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Thoughts about the relationships between transport and the urban area it serves

Archive for February 7th, 2008

£2bn of public money goes down the Tube as Gordon Brown counts cost of failed deal

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The Times

This one of the privatization stories that you can bet Wendell Cox will not be writing about.

Taxpayers will have to pay £2 billion to rescue the failed privatisation of London Underground, the Government admitted yesterday.

Ruth Kelly, the Transport Secretary, had to raid the Government’s contingencies fund to settle the debts of Metronet, which ran nine of the twelve underground lines but went bust in July.

The scale of the public liability for Metronet’s failure will be a severe embarrassment to Gordon Brown, who forced through the controversial Public Private Partnership of the Tube when he was Chancellor.

It was supposed to transfer risk. It didn’t. It was supposed to improve the system. It didn’t. It was supposed to be more efficient than public ownership. It wasn’t and now has been taken back under public control.

Just who benefits from P3s you may ask. It isn’t the customer and it isn’t the taxpayer. But a heck of a lot of public money seems to be finding its way into somebody’s pocket with very little to show for it.

UPDATE There is also a useful summary in the Economist

Chief among the criticisms—most recently stated in a report from Parliament’s transport committee last month—was that the PPP contracts failed to transfer risk to the private sector. Metronet’s five constituent firms—WS Atkins, Balfour Beatty, Bombardier, EDF Energy and Thames Water—put in £70m each. In return for their minimal exposure, Metronet’s shareholders expected to earn returns on the equity portion of their contribution of around 20% a year—justified at the time on the grounds that the huge PPP deal was a unique and untried proposition. But the firms’ exposure was slight. “There simply wasn’t enough equity at risk to give incentives for Metronet to perform,” says Stephen Glaister, an economist at Imperial College, London, and a member of TfL‘s board.

The transfer of risk is supposed to be one of the main selling points of P3s – but too often it isn’t. And there are of course, a growing number of local examples with similar failings.

UPDATE Feb 9 Useful commentary in the Guardian too

Written by Stephen Rees

February 7, 2008 at 5:51 pm

Posted in privatisation, transit

“Ownership society” is now members-only

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Naomi Klein

I actually prefer reading the paper version to the on line but this is also available at the www.thenation.com. Naomi Klein’s Web site is www.naomiklein.org .

Good analysis of why the right wanted to end the class war by turning everyone into owners – and what went wrong south of the 49th. What is missing is any Canadian perspective, but also I have one small quibble about her understanding of a major plank of Mrs Thatcher’s strategy back in the UK.

Thatcher offered strong incentives to residents to buy their council-estate flats at reduced rates (much as Bush did decades later by promoting subprime mortgages). Those who could afford it became homeowners, while those who couldn’t faced rents almost twice as high as before, leading to an explosion of homelessness.

First of all it wasn’t the flats that sold – it was the houses. You will probably recall the bit I did recently on the role of the big Labour local authorities and the huge council estates that appeared in every large city – and a lot of small towns too had some very desirable council housing. In fact, some councils actually allocated housing in some places to a better class of tenants. And on some estates, provided professional and managerial housing too so that local employers and services could be provided with suitable candidates. And of course it was these houses that got snapped up really fast. But what also happened was that where ownership was not realistic or difficult to finance remained in public ownership but rapidly went downhill. And thus was born the “sink estate” – the areas of the highest crime rates and deprivation. And some former council estates had to be bull dozed – even though the houses were well built and could have been refurbished, but the area had become so undesirable that no one would rent or buy there.

And one of the features of Thatcher’s transportation policies was an end to subsidies for bus services. So in addition to the sink estate (often at the edge of town with high fares or poor services) we also have the rural areas of “social exclusion” – places that people cannot afford to leave but have no services and no jobs and no way to get to either, because the bus was uneconomic to operate and the county council refused to provide a socially necessary service.

Now I do not pretend to have any expertise in the Canadian public sector housing debate. But we have seen a withdrawal of government funding for housing, and affordable housing is a huge issue – and not just in Vancouver. And there are also problem areas – I know one because I lived in it. Malvern in North East Toronto. But also areas like Jane-Finch, an intersection which still seems to the nexus of all the social ills of that city. What we also seem to have lost is the ability to come up with other solutions to housing tenure. At one time Canada was the place you came to observe how ideas like co-ops and other co-ownership projects worked. The absence of senior government funding means not many of these are now being built (if any) and the ones that are still going find it ever harder to keep their internal cross subsidies working for those in greatest need. Municipalities don’t provide housing here either.

And in my bit on retirements and pensions, I also tried to highlight how corporate malfeasance has hit private pensions – it was not just Enron and Worldcom – it is an ongoing problem with corporate governance. Corporations are treated by the law as persons – but they behave like sociopaths.

Written by Stephen Rees

February 7, 2008 at 1:14 pm

Posted in Economics, housing, politics

Primary public view on the climate plan: Don’t screw up the economy

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Vaughan Palmer, Vancouver Sun

This is an important piece, becuase what he is doing is trying to guess what is going in to the budget. Will there be a carbon tax and will it actually be “revenue neutral”? And would you believe them if they said it was.

The public response is contained in a report from the legislature finance committee, delivered last November. Now it seems to me that some massaging may be at work here as I am not convinced that ordinary Joes say things like “that measures to reduce greenhouse gases must neither adversely affect the B.C.’s strong economic position nor increase the province’s debt-to-GDP ratio” – they probably use much simpler language, and to some extent are simply recycling the conservative anti-debt, anti-tax nostrum that is supposed to cure all our economic problems – not matter what the problem might be or the state of the economy at the time.

More worrying is the way that widespread support for a carbon tax is dismissed  as “the result of an orchestrated campaign by “technologically savvy environmental advocacy organizations.” Of course, the issue of whether the analysis of those organizations might be technically correct is not discussed. For we do now have an understanding of how these things have been working out in countries with a carbon tax (like Norway) and without (Canada). And the record is very clear. Norway is not only doing better than us at cutting emission, its economy is doing better too. The idea that perhaps there are also “technologically savvy advocacy organizations” funded by big energy companies, and right wing think tanks (who think we should only levy taxes to pay for more prisons, more armaments and more freeways) is not discussed.

Marc Jaccard (who I reported on not so long ago) now dismisses the view that we can do well by doing good. That rising prices for energy mean that we will save money and save energy by savvy upgrading of our infrastructure and investment
in new technology. Apparently the savings simply go into a more luxurious consumption pattern – so the economy grows and so does the energy consumption. For instance, better fridge technology could have cut hydro bills but instead we bought bigger fridges – and wine coolers as well!

The report also urged the government to “recognize a clear urban/rural divide with respect to increases in transportation-related taxation.”

Well duh! If you live in the suburbs and have no realistic transportation choices of course you will be annoyed about higher gas taxes. Which is why “technologically savvy environmental advocacy organizations” have been talking about better transit for the suburbs for a very long time. And by the suburbs, they do not mean Vancouver’s West Side!

 Another key finding was that people did not know nearly enough about what could and should be done.

But that did not stop them asking for incentives rather than taxes. And, again, as Jaccard’s research shows incentives are very imprecise and wasteful. It is not at all clear that the people who got $2,000 for buying a Prius would have bought a gas guzzler if they didn’t get a grant. And the taxi companies certainly did not buy them as a good pr stunt!

If the people do not know nearly enough is that an excuse to ignore them? We are dealing with politicians who are facing re-election and that is what concentrates their minds – not the environment, even if it does become more hostile to human life as a result of their inaction. Because not doing anything is always their favoured route, or failing that pick the one their backers like best and then spin it to make it look like something else is being done that isn’t.

Written by Stephen Rees

February 7, 2008 at 12:21 pm

Communique from Bear Mountain Tree Sit

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The following message is passed along as I received it.  I do not know what was removed, or who by, at the [snip] mark

We are the people who have occupied the forest on the site of the proposed ‘Bear Mountain Interchange.’ We are people from Victoria, Langford, Brentwood Bay, Sidney, Sooke, and Colwood. We are the southern Vancouver Island community, but more than anything else we are people concerned about our future generations ability to live and breathe on this planet.

Our basic reasons for being here are simple. The government structures established in colonial Canadian society are unacceptable. The present political structure is currently enabling our managerial society to exploit the land for the benefit of car culture. This is indeed an interesting part of human history as we possess unique opportunities like never before: We can continue to develop in a nineteen fifties style mentality and perpetuate the global economic paradigm that is melting the glaciers and putting holes in the ozone.

Or, we can learn to reduce our ecological footprint, we can learn to live sustainably. We need to consume to survive but we do not need to rape our planet. Let there be no mistake, the petroleum economy is killing us. At this point in our development we should be protecting what little there is left of our intact eco-systems. We should be limiting the growth of our cities, not carving out mountaintops and paving them over with highways. It has been alleged in recent communication with the City of Langford that we are opposed to the interchange simply because there has not been a proper archaeological survey of the proposed path of the interchange. [snip]

While this is assertion is not wrong, our objections run much deeper. We are opposed to the political and economic system that places private property interests, and short term financial gain over everything else. We oppose the management society dominated by car culture that ceaselessly continues to grow and dominate the earth.

We demand thorough questioning of these values: That one can own land and therefore determine its fate for all future generations; developers must not be allowed to dictate our future.

To those who would destroy the earth for profit: Expect resistance on all fronts.

Written by Stephen Rees

February 7, 2008 at 11:47 am