Risky business

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UK transport minister Norman Baker this week refused to apologise for saying that cyclists may be safer not wearing helmets. Baker, whose role includes responsibilities for cycling, cited research that drivers tend to go closer to cyclists who are wearing helmets, but give a wider berth to those who are not. Indeed, the national cyclists' organisation itself argues that those who wear helmets are 14% more likely to have a collision than those who don't. Perhaps drivers take more risks because they believe that helmet-wearing cyclists are well protected; or perhaps they think that cyclists without helmets are more amateur and likely to cycle more erratically, making it best to keep well out of their way. Right now, nobody exactly knows.

Of course, if you come off your bike and hit your head, you are definitely better off with a helmet, says the minister. But on the other hand, he continues, "it may be that divers drive closer to you and there is more risk of an incident... The jury is out."

Many people will be shocked by Baker's seemingly cavalier attitude. But his position does reflect a basic truth about risk-taking: that if people believe things are safer, they will take more risks. The law requiring front-seat drivers to wear seat-belts, for example, apparently made motorists drive more carelessly, thinking themselves safer – but leading to a rise in pedestrian deaths. The evidence isn't incontrovertible, but that's certainly how it looks. Prof John Adams, author of an ASI report on risk some years ago, jokingly argued that, in the light of this evidence, the best way to improve the safety of road users would not be to fit seat belts, airbags and the rest to protect drivers, but to have a large steel spike sticking out of the front of each car steering wheel, ready to impale the driver at the first shunt.

We see the same phenomenon in other areas of life, too. The fact that financial firms are now regulated by government authorities means that people are far less careful when they decide where to invest their money. Something that has the government's seal of approval, they figure, must be OK. But recent events have shown how useless our regulators are in doing their job of protecting the public.

The best thing about the transport minister's intervention, though, is that it has got the elf 'n' safety lobby into a right lather. They can hardly take the usual holier-than-thou attitude to Mr Baker – who is himself a keen cyclist and who, when he became the cycling minister, steadfastly refused to change his practice of 45 years and give in to the cotton-wool crew by donning a helmet.

The case for High Speed Rail 2 is weak – very weak

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Despite owing around £1 trillion in public sector net debt (PSND), the Government seems determined to plough ahead with the HS2 (High Speed Rail 2) project, which seeks eventually to build a new high-speed rail route between London and Scotland. Its three Phases are projected to cost at least £50 billion. Most focus currently lies on Phase 1, which aims to provide a high-speed route between London Euston and the West Midlands. The length will be c128 miles and the estimated cost c£17 billion. Whilst there is a consultation process underway, no public enquiry is planned: Royal Assent for the Hybrid Bill is anticipated in early 2015.

The economic justification for HS2 is weak – very weak. Even assuming the aggressive passenger growth projections until 2033 of the project’s promoters, it is very difficult to see how a commercial return can be generated. After all, HS2’s projected capital costs per mile of Phase 1 greatly exceed that of other EU countries – the Financial Times has calculated a multiple of some 4x. And, of course, cost and time over-runs are very likely.

By 2032/33, the construction of Phase 2 is due for completion. This segment of the high-speed rail extends the line from the West Midlands in a Y-configured shape to take in both Manchester and Leeds.

So weak is HS2’s commercial case that the government’s recent consultation document sought to emphasise its non-commercial benefits, such as narrowing the North/South divide. The DfT stated ‘It is those non-monetised benefits which underpin the strategic case for high-speed rail’. The environmental case is even weaker. No material carbon emission benefits can be expected until the Scottish section – if it is ever built – is commissioned, perhaps in three decades time.

In driving ahead HS2, the Government should publish a full financial model, with cost of capital assumptions and revenue sensitivities, so that the real costs – and risks – of HS2 become clearer.

Loop the loop subsidies

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The fight between Boeing and Airbus has taken another loop-the-loop moment. Accusing each other receiving subsides from government, they have taken each other to battlefield of the World Trade Organization (WTO) in dismay of having an ‘unfair’ advantage in the air.

As a fan of the free market, I do not like government intervention. Market competition forces firms to experiment with ways to produce goods and services in the most efficient way. Interfering with this process leads to market inefficiencies and causes competition to decline. Government subsides are on this list of do-nots.

Boeing has received at least $5.3 billion in subsidies from Washington, which has been declared illegal by the World Trade Organization. In one of the most complex cases ever to face the WTO, it was been disclosed that some of the subsidy that Boeing received was for research and development from NASA.

Before this, the US complained to the WTO that Airbus took subsidies from the EU and it had unfair advantage. The EU believe that Boeing has received even more illegal subsides from 1989-2006, totaling $19.1 billion.

This latest dispute has been on running for over six years but I think that there are a number of double standards from both sides of the flight war. The US complained that the EU was helping out Airbus and at the same time the US was helping Boeing. The EU has then counter-complained and we are at the stage of the dispute of where both parties have been found to have broken trading rules.

Both governments need to step back and let the firms compete without help at all. Competition between them should be fair in the sense of governments not handing taxpayers money to them. Though it does not like for the foreseeable future that the Boeing vs. Airbus subsidy war is going to end, the losers are the taxpayers in both the US and the EU whose money is being poured down the drain for the sake of their governments’ sense of pride.

Is UK rail moving inexorably towards re-integration?

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This week’s announcement from Network Rail that it would be devolving its core business units has important implications for the future of UK railways. Crucially, two of its regionally to-be-devolved units – Scotland and Wessex – have been established to overlap with the franchise areas for FirstGroup’s ScotRail and Stagecoach’s South West Trains; this is no co-incidence.

Currently, only the pint-sized Isle of Wight railway is vertically integrated although moves are afoot to extend the process to the self-contained Merseyside network. Whilst the separation of track and train has had its supporters, notably the Treasury at privatisation in the 1990s, a series of fatal railway accidents and the financial collapse – necessary or otherwise - of Railtrack brought about a radical shift in priorities. Understandably, safety rapidly moved up the agenda so that Railtrack’s successor, Network Rail, was given a wide-ranging mandate to repair, to improve and to invest.

Network Rail’s net debt now exceeds £23 billion – and is still going northwards. Moreover, its operating cost base has soared and its bureaucracy has become more entrenched. Indeed, the Office of Rail Regulation concluded that, in 2008, Network Rail was between 34-40% less cost efficient than its top European infrastructure counterparts. Hence, new thinking should be welcomed. The long-term aim should be to part- integrate the railways – probably on piecemeal basis – but retaining a handful of companies – say between four and ten - for comparative purposes.

In doing so, competition should be established through the comparative cost mechanism – a process that has taken place in the water sector for years. Comparative competition also drove down costs sharply in the 12 Regional Electricity Companies that were privatised in the 1990 as they sought to outperform one another. It would be ironic, would it not, if the eventual UK railway network eventually resembled the pre-war set-up when four integrated companies ruled the roost?

What a waste!

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I feel for UK Transport Secretary Philip Hammond MP. Probably the most intelligent person in the Cabinet, he should have been Chief Secretary to the Treasury – the minister in charge of managing public spending, and getting Britain's books back into the black. Instead, because of the horse-trading that went on when the Conservatives and Liberal Democrats were putting together their coalition government last June, he ended up as Transport Secretary. Frankly, it's a waste of his talent.

Particularly when he finds himself having to defend old-style (and highly expensive) prestige public-sector projects like the proposed high-speed rail link from London to Britain's second biggest city, Birmingham. The business case for this is quite shaky. It will shave only a few minutes off the journey, which may help businesspeople in already well-off London and Birmingham but do absolutely nothing for most of the rest of the us. Trains are supposed to be more environmentally friendly, of course. Not that many people fly from London to Birmingham, which already would take longer than taking the train. And environmental campaigners point out the scar across the countryside that would be carved by the new rail routs.

Mr Hammond's heart just can't be in it. Now he has had to defend it by saying it will generate '40,000 jobs'. It won't, and he must know that's the mathematics of spin. We're told that 9,000 people will be involved in the line's construction. Maybe. But that is 9,000 people who will simply be diverted from other work, including construction, elsewhere. Jobs that would be more productive, in that they would be led by the private sector rather than forced into life by government. Private businesses, seeking profit, invest where they see there is a public demand. Governments, in pursuit of political profit, do not.

Another 1,500 jobs will apparently be created in the operation of the link. Yes, but again, those are people who could be used more productively elsewhere.

And regeneration round the stations will create another 30,000 jobs. Ah, well, that may be right. Transport links always produce windfall benefits. But they produce them, not for the general public, but for those who happen to own property around the stations. And those landowners are probably doing better than most of us anyway. True, it might lead to the building of homes and shopping malls. But again, at least some – who knows how much – of that will simply be businesses and construction projects relocating to new, now-easier-to-get-to locations and away from the places they would have gone anyway. Is that really worth £17bn? Underneath, I am sure that Philip Hammond knows the answer. He just can't say it. That's the price of being a minister.

The railways renaissance

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In terms of passenger use, the railways are enjoying a ‘golden age’. Figures earlier in the week showed that 1.32 billion passenger journeys were made last year. Not only was this figure well up on 2009 but it was also the highest railway use since the mid-1920s (if the 1939-45 war period is excluded).

Inevitably, this scenario begs the question as to how future rail demand levels can be met. In the long-term, the Government plans to modernise the network, with the c£34 billion High Speed 2 project being key. Initially, the latter is scheduled to run between London and Birmingham – and eventually to Manchester and Leeds. Since High Speed 2 is unlikely to be operational before 2026, other solutions should be explored.

Like many markets, the UK rail network suffers both from excess demand – packed carriages to London during commuting hours – and from inadequate demand – near empty carriages in some rural areas. The market should be allowed to make its own adjustments. This philosophy should be embraced – at least in part - by the planned franchise amendments. Longer franchises and more scope for the franchise holders to adjust to consumer demand are anticipated.

Much of the capacity concern focuses on both the West Coast and East Coast Main Lines, where trains are often very crowded. Why can’t these standard services run regularly throughout the night, with very cheap tickets being on offer which would be highly attractive to students?

By adopting a Ryanair booking policy, the 1am London Kings Cross to Edinburgh fare, for example, could be minimal – just like its fare to an obscure Polish city on a Tuesday in deep winter. At peak hours, market demand would ramp up fares. After all, many people currently fly during the night as well as visit 24-hour Tesco shops. Will 24-hour rail travel eventually become the norm?

Robots don't go on strike

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When I read that Mayor of London Boris Johnson had raised the prospect of driverless Tube trains in a recent speech I couldn’t help but let out a little cheer. As much as I don’t like to see people potentially losing their jobs, it’s great to see that politicians are willing to stand up to the RMT and TSSA unions. Such a move would create a better service and would probably be cheaper in the long run than the current Tube system.

For far too long the Unions have shown complete disregard for their consumers’ needs and desires. They deliberately seek to create maximum disruption in order to push for outlandish pay and conditions at a time when public finances are tight. Apart from infuriating commuters, these strikes have a negative economic impact. The London Chamber of Commerce calculated that each day that the Underground is closed costs the UK economy £48million. So the five strikes cost us £240million last year, whilst it has also been argued that once all the Tube trains are converted to automatic systems it would save a further £141million a year. With such tempting savings the Tube drivers should be wary that their demands don’t one day do them out of their jobs.

As a result of the unions having entered into unreasonable wage negotiations, increased labour costs have led to Transport for London (TfL) increasingly using machines to top up Oyster cards instead of manned ticket booths. The more strike-prone the workforce becomes, the more TfL will be incentivised to look for alternative, less labour-reliant solutions like automated trains. Previous research into driverless systems found that automated metros allowed the operators to provide exceptional service quality whilst reducing operating costs. They also led to shorter waiting times, greater cleanliness and better information and safety. All of which we commuters would very much welcome.

Disappointingly, such improvements are not to be expected anytime soon. That being said, I do believe the time seems to be nearly up for the unions. With increasing technological advances, tube workers will no longer be able to hold the city to ransom. As a result we may one day have a truly reliable and pleasant Tube network, which will no longer inflict so many costs on individuals and businesses. So come on Boris - the sooner we embrace change on the Underground the better for London and its businesses.

The madness of crushing uninsured cars

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Back in 2005, the UK's Labour administration announced that it would be seizing and crushing the cars of people who drove without being insured. This week, ministers in the new Coalition government are to go further even than this, saying that anyone who merely keeps an uninsured vehicle faces having it seized and crushed.

Such proposals show how tentative a grip our politicians have on commonsense, and on justice. Commonsense first: where do I start? Well, (1) problem of uninsured vehicles is the problem of people driving them and being involved in accidents, and then having no insurance with which to compensate any victims. Collectors and other people may well own cars which they have no intention of ever taking on the road, and so do not bother to insure. It is simply absurd that they should face the cost of insuring a vehicle that never moves out of the garage. (2) When people or property are injured in an accident caused by an uninsured driver, seizing and crushing the driver's car does nothing to help. Sure, the threat of it might dissuade people from driving without insurance, but other, more traditional penalties might be equally effective on that front. In any case, (3) selling the car in order to compensate the driver's accident victims might do more for them. (4) Even on the simple grounds of economy, is it not better to preserve a perfectly good car than send it to the crusher, just so lawmakers can show how 'tough' they are?

But there is a justice question too. The present and proposed law have no regard to the value of the car. The loss to the uninsured driver could vary considerably depending on whether it was a Fiat or a Mercedes. And the point about justice is that the penalty should be the same for everyone. It's time our politicians stepped outside their dreamworld and got a bit of common sense. And it's time that they stopped trying to think up a headline-grabbing arbitrary 'solution' to every problem and learnt something about the principles of justice.

Edit: In the comments, HJ777 makes a point about SORNs (Statutory Off-Road Notifications) which are designed to avoid the situation outlined above. I'd overlooked this, but the point remains because many people will lack the time and knowledge to get out one until it's too late. Thanks to HJ777 for the pointer.

For whom the road tolls

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One result of the Comprehensive Spending Review is that there are more opportunities for private investment to provide what the government can no longer afford. One project to be cut is a proposed relief road in the Midlands, which was meant to ease pressure on a key artery linking the region with Felixtowe. However, the Department of Transport describes the scheme as unaffordable. Cue a sensible alternative – a private toll road.

It seems the government is slowly recognising the benefits of private involvement in the running of the roads. They are considering new congestion-busting schemes that involve the building of toll roads alongside existing bottlenecks. Local councils, meanwhile, have apparently seen the possibility of private companies creating new by-pass roads – sparing them the long (potentially endless) wait for Whitehall cash.

There is already a private road operating in the UK – the M6 toll road. This is the template under which new roads should be built. Currently the road network is open access and funded by general taxation, meaning that both drivers and non-drivers bear the cost of its upkeep. But the highway system is currently hugely overstretched, with congestion and road maintenance becoming a real problem for the government.

The solution is to franchise the roads to private contractors, as suggested by Nigel Hawkins in Privatization Revisited. Part of the levy raised by these companies on the motorists would then be put towards the maintenance and general upkeep of the road, ensuring that those who use the road are the ones to pay for it. This is the system used in many other European countries, so why should it be any different in the UK?

More broadly, these stories illustrate one of the benefits of public spending cuts. The private sector, which has previously been crowded out of many parts of the economy by big government, suddenly has more opportunities to provide the things that people need.

One more reason why we really don't need the European Union

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Idly browsing, as I do, I came across this fascinating little post about the cost of transport. As a decent approximation, getting 30 tonnes of anything from anywhere to anywere now costs around $5,000.

If, and only if, you're on the container routes (either sea or rail). Which means that, again to a reasonable level of approximation, distance is no longer really a concern in trade matters. Pineapples from Costa Rica or the Philippines, water from Fiji or the US, tantalum from Australia or Brazil, electronics from where ever, it really doesn't matter all that much for the costs of transport don't matter all that much any more.

Which makes one of the reasons we're often given for the European Union rather out of date. One of those reasons was of course that we should all be trading with those geographically close to us rather than far flung corners of the world. This is why we were urged to take down the trade barriers to France (an excellent idea of course, lowering trade barriers) and to put up trade barriers to far flung corners (a very bad idea indeed).

It simply isn't true any more that geography determines the costs of trade: thus geography shouldn't be an influence upon trade policies.

It's an amusing little trivial point of history that the very first container ship set sail 6 months before the signing of the Treaty of Rome which brought the EU (or EC as then was) into existence. It is less amusing and less trivial to know that our trade policies are still based on ideas which have been made redundant by technological progress.

But then who is really surprised at politicians and bureaucrats being 50 years behind reality?