Last month, the Office of Fair Trading announced that it has – once again – pressed its nuclear button by referring the local bus sector to the Competition Commission (CC). This decision will not exactly put fear into the minds of the five UK bus companies who dominate the market – Stagecoach, First Group, National Express, Arriva and Go-Ahead. For many in the City, CC enquiries are normally of little interest – they are often dominated by its members poring over out-of-date figures and proposing remedies that are consistently ignored.
Of course, for Stagecoach, the CC – and its predecessor, the Monopolies and Mergers Commission – is a second home. Legendary tales of bare-knuckle competition in Darlington, Thanet and Carlisle will be long remembered. Yet, the fact remains that privatisation of the bus sector has brought considerable benefits, although some rural dwellers would vehemently disagree. In recent years, bus fleets have been modernised, partly due to environmental factors, whilst travelling numbers in major population centres are holding up well.
It should also be recognised that solid bus revenues have helped finance the bids for railway franchises: without them, there would have been precious few bidders for these franchises. Stagecoach was the first credible rail privatisation bidder – for the South Western franchise, whilst National Express – the key bus operator in the West Midlands – has been very active on the railways. Its spectacular over-bid for the East Coast main-line franchise will not be forgotten.
To be sure, 10%+ operating margins on UK bus operations outside London are attractive. But the reality remains that the reform of transport markets would be far better directed elsewhere. The BAA/Heathrow shambles remains unresolved. And, on the railways, urgent action is needed to sort out the much-criticised franchise system and to bring Network Rail under greater financial control.
Hoarders are reportedly stocking up on 100 watt and pearl lightbulbs as the phased EU-ban on their supply comes into force. Like the plastic bag, filament bulbs are an easy target for governments, since we all use them and politicians can be seen to be doing their bit for carbon reduction. But this is gesture politics at its worst. Domestic lighting (for that is all that the legislation covers) does not represent a major component of the UK's carbon dioxide emissions, but it is a soft target.
Many people have criticised the replacement bulbs, the so-called compact fluorescent lamps, despite their lower energy use and longer life. For one thing they will not fit all existing lights, and for another they give a light which is different in quality from the familiar tungsten light. On top of this, they contain mercury, so bringing more of this toxic element into homes just as it has been phased out from thermometers.
But don't take my word for this. Charles Clover, ex-environment editor of the Telegraph now writes a column for the Times. His latest contribution is called Dim thinking behind the new lightbulb laws.
In this, he comments on the reality that many people simply do not like the new bulbs, despite the fact that the head of Osram's consumer products division claims that nobody can tell the difference. Given the lower energy use, it's pretty clear that consumers would be flocking to use the new bulbs if there was no disadvantage. That politicians have to resort to compulsion and manufacturers have to lie to make the change happen speaks volumes. As Charles Clover and others have pointed out, a much more suitable technology is now viable and should soon be available at a more competitive price: the light-emitting diode or LED.
Encouraging the uptake of good new technology is one thing, but forcing people to use a flawed technology which may soon be obsolete does not reflect well on policy makers. But, in the world of environmental politics, few things do.
To hear some environmentalists speak you would think that we are currently in the environmental dark ages. The ever expanding economy (current hiccup exempted) means that we are using up ever more resources, spewing out ever more pollution and generally leading the way to Hell in a handcart.
That they say this when the air and the waters are cleaner than they have been for many centuries, when resources, judged by their price, are cheaper and thus more abundant than ever, causes no little amusement.
However, it is their next step which is so dangerous. We must localise all production, not eat food from outside our own region: depending upon who you talk to it might be from outside your own garden, town, county or bioregion but international trade is certainly very naughty indeed. In fact, we shouldn't be getting anything at all from other countries, let alone the other side of the world.
Localism in government is to be admired, localism in production and consumption rather less so.
A new book on the end of the Roman Empire points to this as the defining economic mark of that age:
An emphasis on "localization" as the fundamental change following the fall of the Roman Empire, and numerous micro-studies of exactly how that localization occurred. Cities shrank, trade networks dried up, etc.
Not for nothing do we decribe that time as The Dark Ages. Last time around it came about because of the collapse (for whatever reasons) of a political power. Let's not inflict it upon ourselves in the name of environmentalism, eh?
After over a week of striking on the National Express East Anglia (NXEA) rail line, we seem to be in worse situation than before. During last weeks strikes, only 100 out of the scheduled 1,800 trains ran, causing huge amounts of travel chaos and wasting many worker hours, as tens of thousands of commuters were late for work. All too often commuters are attacked from both sides, by the government and the unions, when it comes to rail travel.
The RMT’s Bob Crow has blamed National Express for the problems:
This strike has been caused by greedy National Express bosses who have soaked up £2.5bn in taxpayer subsidies in the past 10 years and who have milked every penny out of this franchise while offering their staff peanuts this year,
The average salary for a train driver in the UK is £35,000 – not quite ‘peanuts’ as Bob Crow would like us to think. This is reminiscent of Alan Duncan being ‘forced to live on rations’. However much the unions are given, they always seem to want more without any consideration for the impact for the disruption. With so many in the private sector having faced wage cuts and redundancy in the past year, it is madness for the unions to be demanding wage increases for shorter working weeks.
Currently, disproportional levels of union control in the labour market are artificially forcing prices up for consumers who have no other options but to pay. At the same time, top-down inefficient government intervention is burdening the taxpayer at incredulous rates.It is time for the public, politicians and the private sector to make it clear that enough is enough.
...but not a morsel to spare. Or so we are being led to believe by the Anderson Review. This view is further entrenched by the opposition's, Nick Herbert, highlighting our 'shockingly' increased reliance on food imports. Yet a question hangs over both of these opinions: what is the problem?
Why is food security important? To the government it represents a step in the process of controlling our food supply chains and food production. In no uncertain terms: nationalization. To the Conservatives the remaining large agri-businesses represent a key constituent in funding and support, and therefore anything they can do to increase agricultural prices to the detriment of the consumer will be undertaken. Both approaches show the short sighted, short-term gains and befuddled economic thinking of our current crop of inept politicians and inane civil servants.
Why do we want to produce something at a higher cost when someone else wants to do it for us, cheaper and more environmentally friendly than we can? Where is the benefit to us? Quite simply: there isn't any.
We currently hold enough intelligence to feed all the people of this world (and a few billion more). Yet we decide to hinder ourselves by attempting to make bio-fuels, subsidizing farming, rejecting GM Crops and embracing previous technologies that tie multiple farmers to the land in inefficient modes of production (re: organic and fair trade). All of this is done so that the moral minority can sleep at night safe in the knowledge that they are doing their bit to reduce their impact on the climate. They are living in the Dark Ages and pulling the already impoverished unto them, foisting a life of drudgery and despair on them. All in the name of their selfish ideal. We have been feeding ourselves since the New Stone Age, 10,000-15,000 years ago (becoming more successful as time passed). We need to end farm subsidies/food tariffs, privatize land and seas, and get government out of the way; this would lead to efficient production and resource allocation and the alleviation of food shortages.
The intellectual premise upon which the latest Policy Exchange report is sound enough:
Aviation is, amongst other things, a fundamental part of the global economy and facilitates inter-cultural exchange. Moreover, people throughout the world want to travel. As a result, we must promote methods that can reduce emissions from those flights that do take place.
Yet the substance leaves a lot to be desired, as Martin Livermore has discussed previously on this blog.
Green Skies Thinking argues for the EU and UK polities to promote the development and commercialization of sustainable bio-jet fuels, complaining that at present “there are no specific policies within Europe to create that aim." The policy suggestion is built upon the creation of an EU Sustainable Biofuels Mandate, that if introduced would require planes to be run on 20% bio-jet fuel by 2020, rising to 80% by 2050.
If as this report suggests there is commercial viability for bio-jet fuel, then there is no need to upload airline energy policy to EU. Competition, not subsidy is the only sustainable energy policy. Of course there are financial risks involved, but this will not deter the entrepreneur. And it is much better that they take on this risk, as opposed to European taxpayers.
The argument for regulations and subsidies for investment are never a sensible move for the defenders of free markets. Even if you happen to make the right call on the technological path (hard enough in itself), overturning the regulations and turning off the subsidy tap becomes increasingly difficult.
Although the political capital of climate change gives think tanks an opportunity to cash in and exert influence over government policy, those usually on the right side of the debate should tread with caution. The policy suggestions contained in this paper put politics before markets and upload key aspects of private company and national energy policy to the European level.
Adam Buckley, Ben Caldecott and Gavin Dick from The Conservative Environment Network (CEN) have written a short piece on ConservativeHome on the benefits of decarbonization.
CEN’s argument is entirely objectionable:
CEN believes that we should consider climate change a significant risk and decarbonise accordingly. But even without the very real and obvious risks associated with climate change, decarbonisation has other profound benefits. In a world without climate change it would still make sense, if done in a cost-effective way, for Britain to save energy, use less foreign fossil fuels, and develop indigenous sources of low carbon energy.
Ignoring the well-trodden territory of their position on climate change, much of the argument from CEN is based upon the failed economics of protectionist policies and state dirrection and control of industries.
In arguing that we should use less energy, CEN suggest that we need to tackle “market failures that prevent people and organisations from improving their energy efficiency". These failures are they believe down to access to capital and the “hassle" factor. However, in the real world individuals and organisations do not improve energy efficiency when it will not save them money and given the failure of the climate change predictions to come to fruition, people see no practical and moral reason to waste their money. How is that a market failure?
If – and it is a very big ‘if’ – CEN are right about the bleak future for hydrocarbon fuels, then the market mechanism will ensure that alternative energy production will be put into effect. And with an unmolested market, some entrepreneurs will take risks at the right moment and cash in on this shift. For the government to do so now is bad economic policy.
The last and most surprising argument that CEN put forward in favour of decarbonization is as follows:
Additionally, we can send less money abroad. The issue of balance of trade has become unfashionable, but is another important reason why decarbonisation should be desirable regardless of the risks associated with climate change.
CEN tie this in with arguments to invest (read tax and spend) and protect UK energy production. As an antidote to all this nonsense, I suggest the authors start by reading this from Milton and Rose D. Friedman:
"Protection" really means exploiting the consumer. A "favorable balance of trade" really means exporting more than we import, sending abroad goods of greater total value than the goods we get from abroad. In your private household, you would surely prefer to pay less for more rather than the other way around, yet that would be termed an "unfavorable balance of payments" in foreign trade.
Transport minister Lord Adonis tells us that the government’s intends to replace domestic and short-haul flights with a new high-speed rail network. There are three good reasons to think that this is a terrible idea.
First is the government’s record with large-scale infrastructure projects. The last major project on the railways was the upgrade to the West Coast Main Line, which was initially planned to be finished by 2005, estimated to cost £2bn, and designed to allow trains to travel up to 140mph. It was eventually completed in 2008, at a cost of at least £9bn, and permitting speeds up to 125mph. The government’s estimates for a single 250mph line linking London to the North stand at £20bn, and a decade’s work. Believe them if you wish.
Second is that the railways are not economically viable. Despite the government bearing a large part of the maintenance and capital costs of the rail network, most operators only survive with massive subsidies: Virgin West Coast franchise received £312m last year. Many airlines, despite brutal levels of taxation, still make a profit. It’s nonsense to spend a fortune replacing a mode of transport that is profitable, that generates wealth, with one that destroys it.
Third is that the government’s environmental arguments are ridiculous. Even if we accept their assertion that the construction of new rail networks will make substantial difference to carbon emissions (which manycontest), it’s a horrendously expensive way of doing so. Even if the railways replaced every one of the nine billion kilometers flown by domestic passengers last year, the trains omitted no carbon dioxide whatsoever, and the project came in at the lowest possible cost of £20bn, and assuming that airlines currently use the most polluting planes available (165gCO2/km), the cost would be £13,468 per tonne of yearly CO2 emissions avoided. For comparison, CO2 reduction at coal-fired power stations costs in the region of £20 per tonne.
If it ever gets built, this railway will be little more than a monument to ministerial ego, financial insanity and environmental hysteria.
Property developers will be pleased by Housing Minister John Healey’s announcement that 270 developments have been shortlisted for government assistance totalling £925m. £419m of this takes the form of five-year loans (presumably at lower rates than offered by the commercial banks), while £339m will go towards affordable housing, and £166m be given as direct grants to developers.
Healey’s declared aim is to “help build the homes the country needs." One would think that a shortage of homes would sort itself out – that demand would push up prices, and developers would be able to make a profit on constructing new homes. On these 270 projects at least, that doesn’t seem to be true: since the housing slump, the projects need government help to make them viable. At more than £40,000 per home (22,400 are to be constructed), the scheme is an expensive way of building homes that cost more to build than people want to pay for them.
Perhaps the logic is that we need to provide more affordable housing (although only a third of the proposed homes fall into this category). But if that really is the idea, then surely the best way is not to subsidise loss-making developments, but to give grants to consumers who could not otherwise afford homes. Rather than a Soviet-style central government department determining where and how homes should be built, it should be left to the decisions of consumers and developers operating in a free marketplace – it is they who know best.
Healey boasts that the scheme will “create 20,000 jobs on housebuilding sites", ignoring the fact that government funding for these jobs must found from somewhere. It is perhaps the only merit of the plan that it is to be funded from cuts elsewhere, but nevertheless the money given to house-builders must eventually come from the taxpayer, either now or in the future. The scheme will not create jobs – it will take wealth from the productive areas of the economy, to subsidise the unproductive activities of private builders.
Now, it is true that in the long term we face a shortage in housing supply – the rate of building new homes just isn’t keeping up with the demand generated by a growing population and dividing households. But government handouts (and generous loans) are resolutely not the answer. Rather, if government is serious about tackling the housing shortage, it must address the heart of the problem: the stifling and illogical planning laws and politicisation of the planning process that hold back developers from pursuing really beneficial projects.
According to Monday's Telegraph, David Cameron is considering plans to introduce road tolls after the next election. This is in essence a good idea: as Adam Smith identified in 1776, tolls, if properly implemented, have three great benefits.
A toll road "defrays its own expense" – it pays for itself. Any policy that moves the burden of expenditure from taxpayer to user should be applauded, but Cameron's tolls will only do so if balanced by cuts in general taxation, road tax and fuel duty. Motorists already pay more than 5 times the cost of maintaining the roads , and road tolls on top of this would be rightly seen as nothing more than a revenue-generating exercise.
Toll roads "pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them." Pricing the roads, like any other scarce commodity, encourages their efficient use: drivers have a reason to economize. When tolls are set intelligently, costing more in periods of congestion or in polluted areas, drivers pay not only for the maintenance of the roads but for the costs that driving imposes on others. This can only work, however, if the toll system is a comprehensive one; otherwise drivers simply avoid the expensive roads, and move the maintenance, congestion and pollution elsewhere.
Toll roads "can be made only where commerce requires them." Like in any market, those roads that are profitable would survive, and roads that cost more to maintain than they generate in wealth would be abandoned. Faced with abandoning a road, the government is more likely to bail it out, or put up toll prices. Only a road system owned by private enterprise can sustain the competition necessary to keep down prices and jettison loss-making roads.
Unfortunately, it looks unlikely that the Tories will introduce a system of road tolls that seizes these potential benefits. Rather, Cameron emphasizes that he can't "promise tax reductions", advocates "separate road tolls" rather than a comprehensive scheme, and has made no reference to privatization. It seems driving will remain dirty, crowded and expensive for a while to come.
Last month, the Office of Fair Trading announced that it has – once again – pressed its nuclear button by referring the local bus sector to the Competition Commission (CC). This decision will not exactly put fear into the minds of the five UK bus companies who dominate the market – Stagecoach, First Group, National Express, Arriva and Go-Ahead. For many in the City, CC enquiries are normally of little interest – they are often dominated by its members poring over out-of-date figures and proposing remedies that are consistently ignored.
Hoarders are reportedly stocking up on 100 watt and pearl lightbulbs as the phased EU-ban on their supply comes into force. Like the plastic bag, filament bulbs are an easy target for governments, since we all use them and politicians can be seen to be doing their bit for carbon reduction. But this is gesture politics at its worst. Domestic lighting (for that is all that the legislation covers) does not represent a major component of the UK's carbon dioxide emissions, but it is a soft target.
...but not a morsel to spare. Or so we are being led to believe by the 
Transport minister Lord Adonis 
According to Monday's Telegraph, David Cameron is