports that he was frustrated with the inefficiency of working in the public sector and had a number of clashes with Tory councillors over possible job cuts. Whatever the reasons, it is a shame for London that he was not able to step into this role.

While the underground is becoming increasingly unpleasant to travel on, Bob Crow - head of the RMT union - is still regularly threatening strike action. As a Times leader argued last month, Johnson should “be preparing for a ruthless confrontation with RMT militants that must end with Mr Crow's defeat.” Tim Parker would have been the ideal figure for such a confrontation. Unions have not dubbed him ‘the prince of darkness’ for nothing.

Sometimes there is no political triangulation to escape through. Boris Johnson will have to face down Bob Crow and the RMT as Thatcher did to Arthur Scargill in the 1980s. So far Johnson has failed to give Londoners any hope that he will do so. Events may yet force his hand, and if they do, the people of London will undoubtedly be behind him.

I have to admit, I was rather embarrassed to watch the eight minutes devoted to Britain in the closing ceremony of the Olympic games in Beijing. That said, it could have been much worse…

The red bus that formed the centrepiece of the celebrations was a lot swankier than my experience of catching buses in London. With the exuberance of a bull, Lynsey Hanley was prompted to celebrate the bus in a piece for The Guardian. It is the usual anti-car, anti-Jeremy Clarkson drivel, eulogising the wonder, the humanity and the diversity of the daily bus commute. I don’t know where she lives, but after a year of commuting from Deptford to Russell Square on the 188, I had a glimpse of hell. Read on the bus she suggests…I couldn’t hear myself think.

Perhaps things have changed over the last couple of years. Certainly, the part-privatization of the buses is starting to pay off. The underground should be liberalized as well. The experience is becoming far worse than catching the bus. Hosting the Olympics in 2012 will surely be the breaking point. By then I may well have volunteered myself to life in a padded cell and the promise of two hot meals a day.

Maybe Hanley is right. Maybe everyone loves public transport and will flock like sheep to it upon hearing her wise words. Well if that’s the case, then fine. When I am rich enough to afford the various taxes and charges to drive to work, it will be just the buses, the taxis and me on the road. Or am I not alone?

According to the Daily Telegraph, road pricing is back on the government's agenda.

Quite right. We pay differently for the particular dishes we order in restaurants – so why do we not pay differently for the particular road space we occupy? If we order caviar, we expect to pay more than if we order cod roe. If we choose to drive into town at peak weekday times, we should expect to pay more than if we drive on some wide-open rural road on a Sunday afternoon.

If restaurant meals were funded out of taxation, we'd all be ordering the caviar, and there would be a chronic shortage. And it's because we pay for roads through a standards 50p-a-litre fuel tax that we all want to drive into town at 8.45am on a Monday – causing traffic chaos for everyone, extra costs for hauliers, not to mention extra noise, pollution and accidents as we stop-start in queues.

Road pricing would make people aware of the value of our roads – indeed, of the value of specific roads at specific times. As such, it would encourage people to use them more sparingly. And it prompt planners to put new roads where motorists were demonstrating their willingness to pay, rather than where politicians demanded some vote – catching white-elephant infrastructure.

But the public just don't trust politicians to make road pricing fair. That's why a million people signed a petition opposing it. They think the charge will be a new tax, not a replacement for car and fuel taxes. They don't believe that the authorities will invest in alternatives to using the car (like better public transport). They don't trust politicians with the data or where and when they drive.

The only solution, if we are to curb congestion, is to put the roads into the hands of independent roads trusts - rather like was imagined when the 'road fund tax' on cars was first introduced. Ensure the trust or trusts provide alternatives to those who want to avoid the charge by leaving the car at home. Let them spend revenues on where drivers demonstrate their willingness to pay for access, rather than on what officials think is good for us. Maybe that would restore trust, and get the traffic moving freely at last.

Colin Matthews, Chief Executive of the UK airports operator BAA, has launched into the debate on the future of London's airports with a big speech at the Transport Times conference. There has been suggestion that more traffic should be decanted to other London airports; but, says Matthews, if people were unable to make connections at Heathrow (and, I suppose, faced a gruelling trip across London on the capital's ailing public transport system), it would be a major strategic mistake. Charles De Gaulle or Schipol airports would be only to happy to pick up those interlining passengers, and the UK as a whole would suffer.

So he is strongly in favour of a third runway at Heathrow, rather than resurrecting the old idea of building a new hub in the Thames Estuary. (That idea was floated in the 1960s, but dropped for environmental reasons, leaving Stansted to become the third London airport. I cannot imagine that environmental concerns have got any lighter in the intervening period.) And Matthews thinks the suggestion that Heathrow should be made better before it is made bigger is a false choice. Heathrow needs both new runway capacity and better terminal facilities, not just one or the other.

He's probably right on all these points, though critics like Ryanair's Michael O'Leary complain at the cost of BAA's new airport infrastructure projects, and that a lot of travel these days is point-to-point, which can be done using smaller airports that are presently underused. One thing I still think should happen, though, is that BAA's London near-monopoly (Heathrow, Gatwick, Stansted) should be broken up. We said that in the early 1980s in an excellent little paper called Airports for Sale. Competition works. It's time we had more of it in the provision of airports, just as we now do in airlines.

So that’s it, the government has spoken. One high speed rail (HSR) is all we are to be allowed. Rail companies can’t promise their customers future developments to improve capacity and journey times. This is due to the increased energy consumption by high speed trains. It looks like we will only have the rail link from St. Pancras to the Channel Tunnel for some time. As the rest of Europe embraces HSR we are being left behind by a short-sighted and economically illiterate administration.

In a letter obtained by The Times, Tom Harris, the Rail Minister, said: “The argument that high-speed rail travel is a ‘green option’ does not necessarily stand up to close inspection. Increasing the maximum speed of a train from 125mph  – the current maximum speed of domestic trains – to 220mph leads to a 90 per cent increase in energy consumption.”

The Rail Minister is unaware of the fact that with trains travelling at higher speeds they in fact increase capacity on the line, so energy consumption per passenger is only slightly higher than at lower speeds. Moreover, without increasing speeds or capacity the UK rail network will reach capacity sometime around 2015, at that point more people will switch to travel by air or roads, thus increasing carbon outputs and energy consumption via these two higher polluting forms of transport.

We find ourselves in the unfortunate state where the government of the day can dictate what is done to the infrastructure of the rail network, as well as the companies that use it. All they can really promise us are delays every weekend from now until 2014. Imagine where we’d be now had the railways never been nationalised. Perhaps not at the level of quality that the Japanese do, but I suspect we’d be able to travel to Scotland in just over 2 hours...

Yesterday The Times led with the revelation that the government is introducing a secret tax that will add £200 to cost of many family cars:

Tens of thousands of families will have to pay up to £245 extra a year under new road tax rules after a covert government decision to include cars up to seven years old.

This move is entirely deceitful. If car buyers had known at the time of purchase that buying a car that emits over 225g of carbon dioxide per kilometre would mean such an added cost, they might have thought twice before acquiring it.

As Chancellor, Gordon Brown steered clear of such dishonesty. However, as Prime Minister he has allowed this retroactive policy to be initiated under his watch. Originally cars bought previous to March 23 2006 were exempt from the tax, but Alistair Darling in the last budget announced a new series of car tax bands that rescind the previous exemption, leaving the already over-taxed motorist with even less money in their pocket. The Automobile Association (AA) claims that this will push many people into negative equity because the value of these cars on the second-hand market will now be worth thousands of pounds less than the car owner’s outstanding loans.

Given the rising fuel, utilities and food costs such a stealth tax is plain wrong. The people it will hit are families; these are not super cars but family cars, chosen not for their power but their safety record. Take a look at the EURO NCAP safety standards for the Renault Espace, the Vauxhall Zafira and the Ford Galaxy; three cars that will now be heavily taxed.

What, you may ask is Alistair Darling’s response to hardworking families hit by another stealth tax? Upon being asked in a radio interview what those facing higher car taxes, his answer was that to suggest that they should by new cars. Maybe if you stop taxing us, Darling, we might be able to.

On the news that train fares are to be simplified, I think Damian Hockney (possibly the leader of the One London Party, though I can't be sure) made a good point in a letter to Friday's Metro:

YES, let's all cheer that rail travel will become even more expensive. Let's all leap around and bang the drums to celebrate that all the "confusion" invloved in booking really cheap, early tickets will be scrapped and that we will have less choice. Next, let's stop all that "confusion" in other things like telecoms competition, and then we can go back to the good old days when you had to wait nine months to get a phone installed.

Essentially, the Association of Train Operating Companies has decided that the current ticket pricing structure, under which some companies offer as many as 12 different types of ticket, will be scrapped in favour of a system with just three options: advance, off-peak and anytime. Now, that may simply be good business practice - i.e. what consumers want - in which case, fine. But I suspect that this simplification will just be used as an excuse to raise ticket prices accross the board. Imagine if the supermarkets got together and decided that they would all only offer three particular kinds of, say, milk at three different prices. That would probably be regarded as an anti-competitive practice - sellers clubbing together to offer buyers less choice, and therefore get away with charging more for the product.

On the other hand, it's really no wonder that train operators are desperate to squeeze as much money out of passengers as possible. 40 percent of tickets sold have their prices capped by the government, which is to say that 40 percent of a train operator's business may take place at below market prices. They need to make up for that somehow. The reality is that some tickets - those on busy routes at peak times - should become more expensive, while others should probably be much cheaper. It's supply and demand. Such a pricing structure would also act to encourage people to travel at quieter moments, rather than all pile onto the train at 8.30am with everyone else. It is ridiculous that more than a decade after the privatization of the railways, the government is still preventing this from happening.

Our Senior Fellow in Transport, Professor John Hibbs OBE, alerts me to a new extension of regulation in the bus industry. The Certificate of Professional Competence is already a requirement for any business engaged in public road passenger transport, but from September it will be made a requirement for drivers too.

At a cost of £240, new drivers will be required to take a four-hour theory test, even though that will cover the NVQ that many companies already demand of their drivers, and naturally (since this regulation emanates from Brussels) it will cover not just safety but subjects such as 'customer care', 'transport in the economic context' and 'role in the company'. Existing drivers will have to undergo 'periodic training', involving 35 hours attendance to meet the same criteria.

Well, I love the idea that my bus driver should be trained to drive safely, but this seems to be over-egging it. It won't improve on what responsible operators already do. What it will do is load the industry with extra costs, which the large groups will be able to bear but smaller operators will not be. So new competition will be thwarted, and today's legions of perfectly well qualified part-time drivers will find themselves out of work because their hours don't justify all the cost and training. The impact will be most severe for the small firms, usually personal or family businesses, that today provide private hire and contract services of various kinds, who (thanks to current fuel prices and of course taxes, work on tight margins already.

It is time to set the railways free. It's plain to see that despite the privatization of the railways in the mid-1990s, government interference has only worsened, to the point where David Briginshaw (Editor-in-Chief, International Rail Journal) writing about privatization around the globe states:

"In Britain, for example, we have the worst of all worlds. The government is now controlling franchisees so strictly that all the innovation that arrived with privatization has been squeezed out and the government now exercises far greater control over the passenger operators than was the case with state-owned British Rail."

The government, according to Mr Wolmar, has painted itself into a corner: if passenger numbers fall then the financial demands placed on train operating companies (TOC) by the government mean many may depart the rail industry. If numbers increase, then there will be demands that the infrastructure is improved and expanded, something which will cost the government a lot of money, and something they don't want to spend money they've not got on. The current problems found on the railways are only set to worsen over the coming years due to the political interference that has now seeped into the day-to-day running of the railways. But this crisis is one that could be avoided, and easily: we need to privatize the railways once and for all.

The current system whereby TOCs are separated from the rolling stock and the track they use means that any sense of control over their operations has been totally lost. It is time to allow companies to purchase rail lines, and rolling stock. Vertical integration (much feared by the left) is the simplest way that the railways could be saved. If monopoly of service is feared then competition needs to encouraged by allowing new rival rail lines to be constructed (or, indeed, old rail lines brought back into service). The railways need to be depoliticized, and given the opportunity to flourish.

79. "We should discourage use of private cars by making them more expensive to drive."

Private cars are already hit by vehicle excise duty and fuel tax, in addition to parking fees and congestion charges. The money raised from these is part of the general budget, rather than earmarked specifically for transport purposes.

It is true that each car adds to pollution, but much less than they did a decade ago, and diminishing as new models incorporate new technology. Most of the pollution from cars is caused by older and badly-tuned models. A sustained campaign to improve those would achieve far more than a campaign to raise the costs of motoring generally.

It is also true that each car adds to congestion, but again, a sensible policy to reduce congestion at peak times and on peak roads would achieve more than a general increase in costs. Reducing the need for a 'school run,' for example, would cut congestion substantially.

The anti-car lobby does not seem to appreciate the benefits of private motoring. The extension of car ownership has opened up so many choices for so many people. It enables them to work from places ill served by public transport; it enables them to shop at places which offer more goods and at lower prices. It opens up the country, and even the continent, to ordinary people who had so limited travel opportunities before the spread of car ownership. It brings a degree of independence to people.

Planners might want to move people in blocks between chosen points, but the private car is far more flexible and versatile, allowing people to make different choices. Instead of pricing motoring beyond the reach of all except the rich, we should be promoting the technology which can make car engines use cleaner and less scarce fuels, and the techniques which can spread out their use to avoid the congestion that overcrowding causes.

I had a typically nightmarish journey into London yesterday after the Bank Holiday. I arrived at Ipswich station to discover that all the trains were stationary (they had nowhere to go) and were running hours behind schedule. The wonderfully unhelpful announcements just said, "passengers for London are advised not to travel today". No replacement bus services were offered. I wasn’t surprised: I can't remember the last time I had a post-weekend commute that wasn't disrupted by overrunning engineering works, signal failures, or some other problem.

The thing is, everyone blames the train companies (i.e. the privatized rail operators) for these sorts of problems. Yet it is actually Network Rail (the renationalized version of Railtrack) that is to blame. And the trouble with Network Rail is that it just isn't accountable to consumers. The only thing Network Rail are accountable to is the Rail Regulator – which is set to fine them £14 million for the mess they made in the New Year, when everyone was trying to get back to work. However, this is a particularly imperfect kind of accountability – it doesn't amount to much more than the government claiming back part of its subsidy whenever things go seriously wrong.

I'm increasingly coming around to the view Iain Murray expressed in this ASI paper, No Way to Run a Railway, that the railways should be vertically re-integrated. That would mean the train companies would take over responsibility for the track, rolling stock and stations in their networks. That would certainly strengthen accountability to customers and increase co-ordination between maintenance and transport (Network Rail did not even tell National Express East Anglia what was going on yesterday). It might also create greater incentives for private sector investment in the railway as well.

P.S. If anyone is interested in questioning the rail regulator, Bill Emery, he's doing an ASI Power Lunch on May 27. Contact Steve ( This e-mail address is being protected from spambots, you need JavaScript enabled to view it or 020 7222 4995) to request an invitation.

Kit Malthouse had a fascinating article in The Times on Tuesday, urging us make greater use of the tunnels under London. A couple of the most appealing ideas in the piece were as follows:

We could, for instance, drop the dual carriageway that currently blights the north side of the Thames into a tunnel below, replacing it with a four-mile long riverside park from Blackfriars to Battersea Bridge. Bypassing Parliament Square at the same time would allow it to be pedestrianised on two sides.

Similarly a tunnel could take traffic from the Edgware Road under Hyde Park and the gardens of Buckingham Palace and allow it to emerge south of Victoria station, where most of it is heading in any event.

The entire Hyde Park Corner interchange could be dropped below ground, and the three great parks of Central London could be united. You could walk from Parliament Square to Queensway, about three miles, without crossing a road. Park Lane would be freed up for redevelopment, and a grand new public square could be created at Marble Arch.

There are many tunnels under London, and even Underground stations, obsolete for existing use. It should be one of our priorities to investigate how many of these tunnels could be restored and extended for use as urban tollways. They would offer motorists the opportunity to cross under London at various points, paying a toll to miss some of the surface congestion.

Ferrovial's misfortunes may be London travellers' gain. The Spanish infrastructure group, which controls Heathrow, Gatwick, and Stansted (plus four Scottish airports) through its ADI (Airport Development and Investment) consortium, is under pressure from all sides.

The airport regulator (and recent ASI Power Lunch guest) Harry Bush seems likely to cut the return on the consortium's capital. The Competition Commission is also looking at the London airports monopoly, and may force the consortium to sell Gatwick. The economic slowdown has alarmed aviation executives, since holidays and business travel are some of the first things that people cut down on when times are tough.

All of which means that Ferrovial's shares have halved since last year, and its debts have soared. It needs to restructure fast. But the credit crunch has made that pretty difficult. Some commentators are speculating that Ferrovial will have to sell Gatwick, even if it isn't forced to by the regulator, just in order to make ends meet.

That would be good for travellers. When the Adam Smith Institute proposed the privatization of Britain's airports in the Airports for Sale back in the 1980s, we did not even contemplate the idea of the London and Scottish airports being packaged as a single unit. We were sure that a competitive structue with different owners would serve customers better. Now, more than two decades later, the regulators seem to be coming to the conclusion that we were right. It's a conclusion that air passengers - especially those who have to face the hell of Heathrow - came to a long time ago.