Today’s announcement from the Russian president Vladimir Putin, on strategic bombers flights being resumed, is after a series of other earlier events, another reminder that the situation between the West and Russia has never been so tense since the end of the Cold War. This could very easily be dismissed, as a meaningless gesture on the part of president Putin, yet when at the same time the links between Russia and China are growing this could very well be a step toward a new cold war.
Russia’s transition from the USSR to the country it is today was far from smooth, with coups attempts and instability throughout the nineties. Indeed of all the old USSR countries, only the Baltic countries managed to have a near perfect transition to modern democratic states. It is fair to say that things would have been different, had not leaders like the corrupted Boris Yeltsin had been elected. But the truth is that the West and more importantly, the United States have some responsibility in what is currently happening.
Attempting to meddle in Russia’s partners affairs, like in Georgia, Uzbekistan and Ukraine was a big mistake. Not to accept Russia as a fully fledged partner of the Western world was another mistake. Russia would surely deserve to one the main members of the European Union, but the current EU renders this impossible. I would even dare to say that the same is true for NATO, since the issues we face are after all pretty similar.
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Judging from the announcement of the East Coast railway franchise being awarded today to National Express plc, it seems that the DfT civil servants did not understood what happened earlier last year for this franchise. Indeed if the current operator GNER was forced to stand down, that was because they were unable to pay a premium of £1.3 billion over the course of their ten years franchise. The new agreement includes this time, a premium of £1.4 billion in the course of eight years.
Apparently, it is clear that the DfT does not understand how a business should be run. In fact with yearly revenues of £600 millions; this premium would amount to an operational margin of more than 15% since some of the profits must be kept by the company. It is worth noting that this kind of performance, is not even achieved by the majority of businesses, except perhaps for very specialized companies. On the top of that, the agreement includes plenty of ‘targets’ whom Labour loves so much and as usual the taxpayer is set to foot the bill through higher than inflation fares.
Surely the time to end such lunacy on the part of the DfT must come to an end. Normal businesses do not need any targets, if they fail then they go bankrupt and everybody looses, if they succeed then everybody wins, customer feedback, shareholders pressure and external pressures are enough and are much more efficient than any profit target set by civil servants. The same thing should applies for the railways, thence scrapping the existing system of franchises, complicated arrangements based on contracts, to replace them with a few or even a single integrated plc independent of any governmental interference is the way forward.
What Ruth Kelly and the DfT only deserve is another franchise failure. As learning is by repetition, they will perhaps understand after a few more high profile failures, (the next one could very well be First Great Western) that they have to change something in their ways. But, I have some doubts as whether this will be enough for them. Moreover, if this ‘something’ means even more regulation, then the costs for cleaning up the mess are going to be pretty high and, guess who will have to pay the bill then? The taxpayer as usual.
While I welcome most of the proposals outlined today by John Redwood, I have to say that I am a bit sceptical on some points. The painted picture of weak and a crumbling infrastructure is undoubtedly the right one as, are the failures of Labour policies in that respect. Yet I think that simply just simply relying on some ‘competition’ to solve these problems is, very immature.
It is perfectly fair to say that red tape needs to be eliminated concerning businesses and, that the taxes affecting businesses should be reduced if possible, without further complicating the existing tax system. Concerning railways, I have said numerous times that excessive control from the government is preventing healthy growth and creates waste in the process. But the truth is that, while massive investments are needed if we want to have a world class system. Some of the investment WILL have to come from the Treasury, this is particularly true if large scale modernisation projects are attempted. Since returns on such investments are only apparent after up to twenty years, private investment will always be limited in scope and it is very foolish to assume the contrary. On the others points highlighted by John Redwood, like the lack of technical innovation, vertically integrated railways are the solution, however ones has to acknowledge that this means regional monopolies, free of governmental influence (like during pre-BR times) and not competition.
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The changes in the United Kingdom economic structure, from a manufacturing based economy to a service based economy are often the subject of debates and are most often considered as positive. However, before making any conclusion on this, it is very important to have an historical look at what happened, far away from sentences like ‘the Tories sold off our industries’.
Britain created most of its current wealth thanks to manufacturing and, as most people know, the Industrial Revolution started here. The relative decline of manufacturing started much earlier than what is commonly thought. Indeed by the time of the First World War, Britain was outmatched by both Germany and the United States. The reasons for this decline are numerous, but the lack of technological investment was a major factor at the time. Real decline in the sense commonly understood, only started for good after the Second World War and accelerated once the seventies were reached.
Beyond statements like ‘Maggie destroyed our pits and our factories’, the truth is clearly not at the advantage of the ‘defenders of British industries’ namely, the Labour Party. One of the reasons of the decline, was the lack of properly trained workers. Indeed manufacturing requires skills which are very different from the ones required for white collar jobs, one of the aspects of the Tripartite system were Technical Secondary Schools. These schools very similar to the ones existing in Germany and to the French Lycées Techniques, had a very clear role, providing the engineers, scientists, machinists and technicians of tomorrow. They were nevertheless starved of cash by the Labour Party and its trade unionists cronies. Now let’s talk a bit about, the crazy mergers and then nationalisations made by Harold Wilson. Labour involvement in the motor industry had only one result, the creation of an unmanageable juggernaut, offering similar yet competing products whose dire fate was already sealed in the seventies, the same can be said for the steel making and the shipbuilding industry. Excessive taxation of profits and the free hand given to the trade unions, also did a very good job in wrecking what was working, in the few industries still in private hands.
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The recent actuality is full of news concerning UK’s air industry, whose symbol of Heathrow airport is again under the fire from critics. This time it’s almost look like everybody is guilty in the affair, BAA for its management failures especially since its recent takeover by the Spanish firm Ferroviara and British Airways for having an appalling record when it come to delivering luggage.
Yet behind the scenes the current government is also guilty in the affair. Guilty for not having a clear policy toward airport expansion, guilty for granting Heathrow terminal 5 planning permission a few years late, guilty for supporting the ‘ecologists’ arguments that air travel is bad for the environment; when in fact it only account for at best 2% of the UK’s carbon emissions.
While it is very easy to lambaste British Airways when it comes to the lost luggage, when an airport such as Heathrow is completely saturated, understaffed (clear failures from BAA here) and mismanaged. There are clearly other factors at play, undercapacity being one of them. Thence, since air travel WILL increase in the future no matter what the green lobby twats think, we need to plan future needs in advance.
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