Category Archives: Transport

The Heathrow decision is a menu without the prices

Business in this age of market fundamentalism is cock-a-hoop with the Davies report decision to recommend Heathrow.   They would be, wouldn’t they, since the report has focused largely on the supposed economic benefits while claiming that all the toxic underside of the decision can be ‘managed’.   However the feasibility of the latter needs to be subject to a realistic appraisal, not just assumed.   It is said that night flights will be banned between 11.30pm and 6am, but ‘respite periods’ when some areas don’t suffer overhead noise will be reduced from half the working day to just a third.   The report allows for a huge 54% increase in passenger numbers (more than a quarter of a million a year), but claims this is compatible with a cap on aviation emissions just above current levels – in fact a wing and a prayer that is dependent on big increases in cleaner engines which may or may not be delivered.
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Huge trade deficit in car manufacture shows risks of privatisation of major industries

The Tories have always boasted that privatisation of major industries has been good for the economy and good for Britain.   A rain-check on the history of  Thatcher’s mass programme of privatisation now suggests otherwise.   Who thinks the privatisation of energy, or of water, or of telecoms (or of the Post Office) has been a roaring success either for the economy or for consumers, as opposed to an opportunity for exploitation and a rip-off for customers?   Much less mentioned, but equally if not more significant, is what has happened to the privatised car industry.   It still suffers from a massive trade deficit, with £48bn of vehicles and parts imported last year – that is nearly half of Britain’s net manufacturing trade deficit – with profits and control lost abroad probably for ever.   A worse deal than that is difficult to imagine.
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Ebola a much-needed wake up call for the West

The President of the World Bank, Jim Kim, got it right when he said last night of the international community: “It’s late, really late……We were tested by Ebola and we failed.   We failed miserably in our response……..Every developed country should be prepared to send trained medical staff to West Africa………We don’t need to stop all travel from these countries.   It’s going to be impossible to stop people.   The way to stop the flow the patients from these countries getting to the rest of the world is to have programmes that will treat people (in their home countries) and increase survival dramatically.   It’s possible”.   But it isn’t nearly happening.   The WHO reports already 3,900 deaths in West Africa from Ebola, though with no sign that the epidemic was being brought under control.
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Why is Labour now fighting shy of nationalisation?

It is bizarre that the Labour Party, or at least Ed Balls, is now tying himself up in such contortions to avoid renationalisation of the railways at any cost when the polls constantly show 70-80% of the electorate, which must include a very large number of Tories, is demanding just that.   Is the Labour Party, or at least Ed Balls, ashamed of public ownership when a great majority of the voters want it and when all the facts on the ground make clear it’s the right and sensible objective?   To suggest that when a rail franchise falls vacant, it should be re-auctioned in a competition between the State and the private sector is frankly barmy: why require the State to bid for a section of the railway which at that stage it already owns?   Quite apart from the fact that it’s unnecessary, costly and bureaucratic, it still leaves the UK rail system hopelessly fragmented, which as the McNulty Report recognised is its main problem.
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HS2 still in the air

Despite what might seem like a crushing Commons majority of 450-50 in the Commons last night in favour of HS2, the whole project is very far from settled.   There are good reasons for this.   One is that the Commons, like a local planning authority, is faced with a single choice – take it or leave it – rather than being presented with alternative choices designed to meet the same objective, and then being allowed after appropriate detailed examination to make a choice between them.   Another is that this is the fifth attempt by the government to launch this project, the first four having faded (based on higher speed and faster journey times, or regeneration of the north of England, among others) through failure to convince, and this fifth attempt emphasising the need to improve capacity is still seen by many as unconvincing.   The third is that £50.1bn, the estimated cost of the project (and these things have an unfailing knack to soar higher once approval has been granted), is a colossal sum of money, equal to half the current budget deficit which is currently crippling the UK economy; given the opportunity cost of capital, is there really no other better way of spending such an enormous sum equal to 3% of our entire GDP?
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Boris Island at £50bn+ is a non-starter, but is he wrong about hubs too?

The whole argument about another airport runway for London is based on the idea that the future lies with big national hubs, and of course Heathrow argues that on that basis the extra airport runway should obviously be provided for Heathrow.   They argue that 70% of all long-haul services to and from Britain go to Heathrow, and that is so important for airlines that they are prepared to pay £25-30m for take-off and landing slots there.   Also the government is already greatly helping Heathrow with important new transport links: Crossrail will have a stop there, and a spur may be built from the mooted HS2 to link up with Heathrow.   But is the reinforcement of the existing hub inevitable, and indeed is it necessary or desirable?

A number of recent trends undermine the almost automatic assumption about hub airports in the current debate.   The rise of low-cost airlines, which tend to operate out of cheaper airports, are increasingly challenging the short-haul ‘full-service’ model.   Cheap upstarts are beginning to upstage the EU and US legacy carriers that control the hubs.   Thus by last year three of these low-cost airlines – easyJet, Ryanair and Flybe – had increased their shar of passengers entering or leaving Britain to 35% compared with just 10% in 2000.   Moreover business travellers accounted for 20% of all passengers using Gatwick, Manchester and Birmingham, while those going through Heathrow (which has no low-cost carriers) fell from 37% in 2002 to just 30% now.   Part of the reason for this is that more people are ‘self-connecting’ rather than booking a transfer flight.   All this reduces the need for a formal hub set-up.
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Heathrow expansion is wrong on all counts

The commission headed by Sir Howard Davies, an ex-President of the CBI, has turned out a predictable waste of money.   Governments usually set up Commissions of Inquiry, not to solicit seeds of wisdom, but to try to resolve a political impasse.   The Davies Commission was one such, it has failed in its purpose, and said almost nothing we didn’t know already.   Its main conclusions are that the choice lies between Heathrow and Gatwick, and Boris Island in the Thames Estuary is a non-starter because of its excessive cost (£50bn+ which puts it at par with another white elephant, HS2).   But the biggest complaint against the Davies inquiry is that it never asked the right question in the first place: do we need a huge expansion of airports in the south-east at all?
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The public wants rail, water, energy re-nationalised, & arguments for it are compelling

The latest figures show that a season ticket, including tube travel, from Woking in Surrey to central London cost £3.268 last year.   A similar 22-mile journey in Italy from Velletri to Rome cost just £336.   In France the 24-mile journey from Ballancourt to Paris costs £924.   The RMT argues that the vastly higher costs of rail travel in the UK largely reflect the fragmentation of the rail system into a myriad pieces.   Removing complex interfaces, transaction costs, increased debt servicing and private profit, and dividend payments from the industry could save more than £1bn a year, leading to lower fares and less public subsidy.   Altogether they believe that since privatisation more than £11bn of public funds hsve been mis-spent on debt write-offs, dividend payments to private investors, fragmentation costs , including profit margins of complex tiers of contractors and sub-contractors, plus higher interest payments to keep Network Rail’s debts off the government’s balance sheet.   Not a way to run a railway.
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There’s something very fishy about this West Coast mainline fiasco

The explanation offered by the Transport Department, in McLoughlin’s letter to MPs, is that “these flaws (found by officials only when under the threat of a judicial review from Branson, but significantly not before) stem from the way the level of risk in the bids was evaluated.   Mistakes were made in the way in which inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a result”.   I find this facile and unconvincing since there must be more to it than that.   Balancing risk against revenue lay at the heart of the process, the more so since the government had dangerously extended the life of the franchise from 7 to 13 years, and it is inconceivable in this case of heavily contested bids with huge sums at stake (FirstGroup’s £13bn against Branson’s £11bn) that the parameters for assessment of risk and claims of higher revenue from increased passenger numbers would not have been rigorously worked through, checked and re-checked until their robustness was judged to be foolproof.   This cannot just be put down to 3 officials, who’ve been suspended, who made some unfortunate mistakes since whatever their assumptions and estimates were, they would have been scrupulously crawled over at all the higher levels of the Department right up to the top.
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