UK Transport

As its title suggests UK Transport covers all aspects of transport in the UK. It is written from a libertarian perspective, in other words, that the less the State involves itself in the running, regulation or funding of roads, railways or anything else - the better.
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Saturday, July 20, 2002

The "No shareholders means more being spent" fallacy

As in "The gamble is that with no shareholders, Network Rail should see more government subsidy end up being spent on upgrading the rail network and less on paying a return to investors", The Guardian 1/7/02

This is a line often used to justify nationalisation to which the response ought to be: "If nationalisation is so good why was the Soviet Union so bad?"

The assumptions underlying this fallacy are two-fold. First, that the private and state sectors spend money on the same things. Second, that the state spends it just as efficiently as the private sector.

For instance, on the point about where money gets spent, before privatisation Japan National Railways (JNR) spent a lot of money on new high-speed lines. After privatisation the JRs spent a lot of money on new trains and very little on new lines (see Railways in Japan - Public and Private Sectors p53).

Similarly, on the efficiency issue, the JRs made dramatic improvements post privatisation. Having said that they are still some 20% less efficient than the existing private railways (see Privatisation and Beyond - the JR Case p6).

There are very good reasons for these two phenomena. Private concerns spend money in a different way becauase they are chasing profits while state institutions are chasing votes. Private businesses are more efficient because if they are not they will make less money. State businesses do not have to be efficient because if they run out of money they can always go cap in hand to the Government.

Misuses of the English Language #1: Privatisation

As in the phrase "Privatisation [of British Rail] did not bring more efficient, more profitable railways", The Guardian 1/7/02. There is, of course, a grain of truth in this: British railways were privatised and were done so in the Railways Act 1993. What this misses is that a whole load of other things were done at the same time: the industry was fragmented - principally between wheel and rail, passenger services were franchised on a short-term basis, Railtrack (effectively) had its income set by the government, fare control was introduced and maintenance was forcibly contracted out.

What you can reasonably say is that one, or a combination of these factors created the problems we see today. What you cannot do is isolate one of them and put the blame on that without a whole bunch of evidence.

The point also needs to be made that privatisation emphatically does not mean fragmentation even if the two have tended to go hand in hand.

Having said that libertarians and our softer political allies have rather been hoist by our own petard. Because, by and large, privatisation has represented liberation from government we have tended to forget that it doesn't have to and have hence tended to support any privatisation. The great irony of rail privatisation is that the government ended up with more control of the railways, not less ie not what we (or should that be I?) wanted.

We are stuck for a word. Privatisation has been dicredited. Deregulation could equally well apply to a state industry. Getting-the-state-out-of-the-X-business is a bit clumsy. Any takers for "de-statification"?

In the news

Build castles in the sky
Rail fares to increase as price caps scrapped - interesting graphic. Not sure about the claim that fares account for 50% of railway spending. I am sure the real figure is nearer 75%.
Walk the walk - the Times advocates walking. It'll never catch on.
Greens warn ministers on air policy
BA links up for bullfight on Spanish routes
Driver jailed for killing cyclist

Friday, July 19, 2002

Interesting Articles

Here a few articles that I have found while surfing the net:

Regional Eurostar Services - the Department of Transport's write up on what happened. Many years ago, people thought what a great idea it would be to run trains from places like Leeds and Birmingham through the Channel Tunnel to the Continent. They bought the trains (including sleeper stock) and then realised that this was stupid - flying was quicker and cheaper.

The Channel Tunnel Rail Link - another Department of Transport write up.

The Channel Tunnel Project - an assessment of how the project's finances went pear-shaped.

The Lost Promise of the American Railroad - a "standard" ie wrong, account of the decline of America's passenger railways.

Pioneer behind the road code - about the man who invented the Highway Code, the rules and guidelines of motoring in Britain. A small amount pointing out the nonsense of speed limits.

From Canal Lock to Gridlock - another "standard" history of Britain's railways. I hope to get around to a takedown one of these days

Pollution Control - libertarian style

In the Evening Standard today there is an article about a new anti-airport pressure group, AirportWatch. They begin well, calling for an end to subsidies and tax breaks for the aviation industry. [Actually, I didn't know that there were any subsidies or tax breaks for the aviation industry, so I would be grateful if someone would enlighten me.]

But after a good start things rapidly go downhill with calls on the government to "promote alternatives to air travel such as high-speed rail lines." ie spend lots of taxpayers money, and "set environmental limits at airports and set up an independent body to oversee pollution control regimes on airport operations" ie create a new layer of bloated, inflexible bureaucracy. Ugh.

There seems to be a strain in libertarianism which believes that all environmental problems will eventually be solved by progress. I am not so sanguine. Although I have severe doubts about claims of the damage caused by carbon dioxide and CFCs I am happy to believe that in certain circumstances negative externalities exist. From personal experience I can say that Concorde flying directly overhead is just one such example.

So, how should negative externalities be dealt with? The best paper I can find on this is Max More's Libertarian Pollution Control. He points out that taxation is not the answer because the government doesn't know what the "right" amount is. We now know that not only does the government not tax by the right amount but the money never gets near the people actually affected. He also points out that private ownership is vital. His solution? Have it dealt with by the courts.

The compensation-through-the-courts approach would have many advantages. Firstly, it takes government out of the picture. Secondly, it would be reasonably predictable. Case law would give precedents to follow. You're operating more flights which are creating more noise? Fine. We know that 10,000 flights a year depress property values by £5,000. You're now operating 20,000 flights a year so that'll be an extra £5,000 compensation.

Of course, there are complications here. 20,000 flights might not actually be twice as bad as 10,000. They might be flying at different times, especially at night. The planes might be quieter. But all these sorts of things can be factored in a dealt with by the court. There will, of course, be unfairnesses, just fewer of them. There may be new information, but this, again, can be dealt with in a new court case.

Thirdly, it's quick. No public controversies, no public enquiries, no political agonising. That means development can take place a lot faster - and it's not just a big boys' game.

Fourthly, it provides a means for dealing with some of the global environmental controversies. You are a producer of CFCs are you? OK, well, this claimant here (and thousands like him) are claiming that that's going to destroy the Ozone layer, increasing the likelihood of contracting skin cancer, increasing their insurance premiums. So, here's the fine. Ah, but you've come up with new information that suggests that the hole in the Ozone layer isn't getting any bigger. OK, then, we'll reduce the fine. And so on and so forth. It's quick, it's flexible, it encapsulates most of the available information and it is reasonably just.

Thursday, July 18, 2002

New Links

Over the past few weeks I have noticed some interesting sites out there:

Channel Tunnel Rail Link - official site - some interesting stats
Direct Link North - gobsmackingly funny. This organisation wants to build a TGV-style network across the country. This is, of course, a laudable aim until you look at the cost - £55bn - almost all of which will be coming from the taxpayer. The turnover of the entire UK rail industry is only some £3bn a year.
Streamliners - the site of the PBS programme on the Burlington Zephyr, which for those of you who don't know was a revolutionary, American diesel train built in the 1930s.
Association of British Drivers - people who (for the most part rightly) think that environmentalism is tosh, rightly think that new roads should be built, rightly think that speed limits should be raised but wrongly think that pricing is wrong. Oh, well you can't have it all. Generally speaking, an excellent and well-informed site.

Wednesday, July 17, 2002

Tuesday, July 16, 2002

Told you so

A couple of months ago I suggested that the government was not being entirely fair in its dealings with Railtrack (see "Rail smash has buried bad news" and "More (potential) double standards"). Today, comes the news that Railtrack's successor, Network Rail, is likely to be showered with the very sums (if not greater) that Railtrack was denied.

High fares are good for you

The news that the government is considering removing rail fare controls has, in media parlance "raised fears" of a massive increase in prices.

For once, fear is the right word. Allowing railway companies the freedom to set their own fares does seem scary. The man waiting for the 0822 has to get to work. For him there is, to all intents and purposes, only way of getting to work - the train. There is no choice. Buying railway tickets is not like buying bars of chocolate.

So, there must be controls, right? Wrong. Fare controls are amongst the most damaging forms of regulation that governments can impose on a railway. Here, there were very few controls and very few complaints until the 1920s. London and its railways expanded in tandem bringing suburbia to the masses, all at an affordable price. In the 1920s the state imposed controls on freight charges. Railway profits went for a Burton. Then, during the Second World War, the government froze fares while inflation let rip. The railways emerged in a parlous state, in dire need of a major overhaul. During nationalisation fares were constantly being held down while the industry gradually declined. It is significant, that British Rail's happiest time was during the 1980s when it was allowed to increase fares more or less at will. Incidentally, the chief reason why Japanese trains are so overcrowded is, once again, state-imposed fare control.

But what of the man on the 0822? What's going to happen to him when he's left to the tender mercies of the market? Well, the bad news is that, intitially at least, his fares are going to go up. Quite a lot in fact.

The interesting thing is what happens next. If fares are high and are kept high and passengers see no improvement in service they will start to make different arrangements. Some will move to somehere near a cheaper railway. Others will change jobs to somewhere nearer where they live. Slowly but surely the railway will start to lose revenue.

At this point the market starts to come into its own. Sure, some railways will exhibit a couldn't-give-a-toss-attitude put up the fares, keep them high and do nothing in return but their profits will decline. But others will take an entirely different approach. They will use the price signal to improve quantity and quality. They will introduce lower fares for those travelling before the peak. They will introduce automatic fare reductions in cases of poor punctuality. They will increase capacity and they will spruce up stations (where they don't rebuild them). They will do this because higher fares will tell them that there is a market out there waiting to be satisfied and satisfied markets mean nice, fat pay cheques.

When fares are set free the man on the 0822 will see a step change in the quality of the service. It won't happen at once (railways are not like that) and it won't be without pain, but it will happen.

Monday, July 15, 2002

Interesting Articles

All from Railway Technical Web Pages:

Railway Finance
Wet, wet, wet - why trains are late in Autumn
UK Safety Cases - or why regulation is putting up the price of everything and not necessarily making anything any safer.

Sunday, July 14, 2002