Author: johnredwood

The political parties are now descending on the water industry.It’s a race to be the toughest, after the battle of the energy companies over the last few weeks. The red corner has told us to expect water industry menaces soon. The blue corner has got their retaliation in first, with a letter to the industry telling them to tread carefully when it comes to price changes this winter.

You should not need this degree of political concern about prices. We do not have sharp exchanges on bread prices in the Commons, so why do we need them on water? The answer is simple. The water industry does not benefit from competition.

Some competition has been introduced in Scotland for water supplied to business. It all passed off peacefully. The worst fears of the critics were confounded. There was no interruption to supply. The taps stayed on. The best hopes of advocates were not realised either. Prices did not tumble, though they came down a little. Businesses on the whole approved. They said they got a better service as they could always switch supplier now if they were not looked after.

Usually when you introduce competition to an industry that has not enjoyed it, prices fall, quality rises, and innovation comes to the party. More of all of those would probably have happened in Scotland if the whole industry had been open to challenge, rather than just the accounts of some big businesses. The shock to the water industry was modest as the area for competition was modest.

If the political parties are serious about getting a better deal for English consumers they should go ahead an allow competition throughout the industry. Water is no natural monopoloy. It falls from the skies on all of us. The business task is to harvest enough of this plentiful and renewable resource, and clean it to the appropriate standard for its users.

We debated all this yesterday in the Commons. I will post my speech when it is available in Hansard.

Mr Cameron responded yesterday to the growing attacks on the costs of HS2 by saying the government would work away to get the costs of this very expensive project down. If you are going to build it, that is a sensible aim. The statement was made on the same day as the MOD announced yet another escalation in the costs of building the two new aircraft carriers.

Why do we have such problems in this country with runaway costs on big projects? When I buy a new piece of equipment for my home I choose one I like and agree a fixed price for its manufacture and supply. The contract is binding and I end up paying the original price. Why can’t we buy trains and boats like that?

The boats are different because the UK state wants one offs that have never been built before and will doubtless never be built again. The state as customer gets dragged into the costs of design. the state then regularly changes its mind about what it wants, giving the contractors need or excuse to hike the price. The state as customer needs to get better at deciding what it wants and sticking to it. It also needs to nail down more of the purchase cost as a fixed price.

When it comes to buying trains, there are plenty of fast trains available around the world without having to design completely different ones. Given we have in mind a big order, it should also be possible to ask the winner of the bidding competition to build significant amounts of them in the UK under licence. Building track is a one off in terms of the route, but other wise can be standardised to a considerable extent.

The difficult to knows in the case of HS2 include the compensation and land acquisition costs,and the amount of work that will have to be done to create stable and flat ground conditions for laying the track. More surveys and preliminary negotiations with landowners can start to cut the risks of overrun on the estimates. The costs of the track and signals themselves should not be open to a lot of guesswork and can be specified precisely, in advance, to a standard already in use and production. A sleeper or a signal is a ubiquitous railway product that can be costed and calculated.

I remain against HS2 overall. If it has to go ahead then at the very least it should be possible to lop £10billion off the current projected costs, by going for as many components as are in current production and by completing accurate survey work of the land costs, and conditions. There should be a deadline for the final plan which then does n to allow variations for fear of cost escalations. If the idea is to add stations, vary the routes and make other changes as we go along then the bills could get even bigger.

I support a system which delivers a minimum income. The Minimum wage in most cases is below the minimum income, so families top it up with income related benefits. The idea of raising the Minimum wage is partly to get employers to pay a higher proportion of the minimum income the state thinks appropriate. Some of the increase in wages will be balanced for the individual worker by loss of benefit top up.

The living wage is just a higher Minimum wage. The living wage is closer to the Minimum income, but there will still be income top ups from the state for many people on the living wage. The so called living wage would be difficult to manage on for families without housing, child and other support from the state.

Above all I want to promote policies that will deliver more better paid jobs. The only way we can all enjoy higher living standards is if our economy produces more, either to sell to ourselves or to sell to foreigners in exchange for imports. If we produce more we can consume more. If we fail to produce more we can argue about how much we take off the richer to give to the poorer, but on average we will no better off. If we go too far down the road of redistribution we make ourselves collectively poorer, as some of the rich leave and cease to make any contribution.

Labour’s latest idea of offering employers a tax break to pay more to their employees is mainly redistributing what we have. We will need to see the numbers. The state accounts will lose tax revenue from the tax cut but will also reduce spending from the top up benefit reductions. The employment effect will hinge on what such a scheme does to the costs of employing people. If the tax cut balances out the extra wage cost it will be neutral. Were the tax cut to be less than the extra pay cost then it could damage employment.

The last time I took an early morning train on the East coast mainline, only one in four of the Standard class seats and one in ten of the First class seats were taken in the carriages where I counted. The West coast mainline was similarly little occupied when I have taken early morning trains to the north on that. I reported on journeys to Birmingham and Manchester.

This makes the tri party decision to build more capacity on these train routes all the more curious. I can think of plenty of places where we need more transport capacity now. Providing more on routes where the existing train franchisees are finding it difficult to fill the places is not a model for success or a good investment. Whilst travellers will welcome the eventual fare cuts competition between HS2 and the WCML will bring should HS2 be completed, the poor taxpayer will be left with a large bill to pay the big running losses on both lines.

We could start by looking at the chronic shortage of capacity on our major motorways. They could all do with widening and improving in many locations. We could continue by completing proper capacity on major trunk routes, like the A14, the A 303, and the A 27.

We could move on to the commuter trains into our major cities. We are short of commuter capacity into Manchester, Leeds, London and Birmingham. We need better brakes, lighter trains, better signals so we can run more trains per hour. We need longer trains and in some cases longer platforms. All these improvements could delay the need for more track, though doubtless there are some pinch points and shorter sections into city centres where more track would be a good idea, and even some where it is also possible.

There are a host of detailed local road and rail improvements needed in many towns and cities around the country, that come a lot cheaper than the prospective bill for HS2.
Your thoughts on priorities would be interesting.

The Good bank/Bad bank campaigners were seen off in the Treasury decision on restructuring RBS. Those of us who wanted to see more than one competing UK clearing bank formed from the parts of RBS were also disappointed.

However, the new policy does include selling off Citizens, the US banking Group owned by RBS, and further reductions to the Investment Bank, whether by divestment or slimming down. These are both policies I have called for in the past.

The bad news still continues from RBS. The Bank reported more losses and still pays no dividends. It has published a report on its own small and medium sized business lending and service which is extremely critical.

The new Chief Executive sounded the right note, when he admitted past mistakes and promised full attention to creating a better quality more responsible UK clearing bank. He pledged himself and his team to being a better bank for UK business, and a more attentive and helpful bank towards its retail customers.

The Chancellor was able to welcome all this by saying there is now a new strategy. This new approach is designed to make RBS an asset rather than a burden for the UK economy. It is time RBS was available to make a full contribution to UK economic recovery.

RBS has got its portfolio of bad loans down to a mere £38bn, a relatively small sum for a bank of its size. The plan is to sell more of these on from within the ring fenced bad bank RBS will itself continue to own.

I wish the new management well. Splitting up RBS more fundamentally would have been a good idea 5 years ago or even 3 years ago. Now we need what is left to work better for UK economic recovery. We also need to speed the day when RBS can make profits and pay dividends, to get some of the taxpayers’ money back. Labour made a very bad investment. They should have broken up RBS at the time of its collapse, and only supported with loans those bits essential to the UK’s money transmission and deposit system. Now we have to move on, and manage the inherited mistakes as well as possible.

 

               The Conservative backbench Bill before Parliament to grant a referendum on membership of the EU has as its question:

                 “Do you think that the UK should be a member of the EU?”

                Voters have the right to vote Yes, or No.

                The Electoral Commission have now considered this draft question. They have asked is it clear enough? Is it fairly weighted? They have considered other possible wordings.

              They have come up with two versions which they prefer. The first is inviting the same Yes/No answer. It is

                ” Should the UK remain a member of the EU?”

                 This is shorter than the Bill proposal. It also makes clear should anyone be in any doubt that the UK is currently a member of the EU.

                The second version requires a longer supplied answer: It is

              “Should the UK remain a member of the EU or leave the EU?

              Voters can tick a box to say “Remain a member of the EU”  or a box saying “Leave the EU”

           I am happy with the wording in the current Bill. Anyone voting in the referendum will understand we are currently in the EU, and will also understand that voting No means leaving. Of the two Electoral Commission versions I prefer the shorter one.

            Any amendment to the Bill slows down its passage, so has to be weighed carefully. What do you think?

PS The Electoral Commission amended the Scottish referendum question to “Should Scotland be an independent country?”. This question does not tell people in Scotland that they are not currently an independent country, and gives to the “out of the union” camp the advantage of answer Yes. Yet when it comes to the EU the Electoral Commission does wish to explain the UK is in the EU, and give Yes to those who want to stay in, not to those who want to some out. Their approach seems variable.

 

           On  Tuesday night in the Commons there was rare and peaceful unity on matters European.  The government proposed that the UK should not accept the EU draft  for a European Public Prosecutor. Conservative Eurosceptics agreed strongly. The Labour party seemed to agree, and said they would not be voting against the government’s motion. The EPP would mean EU influence and control over our criminal justice system.

           The unity went further. There was also a proposal to beef up Eurojust, the system which currently allows cross border collaboration between the differing criminal justice systems of the member states when crimes and criminals cross borders within the EU.  The proposals would allow the European body to intervene directly in the criminal justice affairs of a given member state on the grounds that something should happen to satisfy another state or to deal with cross border issues. They wish to have a European right to bring a case.  This too was a step too far for all three main Westminster parties.

           The UK Parliament has lodged a reasoned opinion that the EU is seeking to go beyond the powers granted it under The Treaties, as have other member states.

           The debate was an important prelude to the bigger debate we will have in due course when the UK exercises its opt out from all Criminal Justice measures, as we are entitled to do. The three parties have different views of which of the many criminal justice measures the EU has already established the UK should opt back into, to ensure smooth extradition and cross border arrangements. Indeed, Labour and the Lib Dems do not want to opt out in the first place.  Conservative Eurosceptics are keen to press on with the comprehensive opt out. We will take some persuading about opt ins, given the way the EU swallows powers and absorbs jurisdiction, constantly pressing for more.

          Luanching the European Public Prosecutor and the enhanced Eurojust around the time of the opt out decision was provocative. At least on this occasion the UK Parliament has risen to the task of defending UK powers, jurisdiction and independence in the criminal justice field. May it continue to do so.

 

          In its latest version of Why HS2? the government bases its financial case largely 0n time savings, not on capacity improvements.     The government published the Strategic Case for HS2 yesterday. It said that time savings accounted for £45.7bn of the estimated benefits, with solving 0vercrowding offering just £7.5bn of benefits. Total benefits came out at  £71.2bn over 60 years.

         I was surprised to see this major reliance on the time savings, in view of the words about capacity mattering much more than time. The time savings have been newly valued. The estimators have lowered the value of business people’s time spent on the railway, but increased the value of commuter time and leisure traveller time. They have then added in £13.3bn of wider economic benefits, to get to a more favourable cost/benefit ratio for the total project.

           There has been plenty of media comment that an alternative smaller investment in the existing railway would mean many week-ends of disruption to train services given the working on the line. Yet the  Report in its conclusion on p 135 says ” Some of the upgrade schemes (on the existing railway) are likely to be taken forward as part of Network Rail’s normal forward planning process to modernise the network”. In other words there will be some disruption to existing train services at week-ends even with HS2.

        One of the strongest things to emerge from the Report is the huge scale of the railway investment proposed, relative to other transport investment and to the size of the economy.  Over the period 2015 to 2021 the current plans assume an HS2 spend of £16.5 billion, with another £22.5bn spend on other railway investment. This compares with just £15.1bn on national road improvements, despite roads taking more than ten times as much of the traffic as railways.

       The Report also reveals a reduction in the forecast revenue from HS2 services. The estimate is cut by £1.8bn, presumably reflecting evidence that there will be fewer passengers than originally planned. The new forecast is £31bn over 60 years. There is also the question of whether fare levels  can be sustained as forecast when so much extra capacity comes on stream.

           I could not find figures in the Report about current use of seats out of London in the morning and back into London in the evening. The Report seems to concentrate on journeys into  London at the morning peak and out of London in the late afternoon peak.  The table showing where there will be shortage and stress in the system illustrates that the main capacity problems lie in commuter journeys at peak into London from Watford and Milton Keynes,  into Manchester from Stockport and into St Pancras from St Albans.