Deus Ex Macchiato

No, not other clearing post: this is about forms of transport.

Consider the data to the right about the composition of traffic at a central London junction in peak hours from Cyclists in the City. This seems to be a reasonably even balance until you consider the space occupied by each form of traffic vs. the number of people carried. Using reasonably estimates of bus and car occupancy, we can work out the impact, in terms of road space saved per person, of banning each form of trafffic.

The results of that are pretty unequivocal. If we need more space on the roads in central London, ban HGVs or cars or both. And boy, do we need more space. After a mild improvement in the early days of the congestion charge, traffic speeds are roughly the same as a chicken. We need to reduce traffic and, objectively, the best way to do this is to remove cars and lorries from the road.

Interestingly the Dutch have realised this. Amsterdam’s new traffic plan proposes segregated routes for bicycles (green lines), buses/trams (blue), and cars (red). The map illustrates the plan: in the yellow area, pedestrians have priority; over that area and much of the rest, different modes of transport are segregated, with motorists not being allowed near the centre. This is a much fairer, safer, and more environmentally friendly solution than shared roads.

Now London’s problem is bigger than Amsterdam’s (not just in congestion terms, bad though that is: air quality is a bigger issue here), so we will have to be more radical. Here’s what I suggest:

Posted in: Transport Policy by David /
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I’ve been writing a complicated piece of code over the weekend. It needs to read an excel spreadsheet, so I started in Visual Basic, a choice I am now regretting. The problem isn’t easy, there’s quite a bit of data, and the algorithm is naturally expressed in a way that’s quite inefficient to implement without pointers*. So… it has been a headache. I have some results now, which seem likely to be right, and I’ll spend quite a bit of tomorrow trying various pathological cases. Still, I might have messed up and if I am really unlucky someone else will spot this.

All of this gives me profound sympathy for the civil servants who messed up the analysis on the West Coast main line franchise analysis. It’s really easy to make an error in a complex spreadsheet. For me, there are two main points here. The first is best put by Not the treasury view:

Ministers had months in the run up to the franchise award in August, and two months since, to require DFT [Department for Transport] senior management to explain to them – not with pages of numbers, but with convincing analysis – why this view, now apparently vindicated, was wrong. No remotely competent Minister would accept the explanation “That’s what the model says” on an issue like this. So either they didn’t ask the right questions, or they were incapable of understanding that they were getting the wrong answers. Neither interpretation reflects well.

I guess it would be too much to expect a minister to behave honourably during his opponent’s party conference and a week before his own.

The second and more important point is that this farrago would not have happened without privatisation. Privatisation doesn’t work not just because it provides returns to shareholders when things go well and little risk when things go badly – but also because it is impossible to write a contract that adequately ties down what it means to run a railway well for fifteen years, and to evaluate bids on that contract accurately. Sure, you can have a go at writing a model which helps you to understand, if you are lucky, what the bidders are proposing. But what you can’t do is think of every contingency. If you want to model a railway, run one: the real thing is the only reliable model. So why not close the evaluating contracts department at the DFT, renationalise the railways, and put the resources you freed up to work actually running the darn things? It would be simpler than what they are trying to do at the moment.

*Yes, I know you can fake it with classes. Or with the Win API. No, that doesn’t help much.

Posted in: PFI, Politics, Transport Policy by David /
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My heart fell when I read that the government is to revisit the idea of introducing security scanners at railway stations. Let’s bring all the romance and convenience of airport security to the railways. After all, we got things so wrong in the past – look at how unappealing this is*

*I think I might have accidentally shaken too much snark over this post. Ah well…

Posted in: Photography, Transport Policy by David /
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Picture credit: a sensible comment on Boris Johnson’s cycle policy from Andy.

Jonathan Hopkin gives us news of an unexpected but very welcome campaign from the Times to make London cycling safer. (The Guardian has been behind this for some time.)

I joined the London cycling campaign in 1993, and over that period more people have taken up cycling in the city and it has got somewhat safer. We are at a critical moment now, though. We have a nominally cycle friendly major who isn’t nearly as cycle friendly as he seems and a positively cycle hostile transport authority. We have hire bikes and cycle highways, not that either of these are an unequivocal good for the cyclist. Small measures, danger, and poor infrastructure aren’t going to help London get from current levels of cycling use (2% of journeys) to where we could and should be (the 20-30% typical of continental Europe).

The safety issue has to be addressed first. The most significant cause of cycling fatalities in London is lorries, specifically cyclists going past them on the left. My modest proposal therefore is to ban all private vehicles over 4 tonnes in London between 7am and 11pm.

Given that Transport for London cannot be trusted to design junctions which are not cyclist deathtraps, the mayor needs a cycling commissioner who has the power to over-rule TfL, and this person should actually be a cyclist.

The penalties for driving without due care and attention – a pretty standard charge against those few motorists who are prosecuted with anything at all when they hit a cyclist – are far too low. If I hit a cyclist with a baseball bat, I would be charged with at least common assault and could well go to jail for six months. If I cause the same injury with a car, I might well get away with a few points off my licence. This suggests to me that there is a strong case for dramatically increasing the penalties for motoring offenses.

Finally, cars blocking cycle paths are a major issue. The fines for this should be comparable to those for parking on a red route; that alone would persuade the boroughs to police it properly (if they were allowed to keep a share of the fine, anyway).

Posted in: Transport Policy by David /
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From Slate:

It was a bad day for intra-metropolitan area commercial aviation. Jet Blue flight No. 405—the flight that was supposed to help Angelenos beat the chaos resulting from the closure of the 405 freeway—was bested not only by the @wolfpackhustle A team (elite cyclists who had pledged to follow traffic rules), but by @garyridesbikes, a late entrant promising to take only public transit and walk…

Yep, on a 40 mile journey across a city a bike is faster than a plane.

Posted in: Transport Policy by David /
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The first commercial transatlantic air services date from around 1940, so this service has been around for about seventy years. Based on a recent experience, I think that the peak for air travel was in the late 1990s and we are now on the downswing.

Ten years ago Concorde was still flying, Virgin Atlantic was trying very hard to impress with their new Upper Class, and BA had not yet turned into a travesty of its former self. Airports too were less soul destroying: the war on fluids only began with Richard Reed, and security was not then nearly as time consuming or invasive as it is today.

The time that air travel takes today is also another good indicator that we are past the peak. The timeline for my journey was roughly

• 7.30am, leave my flat in East London
• 9am, arrive Heathrow the recommended 3 hours before departure
• Spend more than an hour queueing for checking in, queueing for security and queueing for extra security at the gate
• 12pm, scheduled departure
• 1pm, actual departure, due to delays in boarding thanks to extra security
• 8pm, land in Boston
• 8.30pm, clear US immigration and collect bag. Queue for taxi
• 9pm, arrive at destination

14 hours to travel 3,300 miles equates to 235 miles an hour. That is roughly the same speed as the latest generation of TGVs. And at least you can work on a train. If transatlantic air travel in 2010 cannot go faster than a high speed train, then it is clearly in decline. The situation is unlikely to improve, especially given the amount of carbon airliners spew out. We are past peak air.

Posted in: Transport Policy by David /
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For once not the banks. Rather I am picking up an interesting article via Infectious Greed on properties of the Honda Accord through time. Who would have guessed that it was most economical in 1985? Or that it has increased in weight by nearly 50% since 1980?

There are too many cars, they use too many resources, and there are too few credible alternatives to them. The Accord’s trajectory is just a minor illustration of quite how screwed up we have allowed transport to become.

Posted in: Transport Policy by David /
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Ken’s right. Can we now, please, at least five years too late, renationalise the railways. After the National Express disaster, it is time to acknowledge that PFI is bollocks and that private franchisees for public infrastructure amounts to nothing more than a grant from the state to shareholders in the good times and socialised loss in the bad ones. Sorry to the crude language and bald assertions, but this waste of money by the ideologically challenged really annoys me.

Update. Felix Salmon has a fascinating piece on the costs of driving in cities here, and how sensible congestion charging combined with fare revisions can make everyone’s travel more efficient. While I am not convinced that fixed pricing is the right approach – letting investment bankers who can afford it drive while less highly waged workers are forced onto the subway – there are clearly some very interesting results in the work Felix describes. The right approach would be a variable tarif based on income, so that the congestion charge depends on how much grief you cause other people, how much carbon you emit, and how much you earn, but that is politically impossible.

Posted in: Photography, Transport Policy by David /
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An article by David Mitchell from Sunday’s Observer is so full of sense, and so nicely written that I want to quote quite of lot of it. It concerns the pathetic whingeing of the car lobby that they are sometimes caught breaking the law and even *gasp* punished for it (although not very much).

Apparently, the criminals who break the speed limit don’t like the punishments they receive. Then again, the criminals who break the murder laws don’t particularly like the punishments they receive either, but they don’t form quite such a strident lobby…

The fact that many more people speed than murder does not make it any less a crime, even though it is a lesser crime. And the difference in the magnitude of the offences is reflected by the huge difference in their punishments. So that doesn’t excuse the grumbling letters to Top Gear magazine either…

Almost everyone knows when they’re speeding and almost everyone speeds. Maybe this massed recalcitrance means we should change the law, allow people to drive as fast as they like and accept a few thousand more road deaths? …

Some drivers seem to have a gut feeling that racing around attached to a big internal combustion engine, going wherever they want, as quickly as they deem convenient, is some of sort of natural right or ancient British liberty. Well it’s not. It may feel natural but so does smoking or an expensive boob job. It’s recent, unnatural and unhealthy and the world would probably be a better place if no one had ever done it. Soon they may have to stop.

Then in today’s paper, in a nice segue, we find:

Thousands of taxis, buses and council vehicles could be fitted with devices that prevent them from exceeding the speed limit.

Given that a driver’s willingness to obey the law seems in inverse proportion to the cost of their car, I would suggest phasing in speed limiters immediately on all cars selling for more than £20,000. Sports cars, the worst offenders, would have to have speed limiters fitted at their MOTs. I am sure that this would do more to reduce road deaths than any amount of traffic calming or improvements in crumple zones. Add in genuine enforcement of the Highway Code by real policeman on the road, and we would have a revolution in road safety.

Posted in: Transport Policy by David /
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Over the last few days I have cycled over sixty miles (for pleasure – business is not going that badly). Somewhere around mile 50, it occurred to me just how amazing public transport is. I can get further in an hour by train than I can cycle comfortably in a day under my own steam, and it costs me much less than I can earn in an hour. Imagine what getting around would be like without the kind of multiplication of effort that railways provide – if we all had to provide our own private infrastructure. The state really did do some things well, and even now, in these denuded times, those advantages have not entirely disappeared.

Posted in: Transport Policy by David /
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I don’t always agree with Michael Meacher, but this letter in the Guardian is so good, and hits the tone which is lacking in both the government and the official opposition so well, that I am going to quote it nearly in full:

We urgently need … an alternative to the prevailing Tory-New Labour orthodoxy. I would propose three central strands. It should seek to restore a social democracy which has been ripped apart by greed and an out-of-control inequality epitomised by the banks’ bonus culture. We need a solidarity tax levied on the top 5% of incomes and on the so-called non-domiciled super-rich – who use Britain but don’t pay into it – with the proceeds hypothecated to end child and pensioner poverty.

We need to redraw the boundaries between the state and the market. The market fundamentalism of the last 30 years is well and truly busted. But ending privatisation, deregulation and PFI is not enough. We need a new perspective for the state, not – as now – passive facilitator and rescuer of last resort, but actively interventionist where the public interest requires it, and strong promoter of the key social values of accountability, equity and real equality of opportunity. A robust market has an essential role, but so does the state, not only in health and education (where private markets do not belong), but in energy (a key to national security), housing (neglect of which is the biggest repository of social misery), transport (for a fully co-ordinated system), and banking (to prevent another collapse and provide reliable housing for low-income households).

We need a state which is less an intrusive snooper and more the guardian of our civil liberties. And we need a major redistribution of power: away from a top-down state to disenfranchised citizens; away from top-down industrial relations to a fair and constructive role for trade unions: and away from a top-down politics to a much more genuinely participative system of governing.

Posted in: PFI, Taxation, Transport Policy by David /
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From the FT:

BAA, the airports operator, should be broken up and forced to sell three of its seven UK airports, Gatwick, Stansted and Edinburgh, the competition watchdog said on Wednesday.

God knows the lot of the blase international traveller is a hard one these days, so any smidgeon of comfort is welcome.

Posted in: Transport Policy by David /
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Because then I will have one fewer dreadful, customer-unfriendly, delay-ridden airline to ignore when booking travel. The rational for loathing British Iberian is easy: it saves time.

Posted in: Transport Policy by David /
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When the new Eurostar terminal at St. Pancras opened, it was to almost universal praise. See for instance here for the Guardian’s take or here for the BBC. As the latter puts it:

The brick and stonework was near-perfect. The soaring roof was “detailed delicately” … [it is a] World-beating roof

And yes, it is a lovely building, and yes, the roof is incredible, a soaring arch of glass that lifts the spirit. There’s only one problem. You can’t actually see it most of the time because the passenger is sunk in a tunnel of shops. Rather than let people enjoy the extraordinary Victorian space, the architect has ensured that what you actually experience is just another retail environment. It is a fantastic building ruined by an excrudescence of high street squalor.

Stansted is exactly the same. The building is one of Norman Foster’s finest. It could be a nice place to use, with clear views all the way from check in to the runways, again with a high roof that lets lots of light in. Instead it is a hell of closely packed shops and restaurants, Foster’s vision having been completely subordinated to the need to get as many square feet of selling in as possible. BAA are not unique in their ability to ruin the traveller’s day but they are one of the leading practitioners of this all-too-common art.

The Victorians realised something that seems to be lost today: that if you make grand public spaces that are a pleasure to use, then you add joy to peoples’ days. If you respect the general populace and provide a context that is fundamentally civil, then many of them, at least, will be civilised. But if you treat them as consumers whose only duty is to spend, then they will behave however they want. Is it too much to hope that one day St. Pancras or Stansted will push the shops into the background and let the building do its job?

Posted in: Transport Policy by David /
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Finally the tide seems to be turning. Bernanke is talking about the need for central bankers to be mindful of asset price bubbles. Darling is reprioritising spending to produce a classic Keynesian stimulus. But isn’t it bizarre that we now have nationalised banks and privatised railways? If ever there was one industry that the state should control – must control – it is transport. (The revelation on Saturday that the reason Virgin trains are so crowded is nothing more than revenue optimisation only makes the case even more clear.) Now Alistair has (reluctantly and a little tardily) got the nationalisation bug, perhaps he could finally undo the evils of his predecessors and renationalise the tube and the railways. Let’s hear no more about internal markets in the health service or in education. Now is the time for the state to spend for the sake of us all.

Posted in: Economic Theory, Transport Policy by David /
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Classical economics, curse its worm-infested body, teaches us that the market will generate innovations which meet demand. Leaving aside for a moment the obvious problem with this – that there is no account of how fast such creativity will happen – my recent travels have convinced me that there is a massive opportunity at the moment for operating companies to make more money from transport. I, and I am sure many others, would pay more for a ticket in a guaranteed child free carriage on a train or cabin on a plane. After all, if I took a tuba with me on my journey, and attempted to learn how to play for the entire trip, I would quickly be silenced. But the same volume of noise can easily be created by one child. First class is no guaranteed of peace as I found out on one memorable trip to New York: the front of a 747 is not the best location for a creche. So, please Mr. Planeman, Mr. Trainman, can I please pay more for a child free trip? I rather suspect the answer will be no, not because the scheme wouldn’t work, but because of the opprobrium some of the breeders would foist upon anyone who dared to suggest their dearest’s screams were unwelcome: Adam Smith is no match for the pram wielding classes.

Posted in: Transport Policy by David /
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The FT reports that UK Competition Commission is considering forcing BAA to give up at least one of its London airports. Given that this government will never agree to the right step – nationalising BAA – I suppose that is a start.

Update. So the competition commission is demanding that BAA sell not one but two London airports. Excellent. The Daily Mash puts it best:

SATAN, the Prince of Darkness, is to launch an appeal after he was ordered to sell Heathrow.

The Competition Commission ruling is a major setback to Beelzebub’s plan to expand his kingdom of the damned via the world’s third busiest airport. He said last night… “Our latest customer survey showed more than 90% would rather be roasted on a spit and have the flesh ripped from their bones by a horde of fire-breathing, shit-covered demons than endure another minute in one of Heathrow’s check-in queues.

Posted in: Transport Policy by David /
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Labour MPs are, of course, far more concerned for themselves than either the governance of the country or their party. Here’s just some of the utter nonsense, the self-serving anti democratic idiocy they and their leaders have been up to recently.

• Spending £3bn on new nuclear warheads despite not providing British troops in a war zone with the right body armour and posturing about Iran’s nuclear ambitions.
• Umming and ahing over vehicle excise duty despite it being clearly sensible to charge more for the most polluting vehicles. And while we are on carbon issues, why doesn’t aircraft fuel attact any duty at all?
• Utterly failing to reform the tax system to make it fairer and to prevent the rampant abuses of both corporates and wealthy individuals.
• Continuing to pursue the disaster that is PFI despite overwhelming evidence that there is little risk transfer to the private sector and excessive cost. Follow the New Zealand example instead and renationalise.
• Creating massive uncertain long dated liabilities by allowing new nuclear power stations to be built. Oh, and letting the company concerned, with a guarantee on clean up costs of course, be sold to the French.
• Failing to stop the free markets are the best thing ever for everything brigade from further ruining our public services. Damn it I’m a derivatives specialist and I’m far less keen on the power of the markets than Alan Milburn is. Maybe that’s because I actually know something about them. And as for Hazel ‘sum of all fears’ Blears – heaven defend us against her kind of ‘reform’.
• Not dealing with the utter mess that is MP’s expenses. Stop spending my money on Lembit Opik. Or a ridiculously grandiose and over budget Olympics.
• Enacted the biggest snooping law in British history.

Now, I admit it, I cheered for Tony in 1997. I drank a lot of wine and ate pasta and stayed up until Portillo was gone. But now, please, can I have a Labour party back that is actually socialist, or at least has some vague aspirations other than leaving the rich alone, lining their own pockets, and trying to find some tiny chink of public life that has not yet been infected by Thatcherite free market dogma.

Posted in: Nuclear Power, PFI, Political Metrics, Transport Policy by David /
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I had to travel via Heathrow today, so I went on the airport website to check the state of the public transport links to Terminal 5. It said `Service not available.’ And you can’t fault a short and wholly accurate summary like that. Please, Gordo, would you nationalise BAA — or shall I just give up on flying?

Posted in: Transport Policy by David /
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A surprisingly not ill-informed and annoying article by George Monbiot (isn’t it nice when someone who is usually foolish says something sensible?) considers the good things about $140 oil. One of them is that it is stopping a lot of unsustainable fishing:

No east Asian government was prepared to conserve the stocks of tuna; now one-third of the tuna boats in Japan, China, Taiwan and South Korea will stay in dock for the next few months because they can’t afford to sail. The unsustainable quotas set on the US Pacific seaboard won’t be met this year, because the price of oil is rising faster than the price of fish. The indefinite strike called by Spanish fishermen is the best news European fisheries have had for years. Beam trawlermen – who trash the seafloor and scoop up a massive bycatch of unwanted species – warn that their industry could collapse within a year. Hurray to that too.

Let me add to that. Hurray if the oil price ruins the road transport industry. We should be sending much more cargo by rail and river anyway. Hurray if it causes people to drive less and to buy smaller and less polluting cars. Not only should Gordon go ahead with higher vehicle duty on the most polluting cars, he should extend that idea to lorries, planes, and indeed every other source of pollution. The only way to realign the economy to the post carbon age is to get the incentives right. $140 oil helps, but $200 or $250 oil would be even better.

Update. The high oil price appears to be working in Washington. According to a Washington Metro press release:

Twenty of Metrorail’s top 25 highest weekday ridership days have occurred since April of this year.

Posted in: Decision Making, Political Metrics, Transport Policy by David /
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If you are ever stuck in the noisy, dirty hell that is Gatwick North and are faced with a queue of 50 people just to buy a cup of coffee, make your way towards Gates 101-114. You will ascend over a spectacular bridge, then find yourself in a quieter waiting area with a much less busy cafe. Of course you might well have to make your way back when it is time to go to your gate, but waiting in this satelite is a good deal less nasty than in shopping centre that is the main hall, at least until the government has the balls to renationalise BAA.

Posted in: Photography, Transport Policy by David /
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God knows there is enough to tear your hair out for and scream about at the moment. But this made me laugh. From our illustrious Foreign Secretary David Miliband’s blog, via the PM programme:

One foreign minister I met at the informal meeting in Slovenia over the weekend has fallen victim to the Terminal 5 saga. He arrived merely to transit, but his bags are nowhere to be seen and it was whispered that it might take weeks. He asked me to pass on a message to BA/BAA: for goodness sake get your act together.

Richard Branson meanwhile must be laughing really quite hard.

Posted in: Transport Policy by David /
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Heathrow, like Gatwick and Stanstead, is operated by BAA. Despite the positive impression created by the new Terminal 5, most of Heathrow is in a terrible state. It’s old. It has little or no natural light. It’s cramped. And it is stuffed full of shops and nasty food outlets to keep the waiting masses spending. Compared with many large airports – Hong Kong springs immediately to mind – it’s embarrassing. Worse, the squalor and massive misery generation of Heathrow was entirely avoidable.

Stock companies have one aim: generating shareholder value. They have a legal obligation to work to that one end. They explicitly shouldn’t care about national pride, client unhappiness, or holding back the broader economy if it gets in the way of making more money for shareholders. Hence not only can you not blame BAA for Heathrow, you should expect Heathrow to be as it is given it is privately owned and lightly regulated. BAA are doing what they are supposed to do: making money for their owners, Ferrovial. (Or in BAA’s case, losing rather less money than they otherwise would.) The fact that this does not serve the countries’ best interests, nor passengers, nor airlines, is irrelevant.

This is why private ownership of public infrastructure is inherently problematic. And why we won’t be getting an airport anywhere near as good as Hong Kong’s any time soon. Now wish me well – I have to use Heathrow again on Friday.

Update. It seems BAA can’t even manage to run a brand new terminal properly. The BBC reports:

Cancelled flights and baggage delays have blighted the opening day of Heathrow’s new £4.3bn Terminal 5.

British Airways, which has sole use of the terminal, was forced to cancel 34 flights by 1400 GMT due to “teething problems” encountered in the morning.

And it carried on. On Sunday we heard from the Guardian:

British Airways warned last night that the disruption that has plagued Heathrow’s Terminal Five could run through this week as it emerged that 15,000 bags have yet to be returned to their owners. This figure is three times higher than BA had originally admitted to. Following three days of cancellations which saw more than 150 flights grounded and thousands of passengers disrupted, the airline, which has exclusive use of T5, said that a further 37 flights would not take off today.

Posted in: PFI, Transport Policy by David /
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One of the major motivations for this blog was to understand how the rules of a given game determine the results, and how participants can better prepare themselves for adverse outcomes by understanding the class of behaviours the rules encourage. Subprime for instance was fundamentally caused by mis-aligned incentive structures.

A good example of a total failure to understand the rules comes from Porsche. They are threatening a legal challenge to London mayor Ken Livingstone’s plans to demand a £25 congestion charge from drivers of high powered sports cars and 4x4s entering the capital. The congestion charge has been a huge success. Global warming is a major political issue which is not going away. If there is one thing Porsche could do to appear regressive and the choice of the selfish bore, suing Ken could well top the list. It looks to me like a PR gaffe equivalent to Ratner’s ‘total crap’.

If you want a fast car which won’t make you appear egotistical, self-serving and totally without regard for others, perhaps you could try a Ferrari.

Or a Jag, as in this gorgeous, pre-Ford period XJ220:

Or even (if you must, given how terrible the suspension is as well as how polluting they are) a vintage Corvette:

Just don’t buy a Porsche.

Update. Strangely enough, Matthew Lynn who I always thought of as a triffle reactionary, agrees with me.

Posted in: Rules, Transport Policy by David /
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The key question with any private sector involvement in public projects is whether the extra return shareholders rightly demand is compensated by increases in efficiency. Often the answer to that is no, which is why PFI makes so little sense – especially when you remember that there is rather little risk transfer to the private sector in many PFI projects. The latest rail debacle over the west coast main line is certainly evidence that the current mess of operating companies, National Rail, and private infrastructure contractors makes no sense — our rail policy is fatally flawed. Let’s renationalise the lot before our railway turns into a historical relic.

Posted in: PFI, Transport Policy by David /
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Will Hutton might be less than 100% sound on the capital markets, but he is often excellent on public policy and infrastructure and he has an excellent article in yesterday’s Guardian on the recent Transport White Paper:

There isn’t an adult in Britain who does not believe that our transport system is overcrowded, unreliable and unfit for purpose…

Last week’s white paper on the future of rail maintains the British tradition. There is to be tinkering at the margins … but the Department of Transport has shrunk from any serious ambition to scale up British capacity.

The heart of the problem is the Treasury’s attitude towards public debt and the way it calculates the payback from public infrastructure projects… its approach to infrastructure spending remains in the dark ages – an outlier of 19th-century thinking.

I might quibble with ’19th century thinking’ – in many ways the Victorians understood the importance of infrastructure spending better than we do now – but otherwise Hutton is spot on. By using a metric for assessing cost/benefit analysis that is hugely skewed (and probably a hang-over from Thatcherite thinking rather than the 19th century), the Treasury is failing the country, holding back economic development and producing more misery. The requirements of tackling climate change and supporting growth require congestion charging over all urban areas, massively increased spending on rail, and a widespread application of the polluter pays principle to transport (which means higher taxes for SUVs and air travel and subsidies to bicycles and buses).

Posted in: Cost Benefit Analysis, Transport Policy by David /
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The collapse of Metronet and the attendant comment suggests it might be worth saying something about risks in equity and debt finance.

The classic model of a company is that it can raise money in two ways: by issueing shares, or by borrowing money. The best thing that can happen to a lender is that they get paid back: there is no upside to making a loan other than receiving your interest. Therefore lenders demand that they get paid before shareholders – if a company has funds, it must pay its creditors first, and only after that do shareholders receive a dividend. Moreover if a company cannot pay its debts, debt holders can typically seize the company and sell or liquidate it to get (some of) what they are owed.

In exchange for taking the risk that they might not receive anything, shareholders collectively own the company and so receive anything that is left after debt holders have been paid. This is sometimes called a residual interest: it is potentially high risk and high reward position, since if the company’s earnings can’t support its debt, they might get nothing; but if earnings are high, then there is a lot left for them after interest costs.

One key capitalist idea, then, is that shareholders take risk in exchange for potentially big rewards. If you don’t like the idea that you might lose everything, don’t buy equity.

Now consider a company in a long term PFI contract such as Metronet. The rewards are potentially very high, as the profits of someone like Amey indicate. But so are the risks, as we see with Metronet or the late and unlamented Railtrack. Is this a good deal for the tax payer?

There are two arguments for PFI: a specious one; and a sensible one. The specious one is that PFI gets infrastructure built without the government having to raise money. But that is just accounting trickery: the tax payer pays eventually, after all. A PFI contract is an ongoing liability just as a bond issued by the government to pay for maintaining the underground without a PFI contract would be.

A private firm doing government work will demand an extra return over and above what they think it will cost in order to pay their shareholders: they are right to do that as their shareholders are taking risk. So on average PFI contracts are more expensive than their fair cost. Are they still the best that is available? That depends on whether the PFI contractor can get the job done and make their profit for less than it would cost the government to do the job themselves. There is a natural assumption that private enterprise is more efficient than government – that may even be true – but is it so efficient it makes up for the extra profit shareholders demand?

Here’s a view from the capital of London financing, Canary Wharf, to end.

Posted in: Accounting, PFI, Transport Policy by David /
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Private equity executives are “paying less tax than a cleaning lady”.

A study of 25,000 travellers shows that only 40% believe they are getting good value for money from the railway system. (Maybe you would be better off going by barge?)

Britain’s energy policy fails to stack up, says expert panel.

Just possibly, might it be that the reason the UK has crumbling infrastructure and a lack of a credible energy policy is that a lot of people, private equity included, are not being charged enough tax to pay for it?

Posted in: Taxation, Transport Policy by David /
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There is a picture in the new Tate How We Are: Photographing Britain show of bear baiting in an English village, dating from 1910. It looks much older: we can hardly believe less than a hundred years ago that was going on in England.

Here’s something that will seem equally odd soon. It is a picture of Sunday’s Monaco Grand Prix in Monte Carlo.
I predict that in thirty or forty years it will be hard to believe that a ‘sport’ which celebrates the egregious consumption of natural resources (and incidentally doesn’t seem to me to be very sporting) will seem as out of date as bear baiting. By then, though, Monte Carlo won’t be the same kind of place: rising sea levels will have turned a lot of the current centre into a diver’s paradise. Underwater roulette anyone?

Let me end with a uncharacteristically sensible (if rather purple) piece of prose from George Monbiot today:

Motorised transport is a form of time travel. We mine the compressed time of other eras – the infinitesimal rain of plankton on the ocean floor, the settlement of trees in anoxic swamps – and use it to accelerate through our own. Every tank of fuel contains thousands of years of accretions. Our future depends on the expectation that the past will never be exhausted.

Posted in: Sport, Transport Policy by David /
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So Ken is to impose a £200 a day charge on high pollution lorries in London? Just when you are really starting to dislike him again he comes up with an excellent idea like this. Well done Livingstone – unlike that spineless and strategy free road lobby toady Ladyman, he is actually doing something to improve matters.

Posted in: Transport Policy by David /
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