Capital spending

 

         The only area of public spending which was cut overall in the first two years of this government was capital projects. The Coalition inherited large forecast cuts in capital from Labour. They abated the cuts a bit, but carried on with the main thrust of them. It has been a bone of contention ever since. The construction industry is not happy. Business lobbies generally have complained about the poor state of our infrastructure. The public sector has made enquiries of Ministers to see if the cuts can be reduced more.

      The government has responded to the pressures. It has not merely found a bit more public money for capital. It has also spoken up about the need to finance more of these items in the private sector. It is working on a scheme to promote more direct pension fund investment in UK infrastructure. It has itself put a lot of political capital into promoting high speed rail, though these plans do not entail any construction work before 2017 for HS2.

        The truth is more privately financed infrastructure would be a good idea. The UK is short of capacity in energy, water, telecommunications, airports and roads. In each of these sectors more private investment is a distinct possibility. It would both act as an economic stimulus as the capital works were undertaken, and help UK competitiveness as better supplies at cheaper prices became available. So what more does the government need to do to bring these improvements about?

Energy:  The government is deeply involved in the sector through its comprehensive regulation, its pursuit of green objectives, its role in the planning process and its overall responsibility for keeping the lights on. It needs to encourage more cheaper energy provision by granting sufficient licences for gas power stations, for oil, gas and shale gas exploration and production, and by reducing subsidies to less economic methods of electricity generation. Progress is being made with securing the construction of new electricity capacity. Changes to licences and the tax regime could foster a more active exploration and development phase for hydrocarbon.

Water  The government and the Environment Agency regulate the water industry and take overall responsibility for ensuring water comes out of the taps. They could set new targets for availability and reserves, and foster the construction of additional reservoir capacity, additional stand by desalination plant if needed, better pipe networks so less is lost in transmission, and explore whether more can be done to transport water between water basins.

Telecommunications. The government is embarked on supporting the main telecoms companeies to ensure good broadband coverage for most people, with faster line speeds and better capacity.

Airports   The government’s veto on new capacity at Heathrow is proving unpopular with business lobbies and growth promoters. Various schemes are being examined for additional runway capacity. An early and relatively quick way of expanding capacity would be to divert Northolt to civil use, whilst considering which longer term option to adopt.

Roads I will not repeat my ever popular private roads full scheme! The government could allow some private toll roads to add new capacity.

 

 

 

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69 Comments

  1. lifelogic
    Posted February 5, 2012 at 7:37 am | Permalink

    Indeed the governments idea of Capital investment seems to be remodelling road junctions ever year, installing anti car traffic lights, huge islands in the middle of roads, pointless HS2 schemes, installing more self funding fine cameras and constricting the roads with bus and bike lanes. Thus giving bike and buses 50% + of the roads for just 5% of the traffic flow and Lots of coloured tarmac and pictures of bikes and Boris bikes. It looks more like vandalism than investment to me.

    I see that in response the 100+ MP’s letter this morning a Downing Street spokeswoman said: “We need a low carbon infrastructure and onshore wind is a cost effective and valuable part of the UK’s diverse energy mix.”

    Clearly they have not bothered to do the maths and are hooked on the irrational green religion. If it is as she says it is “cost effective” then it clearly will not need the absurd subsidies.

    What is needed is a few new road and bridges (certainly one at dockland), a new runway at Heathrow and Gatwick and a 15 minute HS train link between them to give one 5 runway hub. I do not know enough about Northolt but it might make sense as they have absurdly ruled out Heathrow. And some new nuclear, coal and gas fracking.

    They should also stop schools, government and the BBC from pushing the green religion down children and other’s throats through the education system and exam syllabus. Many live in a complete “green” dream world as a direct result.

    • lifelogic
      Posted February 5, 2012 at 9:02 am | Permalink

      By “docklands” I mean the Blackwall tunnel/Canary Wharf area which has been developed without the hugely needed roads and bridges.

      Doubtless if they ever do build a bridge here it will be one just for bikes and pedestrians only and have silly wind turbines and pictures of bikes attached to it!

      • Posted February 5, 2012 at 10:35 am | Permalink

        Docklands benefited from about £5bn of infrastructure when one includes the Jubilee Line and the “new” A13 out to the M25. I agree, the A406-A2 link should have been built to complete connections south, and/or a new Blackwall Tunnel, but the enviro-fanatics stopped the fist and the Labour Govt stopped the second.

      • Philip
        Posted February 5, 2012 at 12:10 pm | Permalink

        Dockalnds has the Docklands Light Railway, the Jubilee Line, and will have Crossrail.

        • lifelogic
          Posted February 5, 2012 at 5:27 pm | Permalink

          Fine for commuters but people need to carry goods, heavy tools and get on to other appointments all over the place, deliver things, go even at off peak times dropping children/wives off on route.

          It does not really work on trains very often.

    • lifelogic
      Posted February 5, 2012 at 10:08 am | Permalink

      It is also reported today that David Laws is set to return. He clearly knew full well what he was doing with his expenses in paying “rent” expenses to his long term partner and he clearly knew of this when he took his position as a minister (and its likely consequences and damage to the coalition when it came out).

      How can he really be a fit person to hold office?

    • uanime5
      Posted February 5, 2012 at 6:03 pm | Permalink

      No matter how much you condemn climate change as a ‘green religion’ it will not change the fact that scientific studies have show it is occurring. Not teaching climate change for political reasons would be like not teaching evolution because religious fundamentalists don’t agree with it.

      Also we need a power system that doesn’t rely on oil or gas because both are finite resources that will run out sooner rather than later.

      • Richard
        Posted February 5, 2012 at 7:50 pm | Permalink

        Climate change has always happened. It happened before mankind was even on this planet.
        The changes in the climate before mankind arrived were far more extreme than the 1 degree centigrade average temperature increase in a century that we now worry about.
        The central argument is about how much mankind is responsible for the changes in the climate and what power mankind has to control the climate.

        What I object to, is when only one side of the global warming argument, as given out by by people like Al Gore, is presented in our schools as unassailable fact, without any alternative views being allowed.

      • matthu
        Posted February 5, 2012 at 9:04 pm | Permalink

        What scientific studies have not shown is whether crippling the UK’s economy will make a blind bit of difference to global temperatures or global climate. Teaching school children that it will is simply propaganda.

        • lifelogic
          Posted February 6, 2012 at 7:48 am | Permalink

          Indeed teaching school children that it will is anti science and an outrage.

      • lifelogic
        Posted February 5, 2012 at 9:29 pm | Permalink

        Of course climate change is occurring ,it always has and always will, and humans and their C02 are one of very many factors that affect it.

        It is the teaching of the, hugely exaggerated, human caused climate change, as a political and religious construct, that I object too. Particularly pushed at children who are vulnerable by authorities like government, teachers, the BBC, and the state. The real science is that humans are one of countless factors. Anyone who tells you they can tell you the temp in 2100 is at to be generous talking rubbish. The could not, even if they knew all the variables, and they do not even know them.

        I rather object to other religions being rammed down children’s throats too. The parallels are very similar, pay you taxes today be good and you will leave a better planet for your children and be rewarded later. Meanwhile the preachers Prince Charles, Al Gore and the like will use huge amount of energy.

        Clearly the global warming exaggeration agenda and the rotating crosses and glittering PV cells (that do not work) are a badge or religion.

        Evolution has overwhelming evidence. As does the fact that you cannot predict the future weather (as the systems is chaotic, hugely complex and you do not have much of the information needed – such as volcanoes, suns activity, asteroids, future science, populations, genetic changes in plants ………….)

        All energy sources are technically finite due to the laws of entropy. But oil and gas can be synthesised from the suns energy water and carbon oxygen and energy (the suns energy, or from nuclear energy or future nuclear fusion) in due course, should it become economic to do so.

        Long term energy needs to come from the suns rays or nuclear but that is not a good reason not to use gas, coal and oil now.

      • Mark
        Posted February 5, 2012 at 10:13 pm | Permalink

        Scientific studies show that the climate has grown no warmer since about 1997 according to Dr Jones of UEA.

      • Disaffected
        Posted February 6, 2012 at 9:51 am | Permalink

        More drivel from the LibDem socialist.

    • Disaffected
      Posted February 5, 2012 at 7:40 pm | Permalink

      I suppose it is cost effective to borrow £1.2 billion and give it away to India. I suppose it is also it is cost effective to give Argentina £500 million when the country publicly states how it dislikes the UK.

      Taxpayers’ money is being wasted hand over fist and then Cameron, Clegg, Mitchell and co tell us VAT needs to be increased, or our water bills need to go up by 7-8% or energy bills increase by 30%. EU contribution exceeds £17 billion and is a drag on the economy. Or that public sector pensions are not affordable, or our military have to to be cut back when it is giving away money to India and Pakistan who are able to afford better military, space programmes and nuclear programmes than the UK. The coalition cannot add up.

      I suppose the Coalition do not understand that wind farms are 22 times more expensive to build, 33% less efficient than conventional power stations, cannot operate if there is too much wind or not enough wind. They will never reach their maximum capacity because there is never the ideal wind conditions all year round. And wind machines will not recover the carbon foot print of their build, especially if sited in the sea. Basic economics is way beyond ministerial comprehension. Oh dear, what inexperienced rash adolescents are in charge of this country.

      Too many graduates from the Oxbridge PPE course where they do not understand basic maths.

      • lifelogic
        Posted February 6, 2012 at 7:16 am | Permalink

        Indeed – but it is not their money so they do not really care if they work . When the policy changes they will be just as happy overseeing the removal of the wind turbines for environmental reasons (so long as they get good pay and pension).

        • Disaffected
          Posted February 6, 2012 at 9:55 am | Permalink

          Even Obama has woken up and changed his mind, as can be seen from his speech to the Congress. Canada will no longer support Kyoto agreement as it is not economically viable. I am sure Prince Charles, Huhne and Clegg are happy to live in a fantasy world where NASA produces science figures that defy their logic, but the reality is if the Government is serious about the economy being its number one project why does it act in contrast on so many Fronts?

  2. colliemum
    Posted February 5, 2012 at 7:54 am | Permalink

    This reads all very nicely, but forgive me if I don’t believe a word of it.

    For example, in the news today is that 100 Tories ‘revolt’ over wind farms. ‘Government’ however keep maintaining that we must press ahead with ‘green’ policies, omitting to tell us that these policies are also due to EU diktats.

    Then we have the extraordinary report here:

    http://www.telegraph.co.uk/news/worldnews/asia/india/9061844/India-tells-Britain-We-dont-want-your-aid.html

    that India doesn’t want or need our aid.

    What is it about this Tory government that ministers from the top down are looking scared of doing more than fiddling around the edges?
    Are they all scared of the Whitehall Mandarins, and don’t dare to go against their ‘advice’?

    John – ask yourself and your colleagues if it isn’t time to hold Cameron’s feet to the fire? The way things are going, more of us feel that the Tory Party is trying to win the next election by courting the left/green part of the electorate, by leaving us conservatives behind. You all must be aware by now that conservatives do not want the Tory party to be distinguishable from Labour and the Liberals by the colour of their rosettes and ties only!

    • Kevin Ronald Lohse
      Posted February 5, 2012 at 11:14 am | Permalink

      You have a point. One of the major errors of Blair/Brown was abandoning their core vote in the pursuit of a mythical loyalty from the middle ground voter. Our Parliamentary party is in danger of doing the same thing.

    • Bob
      Posted February 5, 2012 at 12:27 pm | Permalink

      Alan Duncan on Thursday’s Question Time seemed overly tetchy on the subject of foreign aid, and was getting very irritated by Emma Boon from The Taxpayers’ Alliance. Now, having seen this Telegraph article the mist is beginning to clear. Just like all the other government waste on the EU, HS2 and AGW it turns out to be the nonsense we always believed it to be.

      Providing TVs to villages that don’t have electricity and £70 million disappearing without a trace to who knows where?

      “Controversial British projects have included giving the city of Bhopal £118,000 to help fit its municipal buses and dustcarts with GPS satellite tracking systems. Bhopal’s buses got satellite tracking before most of Britain’s did. “

      In the meantime, the UK has kids leaving school without basic literacy or numeracy, people dying of hospital acquired infections, soldiers being made redundant, roads full of potholes, the list is endless.
      Of course £280 million pounds a year would not solve all of our problems, but it could solve some.
      Maybe Alan Duncan’s pay package and the cost of running DFID could also be put to better use ??

      • lifelogic
        Posted February 5, 2012 at 5:35 pm | Permalink

        And I think paying £1.85 from the aid budget for the Pope to come and lecture us I. Perhaps on birth control or care of young boys in care homes or similar I assume.

        Clearly he must be a bit strapped for cash. I am sure the third world will be very grateful for this advice particularly on birth control.

        • lifelogic
          Posted February 5, 2012 at 9:30 pm | Permalink

          £1.85 Million sorry.

  3. Posted February 5, 2012 at 8:04 am | Permalink

    Good broadband coverage for ‘most people’ means that this will still not be available for ‘some people’. However tax evaders apart, it is not the case that most people pay their taxes and some people don’t; nor are benefits hand outs restricted to most people.

  4. Caterpillar
    Posted February 5, 2012 at 8:20 am | Permalink

    I don’t know Northolt’s local geography or building – can 2000 metres be added to the runway there?

    (Sorry but my usual comment: ensure that the B’ham runway extension is completed by 2014 and get HS2 started now.)

    • alan jutson
      Posted February 5, 2012 at 9:56 am | Permalink

      Caterpiller.

      Not sure about Northolt but Farnborugh has one of the longest runways in the Country I believe. In addition it has warehouse and office structures which look very much like terminal buildings and workshop/hanger space to me, (perhaps a future commercial airport in disguise waiting to be developed). Some limited commercial traffic does indeed use it now.

      Also agree with lifelogics mantra, of a train like M 25 to interconnect all London Airports.

      Also think Boris Island a good idea in principle, which needs to be examined further.

      • lifelogic
        Posted February 5, 2012 at 11:34 am | Permalink

        Indeed we need a hub airport with five runways (at least) near the centre of the population distribution. GATWICK AND HEATHROW and HS train link.

        Boris Island is not really in the right place and is very long term and expensive. Anyway Cameron/Huhne types think it will be under meters of water in a few year time don’t they.

        If the East Coast floods 1953 were repeated (caused by storm, spring tides and low pressure not CO2) then it might be on some odd days.

    • Martyn
      Posted February 5, 2012 at 11:11 am | Permalink

      I used to visit Northolt at work years back. John didn’t suggest adding 2000m to the runway (am not sure where that came from?), but in any case in practical terms it couldn’t be done.
      Northolt can handle most medium jets, not the really big ones (e.g. 747). Biggest problem for greatly increasing traffic in and out is its proximity to the Heathrow zone, which could I suppose become a limiting factor at some point.

      • Caterpillar
        Posted February 5, 2012 at 8:33 pm | Permalink

        Martyn:-

        I just took the typical 3500m runway length that airports seem to have for those long distance / heavy load planes* then looked up Northolt and thought it seems to be 1 or 2km short.

        (*I think B’ham is being extended from 2.6km to 3km to make the China non-stop viable)

  5. Iain Gill
    Posted February 5, 2012 at 9:06 am | Permalink

    if the Chancellor has decided to splash out on new sleeper trains for the london/scotland routes (which I support) why has he not also splashed out on the london/penzance route?

    • lifelogic
      Posted February 5, 2012 at 10:01 am | Permalink

      I do not support London train sleeper routes they make little economic sense I suspect
      they are supported by MPs mainly for their personal travel reasons.

      • Posted February 5, 2012 at 6:55 pm | Permalink

        they are supported by MPs mainly for their personal travel reasons

        You mean like Sir Humphrey and the Eurostar to Brussels?

        • lifelogic
          Posted February 5, 2012 at 9:31 pm | Permalink

          And the diversion of the jubilee line so it called at Westminster and on to dockland.

      • Iain Gill
        Posted February 6, 2012 at 8:39 am | Permalink

        I am not an MP and I use the sleeper trains, I find them very useful, and if you are the kind of person who can sleep on a train they are great. Dont waste your daylight hours waiting at the airport just travel while you would have been asleep anyway. I agree the finances look crazy, I cannot believe they cost that much to run, the tracks would cost the same to run whether they are being used overnight or not etc. I cannot help thinking the new rolling stock for the Scottish routes is yet more public funds to Scotland while the purely English route gets none of it.

        • lifelogic
          Posted February 8, 2012 at 8:38 pm | Permalink

          Yes they are fine for the user but only if the tax payer picks up 75% of the cost of the journey as a subsidy.

  6. alan jutson
    Posted February 5, 2012 at 10:03 am | Permalink

    Of all government expenditure I would have thought that infrastructure projects (worthwhile ones) which make commercial sense (helping people, transport and goods move about more easily) would be the last thing you would want to cut, indeed more expenditure on this may perhas help UK jobs, if we could but restrict immigration.

    No wonder the manderins of whitehall want to cut such infrastructure expenditure, because they want any cuts but to themselves, as they wish to preserve their own status and jobs for life culture which creates nothing but more parework and expense for the rest of us.

  7. alan jutson
    Posted February 5, 2012 at 10:15 am | Permalink

    John

    We have a conundrum with Trains, Power, Gas and Water, they are supposidly privately owned/run, but the government (taxpayer) still funds by and large, huge areas of these businesses.

    Examples.
    HS2
    Finance of new trains/track, Bombadier.
    Power station construction and decomisioning.

    Thus these businesses are not really private businesses at all, they are just limited franchises who will only invest a certain amount of money, that they beleive will give them a sensible return over the franchise period.

    I belive the very basics of life, Heat, light, power, water and transport infrastructure is the complete responsibility of any State, the fact that the state has in the past made cock ups and run at a loss, is because of political interference and dogma.

    You simply need to employ commercial experts and give them some accountable responsibility to run as a service with just enough “profit” for reinvestment. Alternatively you agree a level of subsidy for such services.

    Reply: The taxpayer funds the railways heavily, but it does also own the main part of the railways which attracts most of the subsidy – it is in effect a nationalised industry with private sector contractors running trains.
    Energy could be entirely privately financed, but the government chooses to intervene to ensure some costlier ways of generating power are used which require subsidy. There is currently an argument over the extent to which they do that and the cost it impsoes on taxpayers.

    • Posted February 5, 2012 at 10:40 am | Permalink

      Alan,

      Our railways were built and run, profitably, by the private sector. Power generation was initially established by private enterprise. Water services were extended by private investment as suburbs grew. It is not that the state failed to run these things well, it is that they removed from them the spur of competition and the threat of financial ruin.

      It is socialist dogma which calls for common ownership and nationalisation which has led us here.

      • alan jutson
        Posted February 5, 2012 at 12:21 pm | Permalink

        John

        I agree that State run organisations have not in the past run well, but ask yourself, why is that ?.

        The simple answer is they were treated like a Political football.
        Time after time we had decisions taken out of the hands of those in charge by political dogma.

        Get a good man/woman in charge, give them proper responsibility, and properly financed plan, and there should be no reason why it should fail.

        At the moment we have the worst of all worlds.

        High fares/Tarrifs, limited investment, taxpayer subsidised, AND Government interference.

        Go the whole hog and privatise completely, or run them as a National service with proper accountablity.

        Reply: Quite often nationalised businesses go wrong because politicians do not hold them to account or interfere enough. They have often been badly led, loss making, and good at sacking their staff. They usually see thier main customer as the government and its subsidies, rather than the true customer for their good or service.

        • outsider
          Posted February 5, 2012 at 10:25 pm | Permalink

          The water industry is contracted to invest £22 billion on infrastructure in the next three years, financed by customers’ bills (up at least by RPI) and by private borrowing. It has been investing at an equivalent rate ever since about 1990, when it was privatised, a much higher investment than was ever achieved in the public sector.

          Mr Redwood apparently thinks even this is not enough. The reality is that this investment can be financed privately only because water remains a (heavily regulated) monopoly.
          If the water industry were made fully competitive, as Mr Redwood has previously called for, infrastructure investment would of course collapse overnight, just as it did in power generation when government insisted on an Enron-designed fully competitive electricity market, supposedly to bring prices down.

          As everywhere in economics, there are trade-offs. Water aside, we normally choose quick gains peddled by lobbyists at the expense of infrastructure investment.

          The private sector is perfectly capable of huge amounts of infrastructure spending given the right conditions – ie the possibility of making very large profits if they get it right. As PFI has shown. Take away that possibility and you take away the infrastructure spending.

          Reply: More competitive markets can increase and sustain high levels of investment, as we saw with the passage of telecoms from state monopoly to more competitive private sector industry. I think a more competitive water industry would raise the investment level, as new players came in with better ways of doing things. A competitive power industry carried out a big switch from coal to gas generation.

          • outsider
            Posted February 6, 2012 at 11:40 am | Permalink

            In reply to your reply, I am afraid that private infrastructure spending depends on either 1) the investor having exclusive use of the infrastructure or 2) the investor being contractually guaranteed income/returns.

            The big investment in gas power stations occurred after privatisation but before the fully competitive market was introduced, since when it has dried up as predicted at the time ( apart from windfarms that enjoy a guaranteed subsidy from consumers).

            I find it hard to believe that you think full competition in water supply would lead to alternative networks of reservoirs, treatment plants and sewers being built. The newcomers (mainly fuel and power retailers) would simply buy wholesale and sell on at a margin without the premium now charged to customers upfront to finance part of the investment. Without that, the built-in incentive for water suppliers to invest and earn a guaranteed return on new assets would disappear, as would a lot of the money to finance it. Risks and borrowing costs would rise and the former monopolies would have an incentive to minimise investment rather than maximise it. That is what happened at BT/Mercury.
            You will recall that BT was actually prevented from expanding in order to promote competition.

            Inconvenient though it may be ideologically, private monopoly or very limited competition is often the best model to encourage building of capital-intensive infrastructure networks. There are exceptions: Felixstowe Dock is an outstanding one. But that is the rule. One can argue that monopolistic investment incentives encourage too much investment, but that is not the issue in your post.

            Reply: I do not agree. Just look at the massive investment in private transport vehicles brought about by a very competitive set of markets.

      • Electro-Kevin
        Posted February 5, 2012 at 3:18 pm | Permalink

        Whichever: privatisation or nationalisation. It is short terminism which has led us here.

      • Robert Christopher
        Posted February 5, 2012 at 3:44 pm | Permalink

        Very true!

        When there is common ownership, responsibility is passed around while the music is still playing. Just look at what happened with the FSA, the Treasury and the BoE sharing responsibility, to say nothing of the lack of information sharing.

  8. Damien
    Posted February 5, 2012 at 10:20 am | Permalink

    JR; Todays post ties in nicely with your post yesterday although you are putting forward a different proposition that quantitative easing for Keynesian public spending is good. I was making the same point yesterday but a computer glitch kept showing “awaiting moderation” prevented my post. Hopefully that has been resolved today as the comment is relevant today also.
    QE has not been inflationary nor has anyone seriously proposed that printing money would be a new permanent model for paying for public spending.

    QE is helping large companies with access to refinance their debts at much lower rates. This has been especially helpful to the largest builders who took on massive debts just before the crash. The government has with every budget allocated billions towards the housebuilding industry. The demand for social housing from new immigrants can hardly keep up with supply so billions must be directed to housing associations. 12 million mortgage holders are enjoying record low rates and are paying off their debt in record amounts.

    Other QE is likewise being spent on new infrastructure of every shape and size. This provides jobs and is some say a necessary investment in our crumbling infrastructure. Banks new capital requirements can be financed through QE. This is not inflationary as smaller businesses are de leveraging and overall lending is below target.

    The UK is possibly in recession or very nearly and recovery will be sub par and anaemic for years to come. China risks are high going into 2013-4 and although companies have repaired their balance sheets investors are wary. A break up of the EZ is highly likely with Greece or Portugal having to exit in the next couple of years. In these circumstances some might say the QE was a price worth paying

    Repkly: I am not saying exactly what you impute. I would rather private finance for capital projects came from a set of more competitive private sector banks.

  9. Posted February 5, 2012 at 10:33 am | Permalink

    I suggested a fast tram link to Northolt from Heathrow to provide it with a domestic/third runway. This could run up the side of the M25 and back in down the A40 and be built relatively quickly and cheaply.

    Using the PFI model which built the DLR – not Labour’s monstrously expensive version, could see this privately financed by pension fund investors who would get 5%pa return plus CPI uplift annually.

  10. Alan Wheatley
    Posted February 5, 2012 at 10:51 am | Permalink

    I am pleased to see “telecommunications” is considered as infrastructure!

    Current government plans for bringing high-speed broadband to the whole country are pathetic. Broadband Delivery UK (BDUK) is a joke, as witness the majority of private companies who have given up trying to work with them.

    BDUK is inept when it comes to the most efficient way of rolling out high-speed broadband. The so-called pilot projects seem to be more to do with piloting contracting rather than technology.

    The key issue is that the infrastructure is owned by a private monopoly, BT. They are therefore at a significant advantage compared to all other private companies when it comes to bidding to upgrade broadband services: the chinese wall within BT may look fine in theory but is not working in practice. Ofcom is ineffective.

    Things will not get better until ownership of the infrastructure is changed so as to allow normal market forces to operate. This will also enable a better method of funding high-speed broadband for non-commercial locations (the Final Third), which may or may not require (some) public money.

    And finally, the government are expecting local communities to work for their own salvation, which is totally impractical and unrealistic, as a reading of what is expected of them will show.

  11. ian wragg
    Posted February 5, 2012 at 10:54 am | Permalink

    Check out the National Grid forecast for wind generation. On the coldest days, they have been contributing a maximum 1.8% and averaging in efficiency of about 15%. None of the peak generation has been available for the TRIAD periods and still we continue to waste more on them which is about 70% foreign owned.

    Is the government wilfully stupid or is there a hidden agenda which we are not party too ( and you John)????

    • lifelogic
      Posted February 5, 2012 at 11:40 am | Permalink

      Indeed and the costs of the on demand back up generators needed means less efficiency as these plants too. They clearly are wilfully stupid or worse?

  12. Philip
    Posted February 5, 2012 at 11:56 am | Permalink

    “The UK is short of capacity in energy, water, telecommunications, airports and roads.”

    And rail.

    Overcrowding, and the need for higher speeds on railways (as proved in most other advanced economies), means extra rail capacity, including HS2, is needed.

    Why is it that some on the “Right” of the Conservative Party, although correct in many things, when it comes to transport only think in terms of more airport capacity and roads. Perhaps the trains are seen as a ghastly socialist things, while a modern fast rail system could be seen as something desirable for the nation and the economy ?

    Reply Happy for new railway lines, as long as they do not require large subsidies. Unfortunately they are usually heavily loss making, whereas road and air travel makes a net contribution to the Exchequer.At the moment we are not looking for more ways to lose taxpayer money.

    • Sean O'Hare
      Posted February 5, 2012 at 9:27 pm | Permalink

      It seems that the only objections concerning HS2 that are even being considered by JR and commenters here are economic ones. HS2, if it is ever built will be the most environmentally destructive project affecting the Chiltern Hills since the M40 was constructed.

      Although I’m not resident in the Chilterns or anywhere else along the proposed HS2 route it is any area I love to visit. I walked it’s glorious foopaths in my youth, and take every opportunity to return to them now. To destroy that peaceful landscape for the sake of knocking 20 minutes off the time to travel between London & Birmingham is, to me, an act of vandalism. What can I do about it apart from signing partitions? Not a lot! I’m a bit too old to climb trees Swampy style.

      There are other options, but no-one has seriously considered them. Although JR maintains the go ahead for HS2 has not resulted from an EU Commission directive it is obvious that it fits perfectly into their grand (TEN-T) scheme and is being done to please Brussels. Trust the Conservatives on matters EU? – never again!

    • Philip
      Posted February 5, 2012 at 11:38 pm | Permalink

      There is a hidden subsidy for air travel. As for roads, the DfT budget for roads is more or as much as their rail budget. Vast amounts of taxpayers money is thrown into roads, much of which is given by taxpayers for roads they never use. While local rail lines, including new ones, may be loss-making, they bring social and economic benefit to the areas they serve. Main lines do not, or should not, require subsidies but investment in them brings ecomomic benefit to cities and regions they connect, as did motorways when they were built. Same will apply to HS2. One cannot assume something doesn’t bring value because it requires subsidy or investment. It has sometimes been said of the Treasury that they know the cost of everything and the value of nothing.

      Reply: Motorists pay many more times in tax what is spent on roads. Roads account for 86% of travel, whilst rail is just 6%. The level of rail subsidy per passenger mile is very high.

      • Philip
        Posted February 6, 2012 at 1:25 pm | Permalink

        The 6% of overall UK travel argument is weak. It ignores the much higher share and the vital role rail plays in the transport corridors it does serve, and hence rail’s huge economic (and social) importance.

        But using your statistical argument, the air percentage must be even less if you include bike and bus in the remaining 8%, so any spending on that would be even more unjustified.

        reply: Indeed state subsidy to air would be wrong, but air like road is not subsidised whereas rail is heavily subsidised. I haave no problems with unsubsidised rail services.

  13. Mactheknife
    Posted February 5, 2012 at 12:08 pm | Permalink

    JR Energy: “The government is deeply involved in the sector through its comprehensive regulation, its pursuit of green objectives, its role in the planning process and its overall responsibility for keeping the lights on. It needs to encourage more cheaper energy provision by granting sufficient licences for gas power stations, for oil, gas and shale gas exploration and production, and by reducing subsidies to less economic methods of electricity generation.”

    John, say what you mean. The green lobby has had far too much influence within government via Huhne and his relationships with Greenpeace etc. Its now time to stop drinking the Warmista coolaid and make use of the national and international resources we have available. The US lesson on Shale Gas has shown that our high gas prices could be reduced significantly and industry boosted. In fact US companies are returning manufacturing jobs from overseas and they have become an exporter of gas. Globally we have more gas than we know what to do with and the International Energy Agency has stated at current usage rates we have 250 years supply with huge known reserves yet untapped. Even “green” Germany has stated that a move to more economic coal fired generation is underw

    I note that some 100 MP’s have written to the PM asking for a change in energy policy and I hope you were one of those. The time is now right to push this issue as voters are now realising that their high energy bills include massive subsidies to inefficient wind farms and although Labour started this, the government has continued this policy. For my part I look forward to continuing my discourse with Gregory Barker and the Warmistas at DECC.

    Reply: I do say what I mean. Yes, I oppose large subsidies to windfarms, support proper segregation of widnmills from homes, and want more gas produced. I have regularly said all these things.

  14. David John Wilson
    Posted February 5, 2012 at 12:20 pm | Permalink

    In my early days in business I learnt that the most important thing to do was to make a fairly quick decision and then get on with it. The problem with most government capital projects is the amount of money that is wasted planning reviewing, replanning and so on.
    I would love to see an attitude where a date to start construction was set at the beginning and all the processes had to be completed by that date. In most cases decisions taken late in the planning process are costly tinkering.
    Many of the comments on this blog are examples of how such tinkering is invoked.

  15. Electro-Kevin
    Posted February 5, 2012 at 12:52 pm | Permalink

    “Roads I will not repeat my ever popular private roads full scheme!”

    I hope we weren’t too hard on you, John.

    🙂

  16. Posted February 5, 2012 at 1:54 pm | Permalink

    The government’s role in energy is entirely and very strongly negative, which is rather a shame because any possibility of getting out of recession depends on cheap energy. It is possible, though not likely, that with Huhne gone his promise to stifle the shale gas industry may no longer be operative.Shale gas is what is bringing the US economy out of recession but the EU generally seems to be intent on preventing that here.

    Their role in airports is similarly entirely Ludite.

    The problem with roads is that the transport budget is largely devoted, for purely ideological reasons, to rail wherease almost all travel is by road. If road funding were given most of the money taken in road taxes and run at arms length (whether through private companies or a quango) it cfould be properly funded.

    However almost all government infrastrcuture projects suffer from the fact that around 7/8ths of their budget go to governmental bureaucratic parasitism (or alternately a combination of government parasitism and outright fraud). This is shown in the fact that the new Forth Bridge is 8 times the cost of last one even after corecting for inflation and that the London sewage outflow tunnel costs £100m per km when Norway can cut & outfit road tunnels at £5m per km.

    • backofanenvelope
      Posted February 5, 2012 at 5:49 pm | Permalink

      You have identified the problem with our transport system. The private car enables you to go from A to B in one seamless move. We should go with the flow and accept that this is the way forward. More and better roads and more and better cars.

    • uanime5
      Posted February 5, 2012 at 6:16 pm | Permalink

      Shale gas isn’t bringing the US out of recession. The US is moving out of recession due to a large financial stimulus by Obama and the fact that most of their trade partners aren’t having a problem with their currency (the US trades very little with the Eurozone).

      If you have evidence of government parasitism and outright fraud please send it to the papers. If you have no evidence of either then all you have is a conspiracy theory.

      • Posted February 5, 2012 at 6:59 pm | Permalink

        Cheap gas and cheap housing is most likely a help to the US rather than a hinderance.

      • Posted February 6, 2012 at 11:24 am | Permalink

        Obama’s trillion dollar “stimulus” came at the beginning of his reign; the shale gas advance is current. America failed to grow at the beginning of his reign and is growing now. This is known as cause and effect & is widely regardfed as what is known as evidence. If Unimeg had evidence of his contention he would produce it but of course, since it is nonsense, he doesn’t.

        I have repeatedly given evidence of this fraud. Indeed in the comment U claims to be replying to I give 2 – the 8 fold overspend on the Forth Bridge & London sewage tunnel. It is typical of supporters of socialist state parasitism like U that, while blowing smoke to obscure the facts they make absolutely no attempt to address what is really said.

        Or perhaps I am wrong and he will now explain why, in his view, the laws of physics require that things cost 8 times more in present day Britain than everywhere else?

        • Posted February 10, 2012 at 1:54 pm | Permalink

          So it seems i am not wrong & Unimg has no factual support for his claims. Who would have thought it?

      • APL
        Posted February 6, 2012 at 12:16 pm | Permalink

        uanime5: “US is moving out of recession due to a large financial stimulus by Obama ”

        The US is not moving out of recession.

        The stimulus is not a stimulus.

  17. Bazman
    Posted February 5, 2012 at 2:23 pm | Permalink

    What makes anyone think that cheaper electricity production will lead to lower electricity bills? More likely lead to more pollution and dangerous practices with no change whatsoever to electricity bills, but greater profits for unity companies hiding behind investment, green issues paid for by the taxpayer and user, but with no mention of shareholder profit costs and the cost of siphoning off cash by senior managers in the form of wages and cash gifts. Laughably called remuneration. Does the meter reader get ‘remuneration’ for his services? The utility companies are being bought by foreign companies to subsidise the bills of their own nationals who are protected from high bills. They see us as a bunch of mugs who will pay now and in the future as why would they ‘invest’? All the Billy Britain’s and Little Englanders seem to have no problem with us all being scammed by foreign owned companies for essential services as if they are talking about buying wines. To big to fail just like banks and the ‘investors’ know this.

    • uanime5
      Posted February 5, 2012 at 6:19 pm | Permalink

      Good to see someone who knows the real problems with power generation.

  18. Richard
    Posted February 5, 2012 at 5:02 pm | Permalink

    One of the best infrastrucutre projects Government can get involved in are new towns.
    We used to plan new towns in the past but we seem to have stopped.
    For example, Welwyn Garden City, Telford, Bedford, Luton, Redditch, Milton Keynes, Gateshead etc etc.
    It surprises me that there are no recent new towns being built nor currently being planned when you consider the huge increases in immigration each year (said to be over 200,000 net per annum)
    Where are all these people going to live if there are no new towns being built?

  19. Martin Ryder
    Posted February 5, 2012 at 5:14 pm | Permalink

    I find it difficult to understand why Mr Cameron wanted to be Prime Minister when he doesn’t seem to want to do anything that is different from his two predecessors, other than sack soldiers, policemen and immigration officers. Why did he not use Mr Huhne’s departure to break up DECC and put energy security in with the Business department and climate change in with DEFRA? Why does Mr Cameron consider that Mr Brown’s model of government organisation is the best there is? I am very sure that it isn’t. Why also does Mr Cameron need the EU Commission to tell him what to do? He is like a child that cannot let go of Mummy’s hand.
    Also (Mr Bazman’s post) why is the government so keen on foreign investment in the UK? Surely if you invest in something it is because you want to get more money out of the business than you put in. What would be the point of investing otherwise? If the investment allows for the setting up of a major new business that brings in money to both the investor and the UK then I can see the point. But just selling off companies that are already in business brings money in when the sale is made but after that the profit flow must be all the other way. How does the UK benefit, especially as the foreign owner decides on prices and can close the UK company whenever he likes?

    • Electro-Kevin
      Posted February 5, 2012 at 7:29 pm | Permalink

      Further to that: many of the foreign companies involved are state owned.

      We’ve effectively privatised utilities only for them to be re-nationalised under a different nationality !

  20. Bob Naybour
    Posted February 5, 2012 at 8:22 pm | Permalink

    Your comments about energy illustrate how our politicians are totally ignorant yes ignorant carbon capture is rediculous burn a ton of coal and then pump half a ton to the north sea is ridiculous it we get out eventually The only low carbon options are nuclear fusion or fission but as a politician it is too much to ask you to understand.

    How sad for the world

  21. David John Wilson
    Posted February 6, 2012 at 12:20 am | Permalink

    With regard to your specific proposals.
    The environment agency rejected the idea of moving water between catchments many years ago because of the problems of moving species of flora and fauna between rivers. We already have problems of non-native species invading some of our rivers without making that problem worse by moving water between them.
    Private roads with tolls must be the wrong solution. We need to make the country more efficient not add to the delays by introducing tolls. The government needs to reduce the number of ways it uses to collect money as each one has unacceptable overheads.
    If the government is serious about improving energy production then it needs to look at its plan to reduce solar grants and reject the call from its MPs to reduce wind licences. It also needs to do more to encourage other sources of energy. It is a crime that it has taken the Environment Agency nearly fifteen years to look at generation of power by the rivers where it controls the weirs. There are hundreds of such opportunities across the UK, many of which would provide power for at least 200 houses.

    Reply: A sensible road toll scheme would be like mobile phones – you get the bill monthly based on use, observed from gantry cameras at pricing points on the toll roads.

  22. Mark
    Posted February 6, 2012 at 5:28 pm | Permalink

    How refreshing to have an MP talk some common sense about energy!

    For the benefit of regular readers, may I draw attention to yet another recent shale gas find, this time in Fermanagh? Some 2.2Tcf, or enough to fuel Ulster for more than 50 years.

    http://www.u.tv/News/Fracking-gas-potential-in-Fermanagh/24c3e777-8cde-4d2d-a81f-cd98b927aafc

    Of course, the announcement has brought forth an array of Luddite greens – although some of that is undoubtedly posturing to negotiate a tax share for local spending. Having seen at close hand how damaging expensive energy was to industry in Northern Ireland over 30 years ago when oil (on which it was largely dependent for heat and power as well as transport) soared in price you might have thought that wiser heads would recognise the opportunity, as well as the advantage of not depending on supply from Scotland with its threat to leave the UK.

    One area of capital spending cutback you did not mention was the spendthrift BSF programme. Rebuilding every school in the country in little more than a decade is not a good use of money, because of the waste involved in abandoning perfectly serviceable buildings that could be maintained for much lower overall cost. Gove was right to call a halt to the waste.

    On the other hand, with long lived assets there is a great temptation to defer preventative maintenance expenditure whenever cash is tight. That lies behind the problems in the water sector, that had been starved of cash for decades prior to denationalisation. Similar considerations apply to the roads. Most of our motorway network is now 30-50 years old, and the heaviest used parts need proper resurfacing rather than just scattering on some stone chips and asphalt: there are plenty of motoring tax revenues to fund that, rather than to waste by tipping money into aid for India and welfare for landlords collecting rent subsidised by the state.

    Broadband investment is an area where the state seems unwilling to acknowledge the benefits it brings. Much of the problem concerns obtaining wayleaves, and the keenness of the state to raise revenues from them, despite the state being one of the main beneficiaries because spending on broadband is a substitute for spending on other infrastructure on commuting. We need the entrepreneurial approach that managed to provide broadband to the remote village of Alston in Cumbria.

    There are a variety of alternatives to Northolt: bases at Upper Heyford and Lyneham for example are both on the motorway network. The first thing we need to do is to avoid sending hub traffic to CDG and AMS with our excessive APD taxation.

  23. frank salmon
    Posted February 6, 2012 at 7:56 pm | Permalink

    You know something?
    Let the markets operate. Let airports be built where the money and investment takes them. They will decide where to put the next airport or airport extension. Same with rail. Same with roads. Same with HS2 and Boris Island. No subsidies.
    No windmills.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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