Greenpeace proves roads are better than trains

We must say we didn’t expect Greenpeace, of all people, to make this proof. But they have done.

European governments have “systematically” shrunk their railways and starved them of funding while pouring money into expanding their road network, a report has found.

The length of motorways in Europe grew 60% between 1995 and 2020 while railways shrank 6.5%, according to research from the German thinktanks Wuppertal Institute and T3 Transportation. For every €1 governments spent building railways, they spent €1.6 building roads.

Well, OK, we’re happy to take their word for that.

The fun part is when we get to Figure 3.1 on page 14 of the actual report. Which tells us that 80,000 km (measured by Mk I Eyeball method) of motorways provides 5000 billion passenger km of travel while 230,000 km of rail lines provides 500 billion passenger km. They don’t spell out these numbers - not that we can see - so you’ll have to put up with our estimations off the chart.

Clearly, road vastly outperforms rail in gaining what is actually desired from either system - the ability of a person to travel some number of passenger km. Recall, the aim of any economic system or subset of one is the output to be gained from it.

Given this vast outperformance of roads as against rail it’s possible to therefore conclude that governments vastly overspend upon rail infrastructure. We seem to gain 25 passenger km from every km of road as against 1 from every 1 km of rail. Investing only 60% more in roads is thus so much of a waste of money that it becomes a dereliction of duty to be spending upon rail.

We’re not sure that we would go entirely that far but it is the correct conclusion to draw from the information as presented by Greenpeace.

As with their earlier insistence that airplanes were 30 times better than trains.

Given their known predelictions we do think that we should accept this evidence too. As Greenpeace says, ‘planes for long distance, cars for the rest and stop wasting money on rail. After all, given their predelictions if it was possible to come to a different conclusion then they would, wouldn’t they?

Mazzonomics

We have another of those attempts from Mariana Mazzucato to redefine economics for our age:

Instead of seeing spending on education, school meals and other priorities – such as tackling the climate emergency, health crises or the digital divide – as an expense, it should be recognised as an investment. And one that can drive innovation.

Well, yes, except investment is an expense. Both current spending and investment are expenses. They are money out, being spent upon things - or if we prefer, resources being diverted to do things - which cannot then be spent on something else. They’re expenses.

This doesn’t then give free ride to investment as not being an expense. Sure, it might be a better thing to do than current spending. But that then depends upon what do we gain in the future from investing now? It is the output of the expense, the return on it, that matters.

Free school meals for all could be an excellent investment, one that makes the economy grow in the future. It could be a terrible one, one that makes it shrink. But whichever of those it proves to be it’s still an expense right now.

Investment is an expense and don’t let anyone tell you different - not even a fashionable professor.

Simplifying the UK tax system

Nigel Lawson left us with the memory of a Chancellor, one of the greatest of all time, who not only cut taxes, but simplified them in every budget. There are lessons to be learned today from his record.

One of the most disturbing features of the 2022 mini-budget was the announcement that the Office of Tax Simplification (OTS) would be abolished and replaced with a general mandate to HM Treasury and HM Revenue and Customs to focus on simplifying the tax code. A “general mandate” is meaningless unless there is a policy or series of policies with a team dedicated to implementing them. There is no such commitment within the Treasury and HMRC.

Simplifying the UK tax system is a complex and challenging task that would require significant political will and resources. Nonetheless, there are some initiatives on how the tax system might be simplified in key areas.

One option to simplify the income tax system would be to merge income tax and national insurance into a single tax, levied at the same rate and with the same threshold. This would remove some of the confusion around the different thresholds and rates for the two taxes and make the system easier to understand. The NI would simply be incorporated into current income tax, and if the misnamed “employer contribution” were to be retained, it could be done so as a payroll tax, which is what it is.

Another approach would be to simplify the income tax system by reducing the number of tax rates and thresholds. This could involve introducing a flat rate of tax, or reducing the number of income tax bands to perhaps just two, just as Nigel Lawson did. This would make it easier for people to understand how much tax they need to pay and reduce the administrative burden on HMRC.

The Treasury and HMRC will oppose this simplification because it would make more evident the level of tax that people are actually paying. The current complexity and confusion serve to hide that true level, and minimize the resentment that would be aroused if it were known. Nonetheless, it is a simplification that is long overdue.

Simplifying business taxes could involve reducing the number of taxes that businesses need to pay, as well as streamlining the tax rules and regulations that apply to businesses. This could involve simplifying the rules around capital allowances and other deductions that businesses can claim to reduce their tax bill. Ideally, full expensing would be permanent to encourage long-term investment. And we could thereby reduce the number of tax reliefs and exemptions that are available to businesses, which can be complicated and difficult to navigate.

If inheritance tax is not abolished, it could certainly be simplified. One option would be to greatly raise the threshold at which the tax is payable, meaning that fewer people would need to pay inheritance tax. It is the UK’s most unpopular tax because it is levied on savings that have been taxed as they were earned. A higher threshold would reduce the need for complex exemptions and allowances.

The rules on pensions are unnecessarily complex because they are based on a flawed system. Pensions can be taxed (T) or exempt (E) when payments into them are made, when they grow in funds, or when they are withdrawn in retirement. Currently the system is EET, allowing tax relief on in-payments, but taxing funds when they are withdrawn. This sets up a hugely complicated set of rules as to how much qualifies for tax relief. The system should be changed to TEE, so that payments into pension funds attract no tax relief, but no tax is levied thereafter on growth within the fund or subsequent withdrawals. This would not only simplify; it would be a massive boost for future investment.

Nigel Lawson was not only the great tax cutter, he was also the great tax simplifier. The time for revisiting his legacy is long overdue. Taxes should be simple and transparent, and there are huge savings to be achieved by making them so.

There're populists and then there are populists

Torsten Bell tells us that populists are bad, M’Kay?

Silvio Berlusconi may be dead, but Giorgia Meloni is running the show in Italy. Donald Trump wants back into the White House (it’s cosier than jail), and are we really confident that arch-centrist Emmanuel Macron in France won’t be followed by Marine Le Pen? Even the pope is worried about a libertarian former sex-coach taking power in Argentina.

I raise this because it should encourage anti-populists to focus on addressing the bad economic outcomes that help drive populism. If you need further encouragement, it should come from recognising the scale of bad economic outcomes that follow populists actually coming to power.

Those are all rightish, or at least arguably conservative, type populists. And while it’s easy enough to disagree with some or all of the things they do/would like to do we’re not sure that economic disaster can quite be pinned on any of them. So we thought we’d have a look at the source here. Which is this paper:

A widespread academic view is that populist leaders are bad for the economy and “self-destruct” quickly. Influential work by Sachs (1989) and Dornbusch and Edwards (1991) on Latin American populism in the 1960s, 1970s, and 1980s identified a “populist cycle.” Populist leaders generate a short-lived boom using expansionary fiscal policy that ultimately ends in an economic and political crisis.

Rudi Dornbusch writing a paper on right wing populists sounds a bit odd to us so we looked at that paper too. To find that his two named examples were Garcia in Peru and Allende in Chile. So not really noting right wing, or conservative, at all.

The middle paper, Bell’s reference, actually talks of economic populism as being the thing that goes wrong. Also known as spending all the money in one fell swoop because it’s gonna be great, this new society with its new economics. So, Chavez/Maduro, Mugabe, and so on.

Or, if we were to survey recent British politics, Jeremy Corbyn and his Magic Money Tree (courtesy Richard J Murphy). That’s the sort of populism that ordains economic disaster.

The researchers find that having a populist leader hits a country’s GDP per capita and living standards by about 10% over 15 years as the economy turns inward, institutions are undermined and risks are taken with macroeconomic policy.

Well, yes, it’s a good warning. But possibly a good idea to be a little more specific over what is being warned about? It’s not actually populism at all, it’s fiscal incontinence.

Scary piccies on the booze bottles

As the perceptive have noted the Puritans were not defeated in 1660:

Hard-hitting TV campaigns about the dangers of unhealthy eating and labels on alcohol are needed to curb the huge rise in avoidable cancers, charities and health campaigners have warned.

The World Cancer Research Fund (WCRF) said mass media campaigns, using tough messages mirroring the graphic photographs and wording on cigarette packets, were now needed to tackle the widespread lack of awareness that alcohol and being overweight are both major causes of cancer.

Weekly booze limits these days are what a journalist calls breakfast so we do think that perhaps people are going a little far. But japes and jollity aside, a serious point:

Ireland recently became the first country in the world to legislate to do that. In future, labels on alcohol products will warn drinkers that “drinking alcohol causes liver disease” and “there is a direct link between alcohol and fatal cancers”.

We all know what happens next. Ireland has done it therefore we must too. As when Scotland brought in minimum pricing (which we’ve never understood, why boost profit margins with minimum prices, why not raise tax instead?) then and therefore England must too.

Leave aside the specific policies here. Think about science for a moment. Hypothesis, experiment, evidence, confirmation or rejection of hypothesis. According to the evidence we’ve seen minimum pricing seems to kill people. So, let’s not follow Scotland in doing that. But we only know that because Scotland did the experiment and we all waited to see whether the evidence from it confirmed or rejected the original hypothesis.

Scary piccies on the booze bottles. Will it work? No, leave aside assumptions and all that. Ireland is starting the experiment. Excellent, let’s await the results shall we?

After all, if we’re going to pretend to use science in public health matters then let’s actually use science in public health matters, shall we? Idea, experiment, results - that’s how science works.

Of course, we can run with the alternative, which is to refuse to use science when discussing matters public health. But at that point there’s not much point in doing any public health, is there?

These people are incredible - incredibly bad

The attempt to use this as scientific evidence:

But snacks like bun rotis tend to offer empty calories without key nutrients. Ahmed, who often eats only one meal a day, has lost weight in the year since he moved to Dhaka. “That’s because these foods give them a quick burst of carbohydrates, but it runs right through them and they need another one,” says nutritionist Barry Popkin, who has observed similar trends in other developing countries as they become more urbanised and industrialised.

Bread and butter is terribly bad for you. This ultraprocessed food d’ye see? Our proof is this lad in Dhaka who has lost weight.

Ahmed used to eat a far more nutritious diet of fish and vegetables, but rising salinity in the rivers around his coastal home town of Bhola ended his livelihood in fishing and forced him into the city.

We’re not even sure about that bit of evidence - Bengalis do know how to fish in salt water. Yes, we have been there, do know this.

A sweet, butter-filled bread roll, neatly wrapped in plastic, has become the snack rickshaw rider Jewel Ahmed reaches for when he needs to eat while stuck in traffic in Bangladesh’s capital, Dhaka.

Bun roti, as the rolls are known, are sold for 10 Bangladesh taka (7p) at the same stalls where the city’s rickshaw riders buy heavily sweetened tea to ward off hunger and tiredness.

Ahmed has stopped being a fisherman in fresh waters and instead become a rickshaw driver in Dhaka. Bangladeshi rickshaws are large, heavy and pedal-powered - without gears. Again, we’ve been there and we even asked around as to why there were no gears - too expensive was the general agreed answer.

Snack attack: how the west exported unhealthy eating to Africa and Asia

Oh, right, capitalism, markets, globalisation, all at fault as bloke who takes one of the most physically exhausting, calorie consuming, jobs on the planet loses weight. Eh? What better proof can you desire than that? Proof perfect, innit?

It’s difficult to know whether we should be shouting at these people or laughing. But certainly we shouldn’t be taking them seriously.

Selective death rate

Selective Death Rate

The same thought that had occurred to Charles Darwin ten years earlier occurred to Alfred Russel Wallace recovering from a bout of malaria on an Indonesian island. Each had been considering Malthus’ theory that population growth would always exceed growth in food supply, dooming many to death. Both had the same question, “Which ones will die?” and both came up with the same answer, “The ones least able to live.”

They presented together the notion that evolution proceeds by a selective death rate. Those least equipped to survive and to breed would die off at a higher rate than those better equipped, leading to the development of new species that incorporated the innovation that improved their chances.

A similar selective death rate operates, when it is allowed to, in a market economy. Innovations occur in products, services and organization, and the most successful ones survive at the expense of those less well equipped to compete with them. In market economies, flux, rather than stasis, is the norm. Few of the companies in the top hundred remain there for decades as technological change combines with changing tastes to erode their market share.

Existing firms often use political clout to make life difficult for newcomers, using regulation to raise costs and barriers against new entrants. This is not the free market at work, but the use of legislative influence to thwart its operation. The coach operators lobbied Parliament to insist that the new motor cars must be preceded by a man on foot with a red flag. Progress, growth and consumer satisfaction are maximized when a selective death rate is allowed to cull the businesses that can no longer survive on merit.

Innovations which increase productivity and growth lead to job losses. It is the way of the world. Those job losses are resisted by political representatives more anxious to secure the support of present voters than to make life better for future ones. But countries prosper more if they allow that selective death rate to operate instead of trying to resist its effect by subsidies and trade barriers to protect extant businesses at the expense of future ones.

Sir Karl Popper made the famous observation that the aim of politics is not to select the wisest and best rulers, but to ensure “that bad or incompetent rulers can be prevented from doing too much damage.” In other words, the advantage of democracy is not that it allows the people to rule, but that it can apply a selective death rate to political ideas and their exponents. It enables failed rulers to be changed peacefully and to allow alternative ones to be given a chance. Because politicians in a democracy know they can be called to account at the next election, their behaviour is tempered. No such restraints are there to curb the behaviour of despots.

The methodology is a selective death date, as it is in evolution and free market economics. It is less efficient in the political realm because popular will is not as brutal as it is in nature or a free economy. The same failed ideas can resurface no matter how many times they have sunk in the past. This is because some ideas appeal in theory even if the real world discredits them repeatedly.

In scientific method, new theories are put forward and tested by experiment and observation. Those that are less successful at predicting what we shall observe are discarded in favour of those that do this more successfully.

A selective death rate operates by trial and error. In evolution it is blind, but in market economics, politics and scientific method it is purposive. But in all these areas it is by counting out the less adequate in favour of the more adequate that development and change take place. To interfere with this process is to mitigate its benefits.

Lidl puts that greedflation idea to bed

That greed exists among capitalists we’ve no doubt. We’re not sure whether we think it just the nature of the breed or their purpose but the existence, yes. Where we differ with received opinion is in the effect.

As we’ve pointed out if everyone’s greedy then those making excess profits soon face more competition which then kills those excess profits. Given that new ways to make excess profits constantly appear, even are created, this is what drives a free market capitalist system forward. We’ve also that empirical evidence that while many might have tried to increase their profits in recent times very few succeeded and on average they didn’t. We’re fine with both those outcomes, they show the system is working.

Sure, people strive to make excess profits. They end up not being able to do so.

And one more little evidential stick to add to the fasces:

Discount supermarket chain Lidl has revealed its British arm swung to an annual loss after battling to keep a lid on prices as its costs rose “across the board”.

The group reported pre-tax losses of £76m for the year to 28 February against profits of £41.1m the previous year as it also invested heavily in the business.

Greedflation is an attempt, not an outcome. It’s the capitalism that provides the greed, the free markets that limit the success. Excellent, the system works, we have both the drive and the restraint.

Which leaves us, really, wondering why so many spout the greedflation line - the line that the success of it, the success that hasn’t happened, is what caused the recent inflation. Ah, but that’s just politics, no connection with either the reality or the truth. Sad, but there it is.

Sometimes people will tell untruths in order to gain political power. Alert your relevant Maiden Aunt to this fact.

Scandalous school building money statistics

The Guardian tells us that:

The amount being spent building new free schools, then, was vastly more, per school, than the average amount allocated per school to rebuild England’s existing classrooms. A pet political idea was put ahead of a much broader, if less eye-catching, objective: maintaining school buildings so that children are kept safe.

Well, yes, we’d rather expect that to be true. We don’t rebuild classrooms every year. So the spending on a school being built (or even one being rebuilt if it’s their year) will be higher than the average of all schools some to many of which are not being rebuilt.

Between 2011 and 2018, £1.7bn was spent on site acquisition and construction for 221 free schools. On average over this period, that is £959,000 per free school, per year. By comparison, a National Audit Office (NAO) report published in June revealed that, from 2016 to 2023, annual spending across the remainder of England’s 21,600 state-funded schools on “major rebuilding and refurbishment” equated to just £26,070 per school, per year.

Much the same point applies. When actually building a school the expense is rather higher than the maintenance of another school.

This isn’t to say that the school maintenance programme was well managed - or even managed at all. We’re insistent that government’s inability to manage maintenance is one of the major reasons to not have government building and operating things.

But just to clarify the maths being used here. The cost this year of building a school is higher than the annual buildings maintenance costs of a school we’ve already built.

Umm, Yes?

The real surprise here is that this calculation was thought worthy of publication in The Guardian. But, you know, journalists and numbers….

Government loses plot on 2050 Energy and Parliament follows

In 2020 it dawned on government that transitioning from mostly fossil fuel energy to zero carbon, i.e. electricity, by 2050 was a big deal and something should be done. What that needed, of course, was a strategic plan but we did not get one and still haven’t. Instead, we got the 2020 White Paper which became the Energy Bill originally devised by the House of Lords. On Tuesday 5th September, the Bill had its last examination in the Commons. MPs were given three hours to debate and decide the 397 page bill they received from the Lords plus the 69 MPs’ amendments and 180 from the government. And then they had 117 pages of explanatory notes prepared by the Department for Energy Security and Net Zero and its (entirely inadequate) 39 page Impact Assessment (IA). IAs are supposed to consider additional costs and whether they are value for money. It doesn’t. Whitehall is renowned for its farces and these 680 pages is the script of one of them. The great majority of the 279 clauses are exactly the type of red tape and regulation any Conservative government should be seeking to eliminate, not enact.

A sane government would work out first how to achieve the energy goals (the strategic plan) and only then add the legislation necessary to bring it about. Trying to do it the other way about pretty much guarantees the current confusion. This is Big Government interfering in what a free market should mostly do. An energy strategic plan requires just six main components: the three principle sources of post 2050 electricity (renewables, nuclear and fossil fuels with carbon capture and storage (CCS)), other energy sources where electricity is not viable, e.g. sustainable aviation fuel, transmission from generation to users, and storage of surplus renewables to help fill deficits gaps. The Energy Select Committee is running two Inquiries into exactly these matters. As the Department for Energy Security and Net Zero (DESNZ) does not seem to know the answers, perhaps it should await the findings of these Inquiries.

Government should next consider how much of the necessary action should be left with the private sector, usually better value for money, and how much requires new legislation, not just to secure the energy but to do so as cheaply as possible. Older readers will recall that electricity was supposedly privatised with that in mind. Government may wish, for example, for cornflakes be available for our breakfasts at competitive prices but it does not need to legislate, beyond ensuring that the market remains competitive.

Renewables, per se, are not mentioned in the Bill but off-shore wind is covered by clauses 245 – 269 mostly addressing environmental effects and decision devolution. No mention either of this being Great Britain’s primary source of electricity by 2050. That contrasts with no offshore contracts being sought in the latest bidding round. Capacity now is 29GW and needs to be 50GW by 2050 according to government and with total electricity requirement at the more likely 209GW, wind capacity will probably need to be closer to 100GW by 2050.

Offshore wind may or may not be the cheapest source of electricity but, round the world, those markets with the highest share of renewables also have is the highest consumer prices. This is due to government interference in the market and this Energy Bill is a classic example.

On the other hand, the Energy Bill incentivises onshore wind through community energy organisations – 89 so far- but the numbers are growing fast and would grow faster still with user discounts for accepting adjacent onshore turbines. One onshore turbine services, on average, 6,000 households. The Bill however (clauses 272 and 273) requires every participating community group to be more than 150,000 households but using less than500MW supply. The Hornsea offshore wind farm was expected to generate 1.3GW of green energy from 165 8MW wind turbines, enough to supply 1.4 million homes. Or about1,000 homes per MW or about 8,000 wind turbines for 150,000 homes or 300,000 homes for a single 300MW small modular reactor. SMRs are not even mentioned in this Bill. Onshore wind is a thoroughly good thing, especially when it is incentivised locally as government now proposes, but the same logic applies to SMRs.

Extraordinarily, though Explanatory Note 90 claims “Nuclear power has an important role to play in domestic energy security and in reducing greenhouse gas emissions to net zero in 2050” the Bill says almost nothing about it. There are a few references to sites, the constabulary, setting up Great British Nuclear and other administrative matters but nothing about the 56GW, or so, we will need to back up renewables. For example, most countries are having to finance the first of a kind (FOAK) SMRs centrally and that will require Parliamentary approval. Our need for SMRs, maybe up to 200, was announced by Prime Minister Johnson three years ago and yet it is now considering ordering just two in the next six years.

Yet the claim is “In order for the UK to reach net zero by 2050 and achieve independence from imported fossil fuels the Government will fully decarbonise the electricity system by 2035, subject to security of supply.” Fat chance! Alongside this, the Government expects electricity demand to double by 2050, when increasing by seven times is more likely.

While the UK government has been asleep at the nuclear wheel, the USA and Eastern Europe have been pushing ahead.

The third of the main power sources, fossil fuels, will be essential for dunkelflaute days when the wind don’t blow and the sun don’t shine but requires CCS- the costs and feasibility of which are entirely unproven at industrial scale. Government should step away from this problem and leave it with the private sector. Those whose generate carbon, post 2050, should pick up the tab for getting rid of it and recover the costs through the pricing of their electricity.

On transmission, the Bill seeks to transfer responsibility to the Independent System Operator and Planner (ISOP), a new public corporation, but without any indication of how it will work, what it will cost and how that huge expenditure will save money, as it claims, for consumers. Why will it be shunting gas around the all-electrified country? The Bill discusses the monopolised regional transmission system, recognises that regulation has been ineffective in bringing competition about but gives up on how to deal with it.

Finally, hydrogen will indeed be useful as storage to bridge renewables surpluses to deficits but the “hydrogen grid” proposed to take the place of natural gas is nonsense. So what is to do? We have an immense Bill, the product of three year’s work, just about to receive the Royal Assent but it is mostly a heap of junk. DESNZ should put together, by end November, the long overdue Energy Strategic Plan using submissions to the Select Committee Inquiries as needs be. A new, slimline Bill, based on that and containing just the essential new legislation, should be made available by the end of January 2024.