Pragmatism Is Needed Not Dogma
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.
Road pricing in the form of motorway tolls, is mooted in order to allow the doubling of the network size. While I am against road pricing, I nevertheless welcome this move since motorways tolls do work abroad and would surely contribute in the building of more motorways. However one must acknowledge here, that competition will only occurs between the different transports modes. Moreover, in all the cases building more motorways will require some relaxing of the current planning laws and also some victories over Nimbysts or tree-huggers. Also before building more motorways, some strategic planning will have to be done in the DfT. In that respect creating an independent national planning agency, linking businesses, local authorities and the concerned ministries would be a very wise move.
Where the proposals start to unravel however, is where water provision is mentioned. One of the main raisons of the catastrophic floods which happened in June and July, was the lack of funds and the lack of leadership on the part of the central government. Introducing competition would not have changed anything, since the water industry is more dependent than others on fixed infrastructures like pipes. It is in fact, wholly impossible for another water company to use the existing infrastructure, in order to provide water to a customer who decided to switch provider; as this would require the building of another separate network of pipes. Solving some of the problems highlighted by the recent floods, is however possible by just simply devolving most of the responsibilities related to flood defences to the local authorities.
Infrastructures such as transports and utilities, must be in full working order in order to support a vibrant economy. Looking at the past history of these infrastructures shows that their most successful period was, when they were either locally managed or were government influence was minimal. Splitting up working integrated structures, in the name of competition, was a failure for the railways (BR’s yearly subsidy was lower compared to the one received by Network Rail and all the operating companies) and did not had the expected benefit for electricity provision. I would moreover add that on addition of being essential to strong economic growth, these infrastructures do have a strategic value in terms of military planning. Then, are we willing to see such infrastructures in the hands of a single well working British plc, or in the hands of several unintegrated and disconnected companies potentially owned by founds from non reliable countries like China, Russia or the Gulf States?
As we have just seen, there is much more than just competition, when dealing with this. Pragmatism is needed, not pure economic dogma and we have to acknowledge that having de facto private monopolies, is in most cases better than having to cope with the failures of companies working in a messy structure, ruled in the end by Whitehall bureaucrats through legislation as the failures of the Public Private Partnerships attempted by the Labour governments shows.
