John Redwood's Diary
Incisive and topical campaigns and commentary on today's issues and tomorrow's problems. Promoted by John Redwood 152 Grosvenor Road SW1V 3JL

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How green is bus travel?

The average bus in 2016/17 carried just 11.9 passengers. If you excluded the very crowded peak time service busies in our major towns and cities, the average figure for bus use would be considerably lower. It makes many bus services an expensive way of carrying a few people, and means there is a substantial output of exhaust gases, particulates and CO2 for the typical bus passenger. The argument for large buses is a better ratio of passengers to the cost of the driver and vehicle, but where in many cases there are insufficient passengers wanting that route at that time it obviously dearer and less environmentally friendly than a mini bus or taxi sized vehicle.

This is compounded by the fact that the average bus is 7.6 years old. That means there are still many diesel buses running on UK roads that do not meet modern standards of exhaust emission control. We see these buses discharging smoke and particulate matter as they stand at bus stops or in bus stations with engines running, or as they accelerate away from traffic lights or congestion points.

In 2016 29 cyclists and pedestrians died from accidents involving buses, and 232 people sustained serious injuries from crashes involving buses. Bus drivers usually drive safely and carefully. Many of the crashes were probably not the fault of the bus, but the bus is a large vehicle to deploy on many of our narrow and crowded streets leading to conflicts with other road users. Buses can add to congestion by their need to stop on the carriageway to drop off and pick up, and some bus lanes are designed in ways which greatly reduce the total capacity of the road which they are part of. A road of variable width can offer more traffic conflict by directing buses onto a bus lane for a short distance then back onto the narrow road, then back into the bus lane in ways which slow traffic and may cause misunderstandings and collisions.

Buses are good ways of moving lots of people in very busy urban areas at peak times, and quite good ways of moving people throughout the day in places where enough people want to use these services so they can be frequent. Outside busy places and periods it is not possible to offer a frequent bus service, given the costs of running a large bus. The lack of frequent services then reduces the numbers of people who find it potentially useful. Many people want more flexible public transport like dial a ride services executed by mini buses. Many would prefer a car based service, if it could be made affordable. These different options would also reduce the number of very large vehicles on small roads.

Sin taxes do what it says on the tin

The government is quite keen to use small tax rises on particular products to change consumer behaviour. These seem to be very successful in their own terms.

Let’s take the 5p bag tax. 5p is not a large sum of money on the average supermarket shop, though the average supermarket shop would often need more than one bag. Since the introduction of the 5p charge so called single use or thin plastic bags issued by the main super markets has plunged by 83%. Most of us now take longer life bags to the shop so we do not need to pay for more of these thin plastic holdalls. I have no problem with doing this myself.

We need to remember that some of these so called single use bags were used again for other purposes. I used them again for carrying, storing, or dumping waste through the refuse system. Now they have been largely phased out we need to make and use alternatives for dumping waste and for carrying things. There will be some loss of overall bag output, with more opportunities for bag producers to sell tougher longer lasting bags.

There is then the Sugar Tax. The government claims early victories for this recent introduction, as many makers of soft drinks changed their formula prior to the arrival of the tax to get the sugar content below the permitted maximum. As a result the government has now halved its estimate of the likely revenue from the tax. Levied at 24p a litre on high sugar drinks it is quite a price hike on these relatively low value items,but not a huge increase in the cost of a total food shop for those who want carry on drinking high sugar colas and similar.

These two examples show that quite small tax increases on everyday items will change behaviour markedly where the public buys into the need to make changes, or where the sum of money is annoying or difficult on a low budget.
We now see a pattern to what happens with tax rises or new taxes. It should make the government extremely nervous about putting additional taxes on things like work and savings, where it generally says it approves, as these too can be adversely affected by increases in rates or by new impositions. We also see a pattern that revenue often falls short, and there are consequential reductions in related revenues.

Chancellor Osborne hit the buy to let market with tax rises

In the spring budget of 2016 just before the referendum the government decided it wanted to rein in buy to let housing investment. It introduced a 3% extra Stamp Duty on BTL and other second homes, and announced the phased removal of interest relief on purchasing Buy to Let property.

I presume the government is pleased with the results of its tax rises. According to the Investment Mortgage Lenders the £25 bn of net investment in 2015-16 collapsed to just £5 bn the year after the tax rises. This 80% decline has certainly truncated the successful growth in private rented accommodation, and had knock on effects to the workloads of house agents, builders, renovators and removal firms.

I did not quite understand why policy reversed, as it had been policy of both Laour and the Consevatves to enocurage a larger prvate rented sector to complement social rented and ownership. Many people were fed up with the very low interest returns on their savings held in relatively safe bonds or in savings accounts. They decided to do what the Bank and its Quantitative Easing policy was meant to be about, taking more risk with their savings and introducing some borrowing to their investments to make them more worthwhile. This substantial sum did produce some more homes for people to live in, and helped reduce the rate of rent increases people experienced.

It does make another good example for my series showing how higher taxes do have a direct and often profound effect on behaviour. Here is another great illustration of how higher taxes reduce economic output. The government achieved all it could have wanted in the first year of the tax with such a large reduction in Buy to Let. As a result it also lost a range of other tax revenues on the activity which was cancelled.

Higher taxes cut car sales as planned

The Treasury has hit diesel car sales hard as the government wished. They have managed to bring the whole new car market down for a year by pushing up taxes in the Spring 2017 budget and leaving open future tax attacks on diesels in particular. People fear further action by national and local government. It was a surprising policy choice given the considerable work past governments put in to getting more car engine manufacture in the UK.

There have been stenuous efforts to blame Brexit and ” confidence” but the numbers showed confidence and car purchases soared for nine months after the vote, and then plunged as the taxes came in and car loans were tightened by regulatory action. I blame the taxes.

I guess the Treasury is pleased with its work. It has achieved a big planned reduction in new diesels, despite new diesel cars meeting all the government’s own emission standards. It also has the side effect of bringing the UK growth rate down a little to get it closer to the official forecasts.

It probably means the government has collected less revenue overall, as the higher VED will be more than offset by the big fall in tax on new car sales. There is a 20 % tax on new cars, so each sale lost us a big hit on tax revenue.This then means the Treasury scramble around for something else it can impose a higher tax on, which could help slow another part of the economy they do not like. I will highlight some of their other successes in using higher taxes in posts to come.

More car industry investment – thanks to Brexit?

Nissan, Toyota and Vauxhall have all now announced important investments in the UK post the referendum. We were told the opposite would happen by Remain. During our tine in the EU Ford pulled out of making vehicles here and BL collapsed completely.

Shop prices fall again

In the year to March 2018 UK shop prices fell by 1% according to the British Retail Consortium. They tell us that “shop prices have been deflationary for 59 months now, and this is the deepest deflation since February 2017”. I haven’t heard the usual voices scrambling to tell us this is all because of Brexit. There has been far less comment on this than the rush to get it wrong when general prices were briefly going up a bit faster last year, when many came forward to tell us it was the result of sterling which in turn they thought was related to Brexit. I explained then that their forecasts of much higher inflation to come were likely to prove wrong, and explained how they had misunderstood the movements of sterling and their likely impact on prices.

Sterling has been rising gently for some time as we move closer to Brexit, and shop prices have fallen again. Sterling fell a lot in the year and a half before the vote for unrelated reasons. It had fallen from $1.71 to $1.42 before the referendum. This did not stop shop prices falling. It is around $1.40 today. The Euro was strong last year against all comers. Shop prices have always had more to do with world output, internet competition to retailers and the hugely competitive market for things like clothing and electrical appliances that the world market has provided. The Retail Price Index has been more volatile thanks to rising international energy prices and domestic price pressures like Council Tax and the EU/UK move to dearer electricity for policy reasons.

European health costs

I have been asking questions about how much it costs the UK to pay for health treatment for our citizens seeking treatment on the continent, and how much we charge people from other EEA countries for their treatment here.

In 2016/17 the UK received just £66m from charges imposed on the other member states for treatment of their nationals in the UK, whilst they charged us £630 m for the treatment UK citizens received. It is difficult to believe it should be that one sided. It is true a considerable number of UK citizens live in Spain, which charges us £200m for the health treatment they supply, but we also act as host to many people from the continent who also need to visit surgeries or receive treatment. The UK only received £5m from France for the whole year, compared to the £154 m they charged us.

The NHS in 2016/17 identified just £81 m of treatment carried out for people from the rest of the world, and recovered £30.4m in cash.

It does appear that despite the policy that EEA nationals health costs should be recharged to their governments, and non EEA people should be expected to pay for non emergency treatment, there is still some way to go for the system to identify the full amounts and to collect the cash from those who should pay.

Innovations to like, and innovations that disappoint

I am all in favour of new technology. It can deliver more to us for less. It can help us in ways we did not imagine. It drives good change in the corporate world, forcing businesses to adjust to new competitors and to rethink their goods and services. It often produces a product or service which becomes a must.

There are also times when innovation produces a product or service which is little or no improvement on what it seeks to replace. Change makers can become mesmerised by the technology and think less about the customer. Much change is healthy, but some change can be expensive, disruptive or simply unnecessary.

I was an early adopter of mobile phones, as it was a big leap forward to be able to contact people from wherever you are. Many of the improvements made to cars, to their safety and comfort, are most welcome. Modern computers enable us to find information without going to the library and to send out material without having to persuade an editor or publisher.

I ask myself which innovations that are currently being discussed would do most to improve my life? Clearly a self driving car that took responsibility for my travel would provide a big increase in freedom and give me back the hours I spend in traffic jams studying the safety of the road ahead. I would like a self controlled hoover that could clean a room whilst I was doing something else in another room. More automation of other cleaning routines would also be good news.

There are some changes which have not brought obvious benefits. As a taxpayer I get my share of the big bills for switching trains to electric drive, but as a passenger I do not see any improvement of an electric train over a diesel. All the time we generate electricity from coal and gas it is difficult to see the environmental case as well. Electricity as a secondary fuel incurs energy losses at the power station and in transmission as well as in turning the energy into drive power in the engine.

I have given up on my digital radio at home and gone back to the old analogue one, despite the poor BBC signal. The digital radios are difficult to tune in, slow to warm up and often provide a poor quality output. The one I have to have to have in the car regularly cuts out in busy places.

Quite a few of the digital control systems are far less effective than old fashioned switches and dials. Fiddling about with a light display operated by applying finger pressure to a pad is not as quick or easy as setting a dial to a required setting.

I would be interested to hear your list of good and bad new ideas.

The role of the civil service in Brexit

Last Wednesday night I spoke to the Bruges Group about Brexit at their request. There was widespread concern about the role of the civil service in the Brexit negotiations.

Our constitutional theory is clear. Ministers decide, civil servants advise. Civil servants can warn and restrain Ministers to make sure Ministers obey the law and operate within their powers, but they are not there to write Manifestos or to decide the direction of travel. Many individual civil servants may have voted Remain, but they must all be Brexiteers now in their professional lives, as they are working for a people who have decided to leave and a government which is seeking to do so. Ministers are meant to lead, identifying the issues government needs to address and recommending solutions and decisions which they think will improve things as people and Parliament wish. Ministers are entirely responsible for keeping Parliament onside and getting the necessary Parliamentary consents, and should conduct the public dialogue about government policy and performance.

It does appear that the Cabinet Secretary Jeremy Heyward, and the Chief Official negotiator Mr Robbins have considerable influence. I happen to disagree with the advice that the UK needs to keep on offering concessions, and needs a long additional Transition period following on from the 2 years 9 months wait to get out which should be the transition period. Many Eurosceptic MPs offer different advice. We advise against a Transition period, especially before we know what we might be in transit to. We advise against offering money and other concessions, as the UK is a very generous partner even without such offers. A free trade Agreement is clearly good news for the rest of the EU and will happen unless they wish to self harm. If they wish to do that no amount of concession might change their mind.

The fact is the Prime Minister is in charge. She decides which advice she likes best, and she decides who her advisers will be. She has chosen Mr Robbins to lead many of the talks with the EU, and we must assume he keeps her fully informed. Those of us who wish to see the UK now withdraw some of its very generous offer if the EU does not start to offer us a worthwhile future deal need to ensure the Prime Minister herself is aware of this view. She probably did learn on her recent whistle stop tour of the UK that many people do now just want to get on with it. Many of us do not share Whitehall’s worries about what might go wrong if we do not end up replicating the EU in all but name.

It is true that the Treasury officials produced some very poor work ahead of the Referendum, where they were clearly under political instruction to do so by the Chancellor. They would be well advised to redeem themselves by producing some more realistically optimistic work now they are under a government which says it is pro Brexit. The whole civil service needs to ensure all is ready to leave on March 29 2019, and should help Ministers speed up the necessary work on new fishing, farming, borders and spending policies for the UK. This surely is a very exciting prospect for those interested in the work of government. After years of having to conform, from March 2019 – unless we sign it away again – we will be free to do as we wish. We do not need any more mapping of Project Fear. We need some practical answers to a series of detailed matters, all of which can be resolved. Ministers should enthusiastically lead their officials in getting on with this task. Ministers should send back for changes any document which just repeats the endless false rumours of the Project Fear campaign which we have heard all too often and are one by one being proved wrong.

Good Friday service

I attended the social gathering and service at the Salvation Army Church in Sturges Road on Good Friday. I am grateful to the Salvation Army for hosting the event this year and making us all feel welcome.