Transport for London's taxi conspiracy against Uber

Adam Smith wrote in his Wealth of Nations that, “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” He goes on to conclude that proposals for new regulations “ought always to be listened to with great precaution”. His words from 1776 remain as true as ever in London today. Transport for London’s latest regulatory proposals are a sop to the Unions. They will hammer innovative businesses like Uber, reduce competition, raise prices and worsen the quality of transport Londoners receive.

Proposed rule changes include a ban on showing available cars for hire “either visibly or virtually on an app”, and a mandatory wait time of 5 minutes from booking a journey to getting a car, even if a car is available immediately. These two rules alone would undermine the core of Uber’s business model – you won’t be able to see cars on the app and you’ll be left needlessly waiting on the street.

The rule changes would harm many drivers too, particularly those who work part time, with a ban on working for more than one operator at a time. “Controls on ridesharing” would halt plans to introduce UberPool and other upcoming digitally enabled transport services. TfL are also looking at new tests, advertising controls, payment rules and a requirement that companies “seek TfL approval before changing their Operating Model”.

TfL innocently claim the consultation seeks to "raise standards across the industry" following an "exponential" growth in the private hire industry and technology.  Yet according to City-AM the taxi unions are boasting about their influence over the consultation, and Addison Lee is happy they are putting the “genie back in the bottle”.

Regardless, these proposals would protect incumbents at the expense of innovators and flexible jobs. This is hardly consistent with the Government’s ambitions to cut regulations, promote the Tech City, and make services ‘Digital by Default’. Londoners looking for instant, cheap and quality transport are the ultimate victims.

This all reminds me of Bastiat’s satirical parable from 1845 in which the candle makers petition the French government to block out the sun, lest their business be harmed by unfair competition. Fortunately, Uber has established a counter petition, which you can sign here.

The housing crisis has a simple solution: build, baby, build

Over at the IB Times I've written about the government's housing targets (not worth the paper they're written on, basically), and why we want to concrete over the green belt – well, at least some of it:

By freeing up green belt land the supply of housing could grow enough to let prices fall considerably. All of this would actually require very little green belt land to be built on – less than 1.5% of it would give us the space we'd need to build an extra 1.4 million new homes. We could build one million homes around London on just 3.7% of the capital's green belt.

Could the private sector do it? It already has – during the 1930s housing boom, private construction rose from 133,000 houses per year in 1934-45 to 279,000, in just one year – and these houses were affordable. If you come, they will built it.

The cost of extra infrastructure could be more than covered by capturing "planning gain", with the government buying green belt land, reclassifying it and selling it at the market rate to the private sector, keeping the gains for itself.

Trimming the edges of the green belt would suffice, but I'd like to go further. Much of the countryside is worth protecting, but much of the green belt itself is not. It doesn't provide amenity to anyone who doesn't live there already, it's bad for the environment, and it makes housing cripplingly expensive.

Read the whole thing. I've tried to make it as comprehensive as possible, as a useful 'cut out and keep' piece to send to people who haven't thought about how easily we could solve the housing crisis.

Putting the brakes on railway nationalisation

The new Labour Party leader Jeremy Corbyn wants to re-nationalise the railways? It is a political totem for the Left, of course. But is there an economic case too? The main economic argument made for nationalisation is that private providers have to make a profit, so a private service is necessarily more expensive. But this is untrue. Where there is competition, the need to make a profit is what drives improvement by pushing private providers to deliver better services cheaper. If they do not keep improving, they will lose business their competitors. In the case of rail, that means other companies who would be delighted to win franchises off them.

Remember too that investing in a service that has to keep improving in order to keep its customers is expensive. Investors quite reasonably expect a profit in return for giving up and risking their capital in such an enterprise. If the government did not generate the same profit, it would, in reality, be subsidising the industry – at taxpayers' expense. So there really is little or no 'saving' to be made.

Another argument is that a nation-wide service would reap economies of scale. But remember that there are diseconomies of scale too: large state industries are notoriously hard to manage. And any supposed economies would soon be eclipsed by inefficiencies when there are no competitors to keep the provider on its toes.

The old British Rail, of course, did not make profits at all; indeed, it made a large annual loss. It was inefficient and vastly overstaffed, and yet survived. As with other nationalised industries, the problem was that decisions were made politically.

In the first place, a nationalised industry has to compete for investment with other government departments and services. Spending decisions owe more to the political necessities of the moment (like elections) than long-term investment strategy. Second, politicians fear that cutting staff costs causes them political problems, while cuts in capital investment are barely noticed: the service just gets slowly less reliable. Third, the lack of competition in a nationalised service gives huge strike-threat power to the staff yet leaves service users with no power take their custom elsewhere. And the lack of competition means that there is no pressure to change, to adapt to customer needs, stay up to date, modernise and cut costs.

Even where, for practical reasons, competition is limited (as in railways), the public is better served by an independent regulator scrutinising private providers than a nationalised industry responsible only to ministers and Parliament. The independent regulator can fearlessly point out when things are not up to standard. The minister, being responsible for the provision of the service, will never admit to failures. And independent regulators can become highly expert on every aspect of the sector they regulate – transient ministers with many other responsibilities cannot.

Competition, of course, is the best regulator, and much can be done to improve competition in most industries that have been privatised, including railways. Competition opens each and every part of the service provision up to scrutiny – and potential replacement – by others.

Prior to 1992, just a couple of years before the rail industry was privatised, British Rail did not even bother to keep punctuality figures. Is there a more eloquent statement of the dismal nature of nationalisation?

The Devil's in the details but this sounds like a good idea.....

We have, for some years now, been saying that Britain doesn't have a shortage of land to build upon but does have a shortage of land that people are allowed to build upon. That permission to build is artificially constricted by the state and any solution has to be an increase in the number of those permits granted. So, this looks encouraging:

Billions of pounds worth of public land and buildings could be sold off with planning permission already granted to solve the housing crisis, David Cameron will announce today. In a major speech ahead of the spending review the prime minister will outline plans to cut waste, sell off government assets and merge public services as Ministers attempt to save cash.

Of course, it's entirely possible for such schemes to die in a blizzard of bureaucracy. But government as a whole grants planning permission and government as a whole owns a lot of land. So, if they can manage to get their act together they could in fact achieve what would be at least a partial solution to our housing problems: the release to hte market of substantial amounts of land with planning permissions.

That government will capture the value of the granting of the planning permission is an added bonus. Government should, after all, capture the value that government creates where this is possible. But it's not the point and purpose of the scheme at all: that is simply to make available more land to build upon.

We'll have to see how well government can deal with its own bureaucracy though. One could, for example, imagine local authorities being forced to grant outline permissions but then, when the project is bought by private interests, playing silly buggers with the detailed implementation. We'll see no doubt...

Poor George Monbiot doesn't really get it, does he?

That there's something wrong with the British property and land markets is entirely true. but if we're going to complain about it it does help if we manage to identify what is actually wrong with it. Which is where George Monbiot doesn't really get it:

It’s hardly surprising, given the degree of oversight. Private Eye has produced a map of British land owned by companies registered in offshore tax havens. The holdings amount to 1.2m acres, including much of the country’s prime real estate. Among those it names as beneficiaries are a cast of Russian oligarchs, oil sheikhs, British aristocrats and newspaper proprietors. These are the people for whom government policy works – and the less regulated the system that enriches them, the happier they are.

Land has great value in Britain not because it is less regulated, little regulated nor even under-regulated. It is because it is all over-regulated. Specifically, through the planning system which creates and artificial scarcity of who may build what, where. That makes having the right chitty extremely valuable. And as such, the people who currently own both land and chitty are absolutely delighted about this system of over-regulation. While the rest of us are less so as we're forced to pay for that artificial value created by the artificial scarcity.

It has been pointed out for decades, just as one example, that the existence of green belts is simply a subsidy to those who currently own land inside one. The answer to which is, of course, deregulation of those restrictive planning laws.

Or, as we have suggested more than once around here, simple demolition of the Town and Country Planning Act 1947 and all its successors.

We do agree with Monbiot that all is not right with Britain's land. But the problem is one of over-regulation, not under-.

Centralisers don't get it: We're all planners!

Unless you live a solitary life on a forgotten island, it seems likely that decisions you make will impact upon others. Decisions about what to buy and sell, which causes to support, which groups to join, which friends to make, and which things to say, all constitute the actual form of society. The fallacy of the central planner is to believe that none of this could happen effectively without their interference. The debate, therefore, is as to what kind of society we ought to live in; a bottom-up society of individuals voluntarily cooperating, or a "strategically planned" society with fundamental parts of our lives influenced by social science experts.

While the "invisible hand" explains the behavioural forces that make a free society possible, the advantage of dynamic planning as system over a system of state control is infrequently made. The free society acts as a total nexus between all agents, retaining all the information of how people act, and, indirectly what people want. Though it lacks a mind to process or plan, the ripple effects of our decisions change the system and society as a whole, whether through changes in prices and production, our personal relationships or through cultural memes. No central planner, no computer and no expert can comprehend the complexity of the organic society they wish to reorder, nor can the information held in bit pieces by individuals be reduced and aggregated to guide the planner as to our wants. The paradox is that the brightest and best intentioned officials are routinely outsmarted by ordinary people managing small projects, precisely because the system of free association has no calculating centre or mind to overrule the genuine needs and desires of individuals to plan for themselves. Going forward, it is necessary to accept that a network of ordinary people has more collective intelligence than any committee of even the super bright.

Even indicative planning assumes that authority knows best how to arrange our lives, and, as with the holiday companion who insists on planning every minute of your day around their own interests, this engineering of persons soon becomes tiresome. Yet the stifling conceit of strategic planning can be replaced with a decentralised model. As everyone is different, finding satisfaction in colours of life specific to their person, our approach to others must recognise human beings as ends in themselves, and respect that their own path to happiness may not be the same as our own.

Localised actors, whether individuals, companies or governments can act based on better knowledge of their own specific problems, and provide solutions that are diverse and flexible. The inflexibility of the standardised national plan is its fragility, for whatever its political imperative, compounded errors induced by poor information impact on the grand scale. The utopian thinker should remember "small is beautiful", and be content to respect the authentic wishes and plans of people as they are.

There's silly housing policies and then there's stupid ones

We'll leave it to you to work out which one this is, silly or stupid:

Londoners should be given the chance to buy a new type of state-built, price-capped home that could only ever be sold to a first-time buyer, according to David Lammy, a Labour mayoral candidate.

Announcing new details of his plans to address the housing crisis in the capital on Monday, Lammy said his plan would create a new type of tenure in the UK housing market and see the state showing “hands-on leadership” in housing.

Lammy, one of the six contenders hoping to be named as Labour’s candidate for mayor in the 2016 election, said he wanted to build 30,000 of what he described as new “first-time homes” with the intention they would provide affordable housing for Londoners for generations to come.

The homes, which he said could be available for as little as £150,000, would be built on public land and sold with conditions on the leasehold intended to stop the price rising in line with normal London house price inflation.

The buyers would be able to sell for up to 10% above cost price, but only if they had lived in the home for a long time. For those trying to sell after a shorter period, the cap on the amount by which the price could rise above cost would be “significantly lower than 10%”.

Well, no, we won't leave it to you: this is a stupid policy, not merely a silly one.

There's two ways you can ration things: by price or by queues. And if you fix the price then you will be rationing by queue. Thus the inevitable outcome of this plan will be a vast waiting list of people wanting to buy this price controlled housing. The difference between this and standard housing association or council housing is only that people will be paying a mortgage to live in it rather than rent. Which isn't in fact all that much of a difference.

If there is in fact public land upon which housing can be usefully built then sure, housing should usefully be built upon that public land. But it should of course then be sold at the market price for to do otherwise means a subsidy from all other taxpayers to those who gain that below market price. That is, the politicians would just be buying votes with our money again.

No, prefabs are not the housing crisis solution

There's a short answer to this question posed in the Telegraph:

Are prefab boxes the answer to Britain's severe housing shortage?

That answer being "No".

There's a longer possible answer as well: "No way".

Because, as the article itself goes on to point out, the problem is not in fact the cost of housing:

“The nature of London property prices in particular makes moving house impossible. We want to prove prefabs can be cool - if you have spare land, why not have an extra bedroom. And you can take it with you if you do move, “ said Lee Thornley, co-founder of Bert & May. He adds that prefabs are a cheaper alternative to costly extensions, as planning permission isn’t required for structures that are counted as mobile homes.

That "cheaper" part isn't quite right:

Bert & May Spaces, which launches its units next month at design show Decorex, will sell three types of units. The smallest will be a one-roomed box retailing for £25,000, a one-bedroom unit will be available from £75,000, while the most expensive will be the two-bedroom option at £150,000.

Because any form of volume building operation will have a build cost of better than £150k for a two bedder. However, accepted, the total cost, when including that planning cost, might well be lower. But at this point we need to note that it isn't the cost of building houses that is the problem. It's the cost of negotiating the planning system.

That is, prefabs, classed as mobile buildings, are an arbitrage around the planning system. Meaning that our problem is in that planning system, not in building nor the cost of it. Our solution must therefore be to do with the planning system as that is the root cause of our problems.

It's possible to be reformist here and suggest minor changes and tweaks to the system. But we are increasingly of the opinion that that's just not going to work. We're not entirely convinced that incremental reform is impossible but very nearly so. Thus the solution is simply the wholesale shredding of the Town and Country Planning Act of 1947 and all the subsequent updates to it.

The real importance of this solution is that we know that it would actually work. It's said that we need 250,000 new homes a year: the last time the private sector managed this was in the 1930s, before planning became so constipated restricted. And what was constructed was exactly what gains a significant premium in today's market: the 1930s suburban house, the very thing which people fight over to buy in the Home Counties.

That is, the last time the market was left free to build houses for the people the industry built the houses that the people wanted, where they wanted them. Our current system does not manage that so why not blow up that current, nonfunctional, system and retreat back to the last one we had which actually worked?

These people are mad

There's always someone willing to take advantage of a good crisis, isn't there?

British railway passengers could be subject to airport-style screening at intercity stations, under plans being considered by the European Union in response to the Arras train attack. Train operators could be obliged to introduce surveillance cameras in every carriage and stations instructed to install scanners for passengers boarding high-speed trains, under options being discussed following the foiled attack. For the first time, Brussels officials are drawing up plans to create common EU rules on railway security. At the moment it is a national competence.

Before deciding whether to let the bureaucrats in Brussels make the rules it's necessary to work out whether the rules themselves make sense. That is, let's test the competence of the proposed rule makers, shall we?

Fortunately we've a method that allows us to do this: cost benefit analysis. Predictions are that soon enough we'll have some 1.4 billion high speed rail passenger movements each year in the EU. So, if we're to scan passengers, that means 1.4 billion passenger scans. Say, given the inevitable queues, this costs each passenger 10 minutes. And let's simply ignore the cost of the scanners and the people to man them. 14 billion minutes, 230 million hours, that's quite a lot of time being spent there. And we should value time at something....the Sarkozy Commission recommended that this sort of time should be valued at "undifferentiated labour rate" or minimum wage for ease of calculation.

230 million hours at, say, 7 euros an hour? That's €1.6 billion euros a year, just in the time spent being and waiting to be scanned. Hmm...and so what's the benefit?

Well, in order for this to be of benefit overall we've got to look at what will be saved. Lives, presumably. And we do know the statistical value of a life. Around and about €5 million in fact. That means, that to be of benefit, these scanners must save 320 lives a year. Each and every year.

Do we have 320 people a year being killed by terrorist attacks on trains? Are we likely to? Not that we can see it has to be said.

So, rather than imposing all of this cost on the good people of Europe it would seem more sensible to simply stay with the system we have. Punch any bearded nutters who start waving AK 47s around. After all, we do have good evidence that the current system works.

Britain needs more slums

The problems with the UK housing market have been well-documented. There is a 'housing crisis.' No-one today can afford to buy the sorts of houses their parents did. Household formation is depressed. Every day, the reports get more lurid. The latest example of this is a survey suggesting that all 43 of the affordable houses in London aren't actually houses, but rather boats. There has been a proliferation of not-houses in recent years, from houseboats to 'beds-in-sheds.' The reason is clear – Britain has a sore lack of proper slums.

Government regulations designed to clamp down on 'cowboy landlords' restrict people's ability to choose the kind of accommodation in which they want to live. Local authorities impose exhaustive energy efficiency standards, design codes, and depress density – if they allow construction at all. Each individual requirement sounds fairly reasonable, something that almost everyone would want. But housing should cater to a wide array of preferences. Some people might not feel like they need a bedroom space as large as the state expects, while others might not mind sharing a bathroom with another family if it means lower rents.

The consequences of forcing people outside the law are serious, as with immigration. If the only way you can afford housing is to live illegally, you have no recourse to the law if you do have a dispute with your landlord.

These regulations don't just affect the type of squalid accommodation that they were designed to outlaw. A recent project to build 'micro-flats' worth up to £231,000 required the intervention of the London Mayor to exempt it from certain regulations. Developments like these might be the future for young people like me struggling to get onto the housing market, but this kind of ad-hoc policymaking is no way to run a country. Wholesale change is needed.

The market desperately wants to provide houses people can live in at prices they can afford – but in the eyes of local authorities these houses are too small, or too tall, or the ceilings are too low, or the windows not energy efficient enough. Sweeping deregulation is the only way to provide Britain with the slums it is crying out for.

Theo Clifford is winner of the 18-21 category of the ASI's 'Young Writer on Liberty' competition. You can follow him on @Theo_Clifford, and read his blog at economicsondemand.com.