Another twist to inflation

 

                 Yesterday’s announcement of a rise in the inflation rate to 3.2% (RPI) and 2.6%  (CPI) was a blow to the Bank’s promise of rapid falls to the 2% benchmark or below. It also puts another inflationary pressure into the system, as rail fares will go up by 3% more than the inflation rate in England. It means a further squeeze on spending power,as wages are still rising less fast than prices.

           The failure of the railway to control its costs and promote its revenues by selling more tickets is costing both taxpayers and rail travellers dear. The government  rightly says it expects the UK railway to get its costs down substantially to nearer comparable railway levels. The question is how and when will this happen? Why can’t the railway get on with it more quickly? Why does the current service pattern leave us so short of seats and capacity at times of day on routes where people want to travel, and so over provided with capacity on many other routes at other times of day? Why is the railway so unable to innovate, to use the tracks and trains more where and when needed?

           I received an unsolicited email yesterday from the railways. They were urging me to undertake some more rail travel. In was told  I could go to Brighton for £5, to Manchester for £12  and to Cardiff for £11.50 from London.  A little research on their site found a train to Brighton at 10.36 am  for just £7.50 single.  The £12 tickets to Manchester entail leaving before 9am from London, exactly the times you would have thought the business travellers would be hogging. My own recollecitons of these longer distance services  is of plenty of empty seats whenever I have gone by early morning trains. Clearly now the railway is dumping them at any kind of low price in an effort to boost seat occupancy.

           The railways are a wasted opportunity in the UK. They take their long suffering commuters for granted, providing too few seats and a poor service for ever escalating cost. Meanwhile they are having trouble filling many of the other trains, and are now dumping capacity at uneconomic fares in default of selling tickets at better prices. They do not seem to optimise the use of the valuable routes they command into our major cities, and they fail to innovate to put on more capacity where needed. When you have such high fixed costs as they do you need to be smart in using the network to maximise the revenue take, without doing it by large fare rises. The Channel 4 “interview” of the industry rep last night was lamentable. He was asked no questions about why the cost base is so high, no questions about how he might cut costs or take a lower profit. Mr Snow saw it as a great opportunity to conspire to say taxpayers should be taxed a lot more to pay all the railway’s bills, whatever they may be.

          It will be interesting to hear the Bank’s explanation of why inflation has picked up again, so soon after the Bank confidently predicted further falls. Air fares to Europe and fewer clothes discounts are said to be special factors, but there was considerable buoyancy in a whole range of prices and charges.

          It is interestign to note that the winning bidders for the West coast mainline reckon there is unused capacity on the line, at a time when the case of HS2 says we lack capacity.

Subsidy per passanger mile by rail franchise   2011 (DTp figures, some e.g.s)

Northern 34p

London Midland    17.8p

Trans Pennine   20.9p

SW Trains   2.4p

First Capital   -0.9p

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110 Comments

  1. lifelogic
    Posted August 15, 2012 at 5:51 am | Permalink

    Trains are, in general, not the best solution (too inflexible) and certainly not ones run as they are in the UK. They should cut the subsidy and create a level fiscal playing field for transport.

    Inflation is clearly caused by the BoE intentionally weakening the currency to rob savers, lenders to government and pensioners. They keep predicting lower inflation (perhaps to assist more cheap government borrowing) but does anyone sensible ever believe them?

    • lifelogic
      Posted August 15, 2012 at 5:58 am | Permalink

      The BoE will no doubt find some, distant from the them, and external reason for the inflation – extreme weather caused by global warming affecting world harvests of cotton and the like we shall see what they come up with. One can only assume Osborne is in on the BoE’s devaluation plan and spin.

    • Denis Cooper
      Posted August 15, 2012 at 7:53 am | Permalink

      You’d certainly expect that the creation of (now) £340 billion of new money would create a downwards pressure on the external value of sterling, but in fact before QE started the sterling trade weighted index was moving in the high 70’s and now it’s in the l0w 80’s.

      http://www.bankofengland.co.uk/boeapps/iadb/fromshowcolumns.asp?Travel=NIxIRxSUx&FromSeries=1&ToSeries=50&DAT=RNG&FD=1&FM=Jan&FY=1963&TD=15&TM=Aug&TY=2012&VFD=Y&CSVF=TT&C=IIN&Filter=N&html.x=22&html.y=26

      So if the Bank did intend to weaken sterling they haven’t succeeded.

      The inflation is a different matter, and it’s hard to see how the imminent danger of a deflationary spiral can still be used to justify more QE.

      But then in reality the primary purpose of QE as practised so far in the UK has always been and still is to rig the gilts market in the Treasury’s favour, so that it can continue to borrow money by selling new gilts and government can carry on paying all its bills in full and on time.

      I notice that the Greek government, Greek commercial banks, the Greek central bank and the ECB have just co-operated to use another roundabout device to save the Greek government from defaulting on a €3.1 billion payment due to the ECB on August 20th:

      http://online.wsj.com/article/SB10000872396390444772404577588711377486298.html

      “Greek Bond Auction Fends Off Default”

      • Mark
        Posted August 15, 2012 at 10:28 am | Permalink

        All that the terms of trade indicate is that other countries are also debauching their currencies.

        • Denis Cooper
          Posted August 15, 2012 at 1:42 pm | Permalink

          The sterling trade weighted index is intended to reflect the effective external value of sterling compared to other currencies, and the fact is that it hasn’t fallen since the start of QE even though it might have been expected to do so.

      • lifelogic
        Posted August 15, 2012 at 11:21 am | Permalink

        You cannot really say that “if the Bank did intend to weaken sterling they haven’t succeeded” other factors have made the UK a relatively safer haven than many places, the Arab spring and the self inflicted Euro disaster. It is perhaps still lower, than it would have been without QE, relative to oil, energy, commodities and other goods we import.

        • Denis Cooper
          Posted August 15, 2012 at 1:46 pm | Permalink

          True, but the simple fact remains that sterling has strengthened, not weakened, since the start of QE.

    • lifelogic
      Posted August 15, 2012 at 11:42 am | Permalink

      Why exactly should the tax payer pay £100 per week just to pay for someone to commute 30 miles on Northern Trains for example? Yet tax them perhaps £100 per week (in fuel ,vat, road tax) should they go by car. It just distorts the market and wastes resources.

      • lifelogic
        Posted August 15, 2012 at 11:43 am | Permalink

        Also cars (and certainly car sharing) is far more efficient and flexible too in general.

      • lifelogic
        Posted August 15, 2012 at 11:46 am | Permalink

        In fact they pay more than the £100 PW in car taxes on the commute. This as they also have to earn it (and thus pay income tax and NI on it first) so nearer £130 PW perhaps.

      • Bazman
        Posted August 15, 2012 at 8:40 pm | Permalink

        Maybe the subsidised use of private helicopters could somehow be used to finance other areas of transportation? As I have mentioned before the absurd regulation of helicopters especially safe twin engine types, is holding the country and London back.

    • Bazman
      Posted August 15, 2012 at 8:04 pm | Permalink

      So what is the best solution? More cars? Railways into roads?

      • lifelogic
        Posted August 15, 2012 at 9:00 pm | Permalink

        A level fiscal (and subsidy) playing field, freedom of choice and a free market will solve it. So yes – probably more coaches, cars, roads, bridges, underpasses, working at home or telecommuting in the UK.

      • Caterpillar
        Posted August 15, 2012 at 11:06 pm | Permalink

        Bazman,

        Solution?

        To remove the demand for the flexibility that cars offer and to increase the utilisation of fixed transprot routes –

        This is accomplished through developed, large dense cities; London, Singapore, Hong Kong, NY … These are the places that deliver high GDP per capita.

        Rail and, more recently broadband, support large, dense cities – in turn large, dense cities support rail and broadband.

        The UK has(d) some indication of a plan, connecting the large cities up with HS2 and not focussing on just one international airport. With reduced planning (+ enterprise zones and broad band speed focus not remote reach) this could start the feedbacks going such that Manchester and Birmingham could one day up the GDP per capita alongside London. Unfortunately many people will support driving cars and connecting broad band to sparse and disperse places, thus pushing away from cities’ dynamism and efficiency. I think the Coalition will back track on the transport and growth solution (rather than speed it up) and go for votes instead by shuffling Justine Greening to allow U-turn on HS2 and Heathrow, directing broadband policy more towards access to all, and continue to restrict population growth … many people will celebrate and think this is a listening Govt, it might be, but it won’t be a thinking Govt.

  2. Posted August 15, 2012 at 5:56 am | Permalink

    It’s crony capitalism shored up by the taxpayer – like the banks, PFI, the Olympics, the lot. Give us genuine free enterprise or communism – not this corruptionfest in the middle!

    • lifelogic
      Posted August 15, 2012 at 11:26 am | Permalink

      This “corruptionfest” is still far better than communism. Just give us free enterprise no green religion, a level fiscal playing field, fewer transfers to the feckless, a sound currency and a government that takes about 20% of GDP and then delivers sound defence, law and order and a few other basic services. Just these please no more and no EU just trade.

  3. Paul H
    Posted August 15, 2012 at 6:02 am | Permalink

    In case you haven’t noticed (I sure you have), all increasing prices are “special factors” and all decreasing prices are proof of an imminent deflationary vicious spiral.

  4. Mike Stallard
    Posted August 15, 2012 at 6:16 am | Permalink

    Back to reality after the Olympics!

    1. How much has the EU got to do with this? I suspect, having discovered MOVE Directorate, rather a lot.

    2. What are railways for? If it is shifting a lot of people on a regular commute, then they should stick to that. If it is prestige big spend projects to make people look good (TGV, Shin ka sen) then please don’t.

    3. PS: If you print a lot more money, then it does tend to lose its value, not so?

    • Jerry
      Posted August 15, 2012 at 9:12 am | Permalink

      Indeed, due to EU rules, the UK could not renationalise the railway system even if we wanted to.

      The Major Government messed up in two major ways (no pun intended), first was signing and ratifying Maastricht, second was the fragmentation of the railway system, both are coming back to bite the UK’s economy and society very hard.

      • lifelogic
        Posted August 15, 2012 at 11:35 am | Permalink

        Taking us into the absurd predictable disaster of the ERM (as Chancellor) and then trying to keep us in with 17% + mortgage rates (as Prime Minister) is fairly major too as I recall. As countless businesses collapsed, houses were repossessed, and people committed suicide all for nothing or rather his daft belief in the Euro religion.

        In fact nearly all he ever touched was a disaster. Needless to say he is now a BBC “expert” called in to give us his views – usually in a manner suitable for dim 8 year old’s who would swallow anything.

      • uanime5
        Posted August 15, 2012 at 3:46 pm | Permalink

        Actually the UK could renationalise the railway because nearly every European country has a nationalised railway. All the EU said was that the Government couldn’t own all the railways but the Conservative Government used this as an excuse to sell off the railways, creating the current problems.

        In France they have state and private railways, and without the problems of high rail fares and poor services found in the UK.

        • Jerry
          Posted August 15, 2012 at 8:34 pm | Permalink

          @ uanime5 Not sure what your point was, nothing you say changes the fact that it would be against EU law to renationalise, all you have proved is that a previously nationalised national rail network doesn’t need to be privatised – although it is, in effect, a requirement under the open market to ‘sectorise’ them and allow EU wide competition – hence why Deutsche Bahn AG operate in the UK and other EU countries for example.

          • uanime5
            Posted August 16, 2012 at 7:51 pm | Permalink

            It’s not against EU law to renationalise the railways. Every other EU country has national railways because they’re not illegal.

          • Jerry
            Posted August 17, 2012 at 5:32 am | Permalink

            @ uanime5 again. Sorry but it is illegal under the single market and competition rules to RE nationalise.

            As I said and you have illustrated, there is on requirement for countries don’t need to sell off already state owned and run industries (not just rail), but even then they are required to allow competition, hence the various sectorisation that has occurred within the French SNCF railway system.

            Reply: Labour did renationalise Railtrack and then added RBS for good measure.

          • Jerry
            Posted August 17, 2012 at 8:11 am | Permalink

            @ JR: Railtrack/Network Rail hardly amounts to a full scale re-nationalisation and in any case our own railways were never truly privatised (if they had been we would not have the mess we do now), they are just franchised out, all routes and services default back to the government (or agents of). Also Network Rail Ltd. is technically a private company, just wholly owned by – well that is a good question….!

            Labour did many things within the banking industry but I must have missed them nationalising Barclay’s, HSBC and others alongside of RBS, HBOS etc. Perhaps I’m using a different definition of Nationalisation…. 🙂

      • Iain Gill
        Posted August 15, 2012 at 6:36 pm | Permalink

        the east coast main line seems to have been renationalised, since gner handed it back to the government nobody seems too bothered about finding another private enterprise to take it on

        • Jerry
          Posted August 15, 2012 at 8:40 pm | Permalink

          Iain the ECML is being run by the default, state owned, rail operator, this is not the same as wholesale re-nationalisation.

      • Iain Gill
        Posted August 15, 2012 at 6:40 pm | Permalink

        The East Coast main line has been renationalised, since GNER handed it back to the govrnment there has been no move to get another private company running it

  5. Mick Anderson
    Posted August 15, 2012 at 6:24 am | Permalink

    There are a few self-fulfilling events going on here.

    The radio news tells me that Virgin have lost the contract to run west coast services because First have bid a higher price. All this extra money has to be found from somewhere, so either higher fares or higher subsidy will presumably be required to fund the licence. It would be far better for the rail traveller if the licences were free, and permission to run the trains was purely based on which company was going to provide the best service.

    Then there is the rambling, devolved system with so many different parties needing to interact to run the railways. It’s a massive and expensive inefficiency.

    On top of that, the rail fare regulator has agreed that they can raise the prices above inflation every year. For those who commute by rail, the season ticket is a significant part of their personal outgoings. These rises might not show up in the CPI figures, but it affects the personal inflation inflicted on the individual. It’s not as though wages are keeping up with inflation either.

    This seems to be an extension to the high tax, high spend, wasteful Westminster policies. There is no concept of either value for money (either with the very high or unsustainably low fares) or making things simple. The principle seems to be to charge as much as possible for everything to maintain high money velocity. It doesn’t work, especially in recession.

    • Mike Wilson
      Posted August 15, 2012 at 8:18 am | Permalink

      Surely if you want high velocity money, you need low taxes.

      • Mick Anderson
        Posted August 15, 2012 at 9:53 am | Permalink

        You’re right, I phrased that clumsily. I suppose that the Treasury would be happy with momentum, as long as the speed and/or quantity of money is large and heading towards the tax man.

        As electronically transferred money has a negligible weight, you could argue that the only thing that matters is speed. All Mr Osborne cares about is quantity.

        I certainly agree that lower taxes are the better approach. Speed things along….

    • uanime5
      Posted August 15, 2012 at 3:50 pm | Permalink

      It’s going to be higher fares as the treasury wouldn’t agree to giving a railway company higher subsidies, so that the railway company can give the treasury more revenue.

      Sadly the Government it too willing to accept bids that promise large cash returns without checking whether it will be possible to get these returns.

      • Bazman
        Posted August 15, 2012 at 8:06 pm | Permalink

        The private railways then just chuck in their hand. If they lost all their franchises then this would not happen.

    • Mark
      Posted August 15, 2012 at 9:04 pm | Permalink

      As far as I understand it, the difference between the bids is £750m, while the current annual fare revenue is about £900m, likely to escalate at around 5% p.a. in unit terms over the 13 year franchise. That gives total revenue of around £18bn, so the difference is worth about 4% of projected revenues. Perhaps FGW believe they will be able to increase revenue and profit sufficiently to make up that difference, which isn’t quite so large when looked at in that light rather than as a proportion of the fee they were prepared to offer for the right to run the franchise.

      I’m sure Virgin feel disappointed at having been outbid, especially having suffered during the extended period of track upgrading that will have limited their returns. Presumably most of the staff and the actual trains will transfer to the new franchise, and Virgin will have an opportunity to negotiate over the sale of their trainsets.

      • Mark
        Posted August 15, 2012 at 9:07 pm | Permalink

        Revenue of course can be generated by extra passengers rather than simply by fare increases. To make it more profitable, it pays to increase load factors and train utilisation (less time in the sidings), although extra trainsets may also help make more money.

      • Iain Gill
        Posted August 16, 2012 at 8:02 am | Permalink

        on the other hand both GNER and National Express have outbid Virgin for the East Coast main line and both subsequently handed the franchise back to the government having failed to make their numbers, Virgin have a good track record of estimating whats possible and have been proven right time and time again

  6. Nicola Clubb
    Posted August 15, 2012 at 6:31 am | Permalink

    I think you will find some commentators have already said it is due to the Olympics and the price hikes before and during.

  7. David Hope
    Posted August 15, 2012 at 6:41 am | Permalink

    The BoE has gone beyond a joke. Why does anyone listen to a word they say when they have continually called everything wrong for years!

    Surely one of the main reasons there is no growth is because inflation has been so high for years with wages frozen or rising slowly since the 2008 crash.

    Further, keeping rates low also damages savings. How are we to see significant lending without savings backed by real wealth – right now there is no incentive to defer consumption and save.

    Finally, the BoE helped cause the housing bust by having rates too low for too long.

    John, you rightly say that a central bank can never be politically independent regardless of how its labelled. But if this is true and if policy makers and/or central bankers cannot be trusted to make sensible decisions, surely we need to look very seriously at inelastic money and other more Austrian like approaches. Doesn’t have to be gold but we need something that prevents such large and continual distortion of our medium of exchange.

  8. Steve Cox
    Posted August 15, 2012 at 6:54 am | Permalink

    It will be interesting to hear the Bank’s explanation of why inflation has picked up again…”

    Ummm, let me see now, could it be anything to do with having just started printing another £50 billion of funny money? 😉

  9. Gary
    Posted August 15, 2012 at 7:16 am | Permalink

    as was shown to work during the olympics,ramp up telecommuting. Squeeze these price gouging railways.

  10. Brian Tomkinson
    Posted August 15, 2012 at 7:30 am | Permalink

    The BoE won’t be worried; their performance on inflation is appalling but, unlike what you might expect, they are being given far more powers, not having their wings clipped. Their comments will be more meaningless babble. The new governor is soon to be appointed and guess what, (Calamity) Clegg is to be consulted. Ever wondered why there is such little confidence in this country? Look no further than the weak and feeble leadership of your party.

    • Denis Cooper
      Posted August 15, 2012 at 10:17 am | Permalink

      Actually the BoE’s performance on inflation was very good for almost a decade during which the MPC always kept it within the range specified by the Chancellor, despite Brown deciding to suck up to the EU by making a foolish change to the measure of inflation in late 2003.

      http://www.tradingeconomics.com/united-kingdom/inflation-cpi

      That’s why the Governor had never had to send any Open Letter of explanation to the Chancellor before the earliest on this list, dated April 16th 2007:

      http://www.bankofengland.co.uk/monetarypolicy/Pages/inflation.aspx

      in which he expressed surprise that it had taken a decade with 120 MPC meetings before there’d been a sufficient deviation from target to trigger a letter.

      Since then their performance has been pretty appalling, but three successive Chancellors have sent their replies to the Governor’s Open Letters and none of them has ever expressed great concern about excess inflation or upbraided the MPC for missing the target.

      • Denis Cooper
        Posted August 15, 2012 at 4:32 pm | Permalink

        Overlooked for moderation?

      • Brian Tomkinson
        Posted August 15, 2012 at 9:34 pm | Permalink

        Denis,
        Three successive Chancellors were all therefore quite happy to see the MPC inflating away the debt and m0netising the deficit.

        • Denis Cooper
          Posted August 16, 2012 at 7:55 am | Permalink

          Apparently so, and also happy for criticism to be directed at the Bank rather than at themselves.

      • Lindsay McDougall
        Posted August 16, 2012 at 9:24 am | Permalink

        But because the chosen measure of inflation did not include an element of house and other asset prices, monetary policy was not tight enough between 2001 and 2007. This was a decision of the great clunking fist and the governor, and was responsible for the inflationary boom. Is the governor still denial that there was a boom?

        • Denis Cooper
          Posted August 16, 2012 at 4:36 pm | Permalink

          Brown defined (and later re-defined) his inflation target; under that part of the 1998 Act the inflation target was (and is) specified by the Treasury, and the Bank has no formal role in that.

  11. The Prangwizard
    Posted August 15, 2012 at 7:33 am | Permalink

    Why are fares rising in England more than in Scotland? The rise in England is around 2% more than in Scotland if memory serves. Is the the devolution issue again? I presume so, another case like prescription charges for example, which are free in Scotland because the devolved administration in Scotland is better placed financially because of subsidies from England through the Barnett formula. Scotland will get I think £3 billion – whether they need it or not – if HS2 goes ahead, merely because money is being spent in England.

    • Jerry
      Posted August 15, 2012 at 9:29 am | Permalink

      Talking of HS2 and today’s announcement regarding the WCML, surely if First Group are correct (a BIG if) in their rational for the franchise bid then they and the DoT have killed off any rational argument for HS2!

      If First Group is correct then HS2 is dead, if HS2 is actually needed then we should expect the First Group WCML franchise to go the same way as the ECML National Express franchise did after a couple of years. Could this announcement be tacit acceptance by the DoT that HS2 isn’t needed?

      • Caterpillar
        Posted August 15, 2012 at 12:07 pm | Permalink

        By the time the First Group franchise ends (2013 + 13 years), only the first link of HS2 from Bham to London is due to open. The ‘northern’ routes are even more into the future than that.

        • Jerry
          Posted August 15, 2012 at 3:31 pm | Permalink

          You have missed the issue here, HS2 has (mostly) been justified because capacity is lacking on the WCML for any more expansion, now FG say that they can find this missing capacity, someone is not being honest…

          If both the the HS2 promoters and FG are correct then it still doesn’t mean that HS2 is the answer, it means that the real need is the re-routing of freight off the WCML (thus allowing even greater capacity for passenger services).

          As I’ve said before, HS2 is a hell of a lot of money just to shave very small amount of time off the journey to Bham a beyond. A better use of the money would be a low speed freight line, not that it couldn’t be used for passenger use as well, this could also use some reopened rail routes which in its self could substantially reduce the build cost.

          • Leslie Singleton
            Posted August 15, 2012 at 7:14 pm | Permalink

            Dear Jerry, What you say makes sense but only if freight takes up a large proportion of WCML usage (I have no feel for this). Even if you are right, what is stopping all this freight running at night when passengers are asleep? What mileage of disused lines are available en route Birmingham? Are the Government really that stupid? Don’t answer that!

    • lifelogic
      Posted August 15, 2012 at 9:03 pm | Permalink

      Simple because they can get away with it in England in Scotland too many would not pay.

  12. alan jutson
    Posted August 15, 2012 at 7:35 am | Permalink

    Last year my Daughters entire miniscule salary increase (after tax) was taken up with train fare increases.

    Looks like this year will be the same.

    Her distance of travel from Wokingham to Theale involves using two trains and a walk at each end of the journey.

    Total travel time 1 hour15mins, distance about 10 miles.

    Thus each year she is worse off than the year before as other costs rise.

    Meanwhile those who choose to stay at home and live off of Benefits got a 5.2% increase which of course was tax free.

    Some real encouragement to go to work ?

    • zorro
      Posted August 15, 2012 at 9:12 am | Permalink

      Some driving lessons perhaps?

      zorro

    • Jerry
      Posted August 15, 2012 at 9:47 am | Permalink

      Alan, you really believe that the majority of those on benefits choose to be on benefits? Those stories in the tabloids are the exception, not the rule, something some politicians should remember too… 5.2% is still very little when it’s a percentage of very little to start with, especially when compared to above inflation raises in the utilities bills.

      If the county is so awash with jobs, why does your daughter put up with such (expensive) commuting, why doesn’t she get a different job that doesn’t need such travel, indeed why don”t you employ her (after all you said you run your own company)….

      • alan jutson
        Posted August 15, 2012 at 10:49 am | Permalink

        Jerry

        Yes you are correct, I used to run my own Company (did so for 30 years) but have now fully retired after winding down my activities over the last 2 years.

        No, I do not belive that all people want, or indeed live a good life on Benefits. But some do and many more try.

        The Benefits system was I thought introduced as a short term safety net for those who found themselves in unfortunate circumstances, and I have absolutely no problem with paying (as a taxpayer for that).

        But we are suppopsed to all be in this together, and the way I see it, those both at the very top and bottom of the system seem to be immune to the sacrifices that the rest of us are having to make to pay for it all, when its not our fault.

        Yes my daughter could look for another job locally, but having been made redundant a couple of years ago (from a more local job) she is loath to tempt fate by moving job again at the moment.

        But rest assured she is looking, whilst she is in work.

      • Winston Smith
        Posted August 15, 2012 at 11:24 am | Permalink

        If there were no jobs in the last 10 years, why have we imported 4m foreign workers, whilst we have consistantly had 4-5m people on out of work benefits?

        • alan jutson
          Posted August 15, 2012 at 12:45 pm | Permalink

          Winston

          Correct, we always shoot ourselves in the foot so to speak.

          One day they may wake up, but I will not hold my breath.

        • Jerry
          Posted August 15, 2012 at 1:55 pm | Permalink

          Winston, before anyone can answer such a question one has to ask were the unemployed are and were the jobs are, then one needs to ask what the jobs are and who would be expected to do them – simply quoting totals is utterly meaningless, doing so might create headlines (good or bad) for politicians but for the rest of us…

          Also do remember that when you say “why have we imported 4m foreign workers” that many of these workers are in fact not ‘foreign’, they are citizens of the EU and have come here to earn (even at the NMW) more than they can back home.

          • davidb
            Posted August 15, 2012 at 8:11 pm | Permalink

            I have encountered Poles and Hungarians everywhere. In unemployment blackspots, on motorway services, in shops pretty well everywhere and even on islands. The argument that people cannot get jobs because they dont live near the demand for labour is far fetched. There is some other reason people cannot find jobs.

        • Bazman
          Posted August 15, 2012 at 8:17 pm | Permalink

          This is because the East Europeans that have come to do the jobs are young adventurous, fleet footed and intelligent. Or they are here for the purpose of obtaining enough money to achieve some goal such as property purchases in their own country. The British find all this very difficult to compete with and why should they compete with five to a room/car for minimum wage? The East Europeans in the same position, like in Britain, stay at home with no job and benefits. Simple innit? Listening to middle aged middle class men tell the working poor and benefit claimants should somehow compete is beyond a joke. As if these pasty faced bleaters could compete with anything.

    • uanime5
      Posted August 15, 2012 at 3:55 pm | Permalink

      Don’t forget that the Government is cutting tax credits for those who don’t work 24 hours per week, so those who work part time will be even worse off.

      http://www.guardian.co.uk/commentisfree/2012/apr/03/cuts-to-working-tax-credits

      Is it any surprise that people aren’t willing to work when the Government punishes them for trying.

    • lifelogic
      Posted August 15, 2012 at 6:25 pm | Permalink

      Indeed a typical example train are expensive and inefficient – a moped perhaps or small car perhaps?

      • Bazman
        Posted August 15, 2012 at 8:19 pm | Permalink

        You could run a superbike for the price of a train ticket never mind a small car or a moped.

  13. Electro-Kevin
    Posted August 15, 2012 at 7:37 am | Permalink

    It does seem out of kilter and these rises are embarassing.

    As far as I know our train timetables are formulated with local councils and user groups and each company is obliged to provide those services as part of their franchise tenders.

    I agree. Something needs to be done to optimise services.

    In truth a lot of essentials a rising at above inflation levels and we should view this for what it really is:

    We are getting poorer.

    It is a great pity that people who are trying their best to get to work are being hit hard.

    • Electro-Kevin
      Posted August 15, 2012 at 7:52 am | Permalink

      I understand that Margaret Thatcher thought railway privatisation a bad idea.

      • Jerry
        Posted August 15, 2012 at 10:10 am | Permalink

        It was the Thatcher government who commissioned a report into the future of the railways, it made Dr Beeching’s second report (the more cutting of the two, and quickly dropped by the MoT) look like a chimps tea party by comparison. She might have thought that railway privatisation was a bad idea but was that more because she understood the need for railways as a social necessity or because she didn’t actually want the railways – she publicly stated on more than one occasion that she didn’t like rail travel.

        The one Tory Secretary of State to publicly back the nationalised rail industry (and the need for investment) in her government was then moved to a different department at the next cabinet reshuffle.

      • Lindsay McDougall
        Posted August 15, 2012 at 3:50 pm | Permalink

        Yes, for one good reason. She thought that they could never be profitable.

        • Electro-Kevin
          Posted August 15, 2012 at 8:31 pm | Permalink

          Any system under which an excellent operator like GNER could fail is deeply flawed. I believe that company to have been the model of what rail privatisation aspired to achieve – much superior to the West Coast franchise.

          The railways might never be profitable. The question we need to ask is if they are essential.

          There is more to it than sentimentality and ‘social’ consideration.

  14. Pete the Bike
    Posted August 15, 2012 at 7:42 am | Permalink

    The problem with the railways is that they are a political football and attract subsidy and interference from every politician and bureaucrat that sees an advantage for themselves. Privatise them properly, not this sham that we now have. Sell them off and remove all subsidies. They will sink or swim in their own and we just might see effective management and customer service. As it is now it will remain a crippled and under performing black hole for money stolen from ordinary people.

    • Jerry
      Posted August 15, 2012 at 10:17 am | Permalink

      Indeed, if the railways are not to be renationalised and run as a service then selling them off (even giving the infrastructure away) as complete railway systems -akin to the old pre-war “big Four”- would likely be the best option.

    • uanime5
      Posted August 15, 2012 at 3:58 pm | Permalink

      The problem is that if a railway sinks then those who suffer are those who used this part of the railway (commuters and trains that use this line to get from A to B). The net result will be a very fragmented railway that can’t be used to travel around the country.

  15. Mike Wilson
    Posted August 15, 2012 at 8:17 am | Permalink

    From the article: ‘It means a further squeeze on spending power,as wages are still rising less fast than prices.’

    Wages still rising? Maybe in the public sector – maybe MPs’ wages are rising … out here in the private business sector, you know – where you have to compete to get business – I haven’t been able to raise my rates for 6 years or more. In fact – I figure I’m lucky if my customers don’t try to negotiate my rates down.

    The fact is – in the private sector most wages are stagnant or falling and with inflation of 4% to 5% for a good few years now, in real terms I’m probably earning 20% less than 5 years ago. It’s no wonder there is no demand in the economy – few people have spare money and, of course, demand in the Labour years was based on ever increasing consumer debt.

    The economy is structurally flawed. The state is too big and is a burden on the only part of the economy that can generate sustainable growth – the private sector. What is the government doing about it? Nothing.

    Reply: MPs’ wages are frozen. Average wages in the UK are rising as the official figures chronicle.

    • Adam5x5
      Posted August 15, 2012 at 12:15 pm | Permalink

      Reply: MPs’ wages are frozen. Average wages in the UK are rising as the official figures chronicle.

      Out of curiosity, are these figures broken down to state and private sector? I would wager that the increases are predominately in the state sector…

      Reply: The state sector is currently under a pay freeze.

      • uanime5
        Posted August 15, 2012 at 3:59 pm | Permalink

        These rises are likely to be in the privates sector as those in the top jobs get pay rises regardless of how the economy or their company is doing.

        • Lindsay McDougall
          Posted August 16, 2012 at 9:31 am | Permalink

          With the elimination / reduction of bonuses, a lot of ‘top pay’ is down. Don’t flog a dead horse.

          • uanime5
            Posted August 16, 2012 at 7:58 pm | Permalink

            If that was true then the wage difference between the richest and poorest would be decreasing, not increasing. “Top pay” isn’t going down.

      • alan jutson
        Posted August 15, 2012 at 6:02 pm | Permalink

        reply – reply

        Its a pay freeze only if you are at the top of your scale, if not you still get yearly scale rises, its just the cost of living ones that are frozen.

      • lifelogic
        Posted August 15, 2012 at 6:29 pm | Permalink

        “The state sector is currently under a pay freeze” not a total one I hear and not for those unemployed or on benefits either. Anyway, as they are paid and pensioned, about 50% more than the private sector it would need to be a freeze for perhaps 20years to redress the balance fully.

  16. Leslie Singleton
    Posted August 15, 2012 at 8:20 am | Permalink

    I was hoping a couple of weeks ago to hear via your learned commentators (commentors?) some kind of explanation why the rail routes from Ally Pally and Noel Park through crowded North London in to the City were closed down but answer came their none. Hugely busy in the Rush Hour and, at weekends, the other direction provided routes to the Palace with its Park and Race Course and lovely Victorian Grandstand till the Race Course was closed down. Few seem to realise these days that there even was a Station actually in the Palace at the back. And they wonder that youngsters have nowhere to go at weekends. Utterly bonkers. Both routes should be re-instated. The modern buildings put up here and there on the otherwise well preserved routes are ghastly, an insult to architecture and should be knocked down forthwith.

    • Jerry
      Posted August 15, 2012 at 10:39 am | Permalink

      To answer your question directly Leslie, ‘cos the route didn’t pay. Am I not correct in saying that the lines your refer to were closed before even Dr Beeching swung his axe, perhaps I am thinking of a different route?

      Of course, many lines that were closed before and as a result of Beeching would now make perfect sense, both from social and economic positions, what makes them so today probably wasn’t even thought of back then though…

      • Leslie Singleton
        Posted August 15, 2012 at 2:21 pm | Permalink

        Dear Jerry, Indeed I’m sure they did not pay (I do not know whether their closures were pre Beeching) but the management must have been doing an awful lot wrong for that to be the case. These routes were already there through crowded North London and relieved or should have relieved pressure not just on the overcrowded even then Northern Line but on car traffic in to London in the Rush Hour. I wonder how they factored in the benefit of reduced rush hour car traffic in to their calculation (Answer: not at all most like). What seems to me to have been very poor management of Alexandra Palace and its grounds (miniature railway for kids round the pond with its fishing not to mention a swimming pool in the grounds and a roller skating rink and the Race Course) no doubt didn’t help much.

    • Winston Smith
      Posted August 15, 2012 at 11:27 am | Permalink

      Much of that route through Crouch End is still visible and used as a walkway. However, you’d never get it past the socialist hypocrites who occupy much of the neighouring, expensive housing.

  17. Iain Gill
    Posted August 15, 2012 at 8:49 am | Permalink

    I did get tickets to Portsmouth and Southsea from Victoria from Southern for only 10.00 each way, which was only a little above the price by coach. Nice journey too. On a route where there is sort of competition from South West Trains but their lowest similar price was 20.00 each way. All depends on being able to predict in advance exactly where I will be and which train will be best. The price I normally pay when turning up and getting on the next train is outrageous. If 10.00 is Southerns “seat dumping” price how comes SWT are charging double?
    I do find the C2C trains immediately after 9.30 in the morning are packed as these are the first trains of the day on which peak fares do not apply, and these trains are normally run with less carriages as they are outside the peak making the crowding worse.
    The worst practise is missing stops completely. Southern trains if they are running late routinely just miss stops out and continue onto their destination as they appear to have targets for time of arrival at final destination and no targets for actually stopping at the timetabled stations along the way, absolute nightmare if you need to use one of the intermediate stations.
    Branson is correct the system is a mess. But the biggest problem is the separation of infrastructure from the train operators, infrastructure folk need to be tied much more closely to success of trains.

    • Mark
      Posted August 15, 2012 at 10:51 am | Permalink

      Failure to stop at an advertised station is a breach of contract, entitling you to consequential damages. I’ve managed to secure redress for this more than once. On one occasion, I was directed onto a train that was timetabled at the same time as the one I needed to catch, but it didn’t stop at my station. I demanded – and got – a taxi home paid for by the railway (there were no further trains running back up the line by the time I was able to get off).

  18. waramess
    Posted August 15, 2012 at 9:35 am | Permalink

    Q”The question is how and when will this happen”
    A”So long as the government provides a feather bed”

    Privatise the lot but do it properly and allow the great travelling public decide with their feet. For too long the railways have been treated as a National Treasure. They are not, in fact they are only of use if the public want to use them.

    Maybe , once again, the free market is a pill too strong to be taken. Poor old Adam Smith, clearly it was all for nothing

    • Jerry
      Posted August 15, 2012 at 11:02 am | Permalink

      For too long the railways have been treated as a National Treasure. They are not, in fact they are only of use if the public want to use them.

      Actually they are, perhaps not treasure, more likely a necessity, life would have to change a lot if without railways, the problem is that they have been miss-managed for years.

      As someone else pointed out, railways have been a political football, well before they were nationalised (it was just that there was just less interference during most of the inter-war years), being kicked about without any thought to the people who make the system work or the passengers who pay.

  19. zorro
    Posted August 15, 2012 at 9:44 am | Permalink

    Yes, I saw those comments on spare capacity by the boss of FirstGroup….It will be interesting to see how that develops bearing in mind the government’s proposal to spend mega billion bucks on HS2!

    zorro

  20. Caterpillar
    Posted August 15, 2012 at 10:20 am | Permalink

    (1) On train offers. When I look up Euston to Man Piccadilly (i.e. the 2 and a bit hour route), the one-way prices are £104 leaving before 9am, £62.50 leaving betweem 9am and 10am, £32.30 leaving after 10am.

    Two thoughts to come to mind from JR’s prices, (i) To which route and duration do the offers refer? Is this a less popular route / company / duration? JR only mentions “email yesterday from the railways”. Perhaps there is capacity but not where it is wanted? (ii) On “dumping” I suspect this revenue management could also occur from trains coming into London before 9am and trying to get people on them during the subsequent repositioning – choose the price to maximize the revenue and thus subsidise the repositioning.

    (2) On inflation. The July 2012 CPI of 122.5 compared with June of 122.3 is approximately an annual rate of 2%. If the BoE/MPC now has the UK back on a 2% annual rate, given the CPI index values of last year we should expect

    Aug 2012 2.17%
    Sept 2012 1.66%
    Oct 2012 1.74%
    Nov 2012 1.74%
    Dec 2012 1.49%
    Jan 2013 2.16%
    Feb 2013 1.74%
    Mar 2013 1.58%
    Apr 2013 1.16%
    May 2013 1.42%
    June 2013 2%
    Thereafter 2%

    My guess is that if these numbers are achieved it will be spun as deflationary pressures, but these are the numbers that should be achieved for the annual rate to have returned to 2%.

  21. Iain Gill
    Posted August 15, 2012 at 10:39 am | Permalink

    Given that we are printing money and that the Bank of Englands own staff pension fund has been moved to inflation linked bonds don’t you think that tells you all you need to know about whats really expected re inflation? Watch where they invest their own pension fund and ignore what they say that’s the best way of treating the Bank of England.

    • alan jutson
      Posted August 15, 2012 at 12:50 pm | Permalink

      Iain

      Exactly

      The old mantra of, do what I say, not do as I do.

    • lifelogic
      Posted August 15, 2012 at 9:13 pm | Permalink

      Judge not by what they say but what they do. Just as you should judge Cameron and the “green” Prince Charles. Does he live in a small house and have a bike/buses for his limited travel or does he spend over £1M of tax payers money on it and use Aston Martins, helicopters and jets?

  22. Acorn
    Posted August 15, 2012 at 10:43 am | Permalink

    Inflation is good, it reduces your debts. It devalues household income and capital. It takes us nearer to the abolition of private sector wealth. The Socialist future is that only the State shall have wealth; and the 1% of the population who will “hold it” for the other 99%.

    Anyway having toyed with many different types of macroeconomics this year, I am going to investigate the history of the Gold Standard again. As my links are struggling to pass moderation at the moment, (they go in sympathy with OSBO’s popularity in the party), I will point you to Google with “The gold standard: generator and protector of jobs – Hugo Salinas Price”.

    Also, some may have listened to he-who-shall-not-be-mentioned, as we get nearer the election, on KWN. As far as I can see it there are a considerable number of Tory back-bencher’s who should gain the testicular fortitude to sail their fleet under a different flag! Google: “He has worked for British, French and American companies operating in the commodity markets, especially the London Metal Exchange (since 1982).” Should get you there and not have the Whips on JR’s back. 😉 😉

  23. a-tracy
    Posted August 15, 2012 at 10:55 am | Permalink

    I’ve never had the need to use the railways regularly until recently when Euston London from Crewe and Glasgow Scotland from Crewe or Warrington have become regular journeys for our family.

    We have had great service and some good prices from Virgin on the West coast mainline often purchasing first class single return tickets off peak at good value. One journey from Glasgow was a bit of a disaster though as there were no drinks available and no staff on duty for the entire journey 3.5 hours and that was first class! The government may be getting more money from the new franchisee, however, what guarantees do the users have that the service will be the same. Also the journeys north of Crewe are much slower, I believe this is down to the rail track rather than the old franchisee.

    I hope the new franchisee is spot on Mr Redwood with the Commonwealth Games due in Glasgow in 2014 it will reflect poorly on the government if the new franchise bails out around then.

    • Mark
      Posted August 15, 2012 at 9:48 pm | Permalink

      Oh! Mister Porter, what shall I do?
      I want to go to Birmingham
      And they’re taking me on to Crewe.

      Go by car? If there’s more than one travelling it soon becomes the cheaper option, and the total journey time is probably shorter.

  24. MajorFrustration
    Posted August 15, 2012 at 11:02 am | Permalink

    Surely the time must come shortly when our elected representatives give the BoE a good kicking given its failure to perform. Does anybody represent the voters on the real issues that effect them.

    • Andrew Johnson
      Posted August 15, 2012 at 12:26 pm | Permalink

      Couldn’t agree more. If you look at both the the B of E’s economic and inflation forecasts over the past 15 years, you will discover just how poorly they have performed.
      I believe Sir Mervyn King has served Great Britian very poorly. If he was in a major company, the shareholders would have had him removed long since.
      What has particularly grated has been that in recent years, in my opinion, every time he has opened his mouth in public he has talked Britain down.
      It speaks volumes of the ineffectiveness and cowardice of government ministers of all parties, that nothing has been done about such a crucial area of GB’s economy.

  25. Simon
    Posted August 15, 2012 at 11:14 am | Permalink

    http://www.tradingeconomics.com/united-kingdom/inflation-cpi

    Look at the inflation chart. Notice anything?

    Single month reversals of trend are common. This might be the start of a new rising trend, or a plateau, or a single month with different sign to the surrounding months.

    We won’t know until next month, or possibly the month after, whether this signifies anything other than a blip.

    Oh, and the modal wage rise in the UK is 0%, the mean is only being dragged up by the continuing wage rises of the top 1%.

    • Caterpillar
      Posted August 15, 2012 at 6:42 pm | Permalink

      Simon,

      W.r.t. to trend in CPI. It is perhaps more interesting to overplot the following three sets of data

      (i) The monthly CPI (the index not the annual rate) from Dec 2003 (97.5) to July 2012 (122.5)
      (ii) A theoretical curve starting at Dec 2003 (97.5) and increasing at 2% per year to the present.
      (iii) A theoretical curve starting July 2007 (104.4) and increasing at 3.25% per year to the present.

      I believe this ‘for fun’ plot much more clearly illustrates what has happened to CPI.

  26. Richard1
    Posted August 15, 2012 at 11:22 am | Permalink

    BBC interviewers tool the same line – why are passengers having to pay more, why cant ‘the Govt’ put up more suibsidy. No questions about costs, profit, structure of the industry. The unions dont want that line of enquiry.

  27. Winston Smith
    Posted August 15, 2012 at 11:36 am | Permalink

    The Chiltern Line recently upgaded its London to Birmingham service, reducing the time to just 20mins more than HS2. They have been running 50p fares to fill the trains. Offpeak, they sell most tickets to Chinese fashion tourists, transporting them to the Bicester Designer shopping centre. HS2 is lunacy. The Tories will lose many council seats on the issue, next May. UKIP will be standing candidates in most areas, dividing the Conservative vote. Despite, their appalling leadership and loony policies, the LDs will gain many seats.

  28. peter davies
    Posted August 15, 2012 at 1:40 pm | Permalink

    The fact that the trains cant seem to get their act together makes the HS2 proposal seem even more absurd. Especially as it will only cut 20 minutes off the journey – Govt needs to wake up!

  29. Atlas
    Posted August 15, 2012 at 1:52 pm | Permalink

    Re the railways: I think the question is whether FirstGroup’s figures stack up. I suspect they do not, in which case we have another G4S egg-on-the-face of the Ministers who espouse the private sector without apparently examining closely what we taxpayers are being asked to fund.

    • Lindsay McDougall
      Posted August 15, 2012 at 4:00 pm | Permalink

      First Group are promising to open 5 new routes, e.g. to Blackpool, provide 11 new locomotives and run more trains. Sounds like a good deal. Also, remember, that Virgin were part of the winning consortium for HS1 at a low price, the eventual cost being almost exactly equal to the bid of the consortium that came second.

  30. Lindsay McDougall
    Posted August 15, 2012 at 3:37 pm | Permalink

    The Olympics will have had their effect on overall price levels, all that lovely ripping off of foreigners, so I expect we shall to wait until the September figures are published.

    Railway inflation? Just accept at face value that the fare increases are to finance future investment. That will include HS2, a link from HS2 to HS1 and eventually a high speed line all the way ……………… to Berlin.

  31. uanime5
    Posted August 15, 2012 at 3:40 pm | Permalink

    The Independent had an interesting article about why the railway fares keep going up. Apparently it’s because the Government keeps giving railway contracts to companies that promise to give the Government the largest amount of money and these companies obtain this money by raising their fares as much as possible. Also these companies can freely leave any contract that isn’t profitable without suffering any loss and the Government has to pick up the cost. So for the railway companies it’s high profits if they win or taxpayer bailouts if they lose.

    http://www.independent.co.uk/news/uk/home-news/sir-richard-branson-blasts-flawed-bid-system-as-virgin-rail-loses-west-coast-main-line-franchise-to-firstgroup-8049374.html

    In other news the fall in unemployment is due to more people working part time and unemployment is still 51,000 higher than last year. Also expect unemployment to rise dramatically rise when the Paralympics end and the seasonal work ends.

    http://www.guardian.co.uk/commentisfree/2012/apr/19/chris-grayling-job-snob-toynbee-left

    Also NHS whistle-blowers and those who prioritise patients over targets are being bulled, and the Government is either doing nothing or supporting the bullies. It’s no wonder the NHS had so many problems when people are punished for doing the right thing.

    http://www.independent.co.uk/life-style/health-and-families/health-news/exclusive-nhs-watchdog-claimed-that-whistleblower-kay-sheldon-was-mentally-ill-8046640.html

    • Lindsay McDougall
      Posted August 16, 2012 at 9:43 am | Permalink

      Now here’s an infrastructure project. Upgrade Scottish soccer stadia so that they are good enough to mount a Euro or World Cup competition, the grant being conditional on a rejection of independence.

  32. Alexis Broadbent
    Posted August 16, 2012 at 12:49 am | Permalink

    Rail travel will never work until timetabling responsibilities are taken away from the government.

    Rail companies should be allowed to auction signalling priorities. This would deliver speed improvements to where they are most in demand across the network.

    The current framework for awarding franchises does not allow TOCs to reduce journey times, and this deprives rail of one of its potentially biggest competitive advantages, as companies have to bid to exisitng timetables.

    Allowing TOCs to buy network priority would increase deliver faster journeys and increased concession fees to the Treasury. Why is there failure to deliver commercial flexibility to rail companies?

    I have not seen any evidence of increasing sophistication of algorithms to promote the best use of network resouces. If Heathrow can operate at 99% capacity, the rail network should be able to deliver similar availabilities.

    All of the governments of the last 30 years have demonstrated massive complacency about reducing commuting times. Anyone who had the misfortune to take the train on a Sunday in the 1980s knows that privatisation has delivered immense improvements to the network since then.

    I have never seen a transport white paper that takes the issue of reducing commuting times seriously. White papers in the last 25 years have always hidden behind the veil of passenger safety, when in reality rail travel is the safest form of transport available to passengers. If safety was really an issue, the use of seat belts would be compulsory.

    One day the country will get a transport minister that understands the needs of the consumer. I am not optimistic that this will happen soon.

  33. Posted August 16, 2012 at 9:00 pm | Permalink

    Since the early 1990s UK train fares on average have increases faster then inflation as reported by RPI, but does this tell the whole story, as the recent news headline make out?

    Historically, UK train fares have generally increased inline with UK average salary growth as can be seen from the graphs of historic UK train fairs against average wages and graphs of historic UK train fairs against RPI inflationwhich show the relative compounded changes since 1987. This is very different to the trend with inflation were train fares increases much faster. From all the news headlines recently, you would have thought that train fares were racing ahead from wages for the last 10 years.

    It was only since 2010 that train fairs have consistently increased faster than wages, mainly due to average wage growth slowing significantly. So relative to wages on average train fares are only slightly more expensive as they were in the late 1980s.

    Reply: Regulated fares have been rising more quickly, but there are lots of discounted and cheap fares providing an offset if you average them. Commuters tend to have to pay the dear regulated fares.

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    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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