The war on motorists looks set to get worse in the suburbs. Nottingham council has said that they expect that by 2014 commuters could face a "car parking tax" of as much as £350 a year to park at their workplace. Failure to pay the charge would be £175 per offence.
Tim Worstall has challenged, in a recent post, the logic of the DfT's suggestion that Air Passenger Duty (APD) needs to be increased further to take full account of the contribution of aviation to carbon-emissions. By Tim's calculations, taking Stern's figure of $85 as the social cost of a tonne of carbon-dioxide emissions, the cost of carbon emitted by air travel is "around and about the amount currently charged" under the APD.
One could raise a number of reservations about this estimation, but let's say (for the sake of argument) that he is right. It raises interesting questions, either about Stern's calculations, or about this approach to welfare economics.
Tim cites approvingly the DfT's explanation of the principles underlying Pigovian taxation. The DfT does indeed reduce the idea to its most basic essentials, but it seems to me that the essence has been corrupted or lost to some extent in the act of reduction. Let me see if I can set out the idea clearly, so we can judge mechanisms like the APD for how well they embody the economic theory that underlies them.
Economics, if it treats only of monetary values, is subject to the Wildean criticism that it knows the cost of everything and the value of nothing. Economists have therefore felt it important to consider the impact of actions on utility (or, simplistically, happiness). Welfare is the notional sum of utility or happiness amongst a group (ignoring for the moment that it is ridiculous to aggregate something incommensurable like happiness). Welfare economics is the study of economics from the perspective of maximizing welfare.
In theory, if all participants in a transaction agree voluntarily to its terms, then they must all feel themselves at least to be no worse off from the transaction, and some of them presumably feel themselves to be better off, or why would they have agreed to it voluntarily? This satisfies the condition needed to demonstrate that an action has increased general welfare. By definition therefore, free markets increase welfare. This (and the inability to make the same case for coerced actions, such as those obliged by the state) is the basis of the libertarian philosophy.
In practice, however, it is often the case that people not party to a transaction may be affected by it. The classic example is a factory whose effluent is discharged into a river. No matter whether all parties engaged in commercial transactions with the factory-owner do so voluntarily, the contribution of the factory to the general welfare may be negative, if the benefit to the direct participants is outweighed by the impact on those who use the river downstream from the factory. The pollution of the river is, in the language of economists, an externality - a value (negative in this case, but they can be positive too) that is attributable to someone's activities, which they are not able to capture (if positive) or obliged to incur (if negative).
Externalities skew decisions, such that the options that provide the greatest benefit to society (maximize welfare) may not be the ones that offer the greatest benefits to the participants in transactions. The way to ensure that markets provide the optimal outcome for society is to internalize the externalities. In effect, this means ensuring that the party responsible for the externality is attributed the cost or value of that externality.
A Pigovian tax (named after Arthur Pigou, the Cambridge economist who first set out a detailed exposition of welfare economics) is a mechanism whereby the cost of a negative externality can be internalized to the producer of that externality. If the impact of the effluent from the factory results in losses to those downstream at a rate of £100/litre, a government may impose a Pigovian tax of £100/litre on the factory, so that the factory-owners' decisions take into account the full costs of any choice, and not just those incurred directly. The Pigovian tax provides an incentive for the factory-owner to minimize the discharge of effluent or even to locate elsewhere where the external costs of disposing of the effluent are lower.
However, the application of the Pigovian tax is not sufficient in its own right to ensure that welfare is maximized. It may be that the factory-owner has few feasible alternatives, and decides to continue to discharge and pay the tax. In that case, the damage (or disutility) to those downstream is no less than before, and the utility of the factory-owner has also been reduced by application of the tax. The utility of the government (or taxpayers generally) may have been increased by the revenue from the Pigovian tax, but it is not the government or taxpayers generally who were being harmed by the externality. The Pigovian tax can only be said to have achieved its objective if it represents an accurate valuation of the harm and if it is distributed as compensation to those on whom the harm is inflicted, proportionately to their share of the harm. In other words, a tax (or charge) cannot be said to be an effective mechanism to internalize externalities unless it either deters the externality or fully compensates those who experience the effect of the externality (or a bit of both).
Greenhouse-gas (GHG, or, in the vernacular, carbon) emissions are an externality. They are a particularly difficult example, because the impact of the harm is uncertain and because most of those who may experience the harm are remote, both geographically (e.g. inhabitants of vulnerable countries) and temporally (i.e. future generations). It is important that mechanisms to internalize the carbon externality reflect the remoteness and uncertainty.
If we applied that tax of £100/litre to the factory-owner in the above example, but recycled the revenues to him by some subsidy or tax-break, there would have been no point applying the Pigovian tax in the first place. Similar could be said if we recycled the tax-revenues to his customers - the amount that he had to increase his prices would be balanced by the extra amount that his customers were able to pay for them. The tax would be neither an effective deterrent, nor an effective means of compensating those who experience the harm. It would simply be an inefficiency in the market, perhaps effective at salving consciences, but of no real value. Indeed, if it is effective at salving consciences, it may exacerbate the harm, because customers may consume more of the good, freed (superficially) from the responsibility of considering the impact of their choices on those affected by the externality.
In the case of carbon emissions, most of us, metaphorically, own shares in the factory, and most of us live downstream. But some own more shares in the factory and suffer less of the impact of the pollution than others (e.g. rich world vs poor world, this generation vs future generations). If we impose a Pigovian tax on the factory, but recycle the revenues to those who own most of the shares, we have not effectively internalized the externality. We may have exacerbated the harm by letting the factory's customers think that they now need not worry about the impact of the factory's externalities. This is exactly what most of the rich-world mechanisms to internalize carbon externalities, including the APD, are doing.
The Department for Transport is to publish a consultation report it commissioned on cutting the death toll amongst younger drivers in the autumn. The major proposal is increasing the age limit for gaining a full driving licence to by a year to eighteen. To do this they will impose a 12-month training period for new drivers, in effect preventing 17-year-olds from holding a full licence. According to DfT research a 12-month learning period would save up to 1,000 deaths and up to 7,000 serious injuries a year. All very well, but I don't really understand the logic entirely.
Last Friday, the LibDems launched "new transport polices to create a zero carbon transport system by 2050." And no one noticed. Not even their website, which carried the press release, but doesn't seem to carry the document, Towards Carbon Free Transport.
We are given a few hints how they might achieve this mighty ambition, but are otherwise left to speculate. The hints are:
So we will still be using trains, planes and automobiles, but they will somehow magically become zero-carbon vehicles. I'm looking forward to discovering how the full document explains how they will achieve this miracle.
UPDATE: They have now (Monday, 8th August) provided a link to the report. As expected, it is a mixture of the sound and the fantastic. Detailed analysis is provided in the Comments.
Once again, yesterday's rail white paper has left me asking - what exactly is this government's policy on climate change, carbon emissions and transport? In order to increase capacity of the railways, commuters will be forced to pay yet more inflation busting ticket price rises. Indeed, this will sort out the capacity problems because it will force people off trains and back in their cars. While the cost of running the railways is expecting to go up from £5bn to £9bn, the government's subsidies are about to go down - from £4.5bn to £3bn. The shortfall will be made up by pass
The Department for Transport (DfT) announced this morning that "Yorkshire commuters [are] at [the] heart of strategy for rail growth". Cleethorpes and Northallerton stations will be refurbished, bottlenecks around Leeds and Manchester will be tackled, extra carriages will be made available for Leeds and Sheffield suburban services, capacity on some routes of the Trans-Pennine Express will be increased by 30% by lengthening trains, and by "53% for peak hour commuter trains serving Leeds". Lucky old Yorkshire, being at the heart of the Government's plans.
Three minutes later, the DfT announced that "East Midlands railways [are] at the heart of strategy for [rail] growth". This strategy is now a bicardiac beast, which tends to be an unstable condition. But nevermind. They'll get longer trains in Nottingham and Leicester, faster journeys on the Midland main line, and "passengers will also see more punctual services as the Government is buying improved reliability". Very cheering, I'm sure, but what quality of service did the Government think they were buying before?
Another two minutes later, and the East has been added to the heart of the strategy. This beast's physiology is starting to look curious indeed. Guess what: longer trains, more capacity, better punctuality... At least this big heart will be beating as one.
The unrelenting attack on the motorist continues and it is TfL that is leading the way. Soon they will be charged £50 for even the briefest of swerves in to cycle lanes - and the cameras are watching be warned. Now given the streets of London were designed and built at time when the largest vehicle on the road was the penny farthing, I am not entirely sure that this insane policy is a fair one. It is being reported that even a motorist who strays in the cycle lane to pass a vehicle turning right will be slapped with a fixed penalty.
So TfL are going to pile in £750m worth of public money to the tube network to stop it grinding to halt as a result of the collapse of Metronet. Tim O’Toole (MD of LUL) has said he expected the taxpayer to plug any financial gaps left by the Metronet intervention. "This will feed in with the larger discussion with the government about the funding of TfL and transport in London." Indeed it will. So much for pass the risk on to the private sector!
If you want to drive fast, stay out of Wales and London and head to Surrey. The Department for Transport has released figures on the amount of money it has raised from speeding tickets over the last year. Surprisingly, there were fewer tickets issued last year than on the previous year. Good news I hear you say. You would have thought - but good news for you is not good news for the chancellor's coffers. Less speeding tickets issued means less fines means less money to plough back in to society (ahem!). Wrong.
Like most men, I do like a good list. I could real off my top 3 greatest footballers, my top 3 meals, my top 3 films, my top 3 just about anything. Alas this is a political blog and not a Nick Hornby novel so I will save you from the controversial news that Teddy Sheringham is the greatest footballer of all time and that Kate Moss narrowly beats Sienna Miller to number one female in the world. My lists are subject to change every now and then, of course, as a comedian starts to sounds dated and a new comedy genius arrives on the block, for example.
It looks like the government have been caught out over plans for a third runway at Heathrow airport. Incredibly, the Times is reporting that The Department for Transport has secretly passed key information supporting the expansion of Heathrow to BBA six months before it is due to be published in a consultation document. Not only does this prove that a government consultation is merely a closed decision dressed up in democracy clothes, but it also stinks collusion and corruption.
It seems that people are not entirely happy with the way the railways are run in this country and over 50% of you wanted to see them privatised. An underwhelming 12% wanted to see them renationalised. 35% were happy with them the way they are. Whatever the result of the Picking Losers' poll, it seems we will have to pay up front for the railways for the foreseeable future. In spite of inflation busting rail fare rises, the government expects them to keep on rising over the coming months and years.
Blair Force One is ready for launch. In fact, both of them are. Our outgoing PM has finally sanctioned the purchase of over £100m worth of aircrafts so that his best buddy Gordon and the Queen don't have to mix with the hoi polloi when doing "business" all over the globe. So much for global warming (though it has long been Government policy to exclude aviation from the environment debate - another runway at Heathrow anyone?).
Metronet, the consortium who are currently cocking up the upgrade of much of the London Underground system, are looking to take £600m of public money to cover their over-running costs. The extremely complicated PPP contract that was signed to last 30 years has so far cost Metronet £1.2bn in overspend. Mayor Ken Livingston has always been a strong opponent of the deal and has publicly stated that they will not receive a penny if he has anything to do with it. And good for him. Balfour Beatty, Bombardier, Thames Water, EDF Energy and Atkins - you signed this contract and you probably thou
A slender majority of people wanted to see the NHS retain political control by the government. Maybe a poll asking whether the NHS should be taken away from nationalisation completely would have produced a different result? One for the future maybe...
A new poll has started and is likely to cause some debate - it already has with myself and bgp. Is the solution to the railways to:
a) Renationalise them
One of the worst pieces of privatisation ever embarked on by a government was the Railways Act 1993 under John Major. It was a complex piece of legislation and opposed by just about everyone - including the Labour party. They disliked it so much they promised to renationalise the railways when they got in and the Tory MP and chairman of the Transport Committee at the time, Robert Adley, described it as the "poll tax on wheels".
Traffic Wardens. They have to be, rightly or wrongly, in the top ten least liked people on planet earth. Right up there with estate agents, lawyers and well, MPs probably. I personally can not stand them, though I'm sure as individuals out of that ridiculous "trying to look very official" uniform there are one or two nice ones. After all, they are just doing their job. And, if you follow that logic to it's conclusion, I blame and dislike the councillors even more! And they are only making it worse for themselves.
Following on from yesterday's post about the Iron Chancellor's historic decisions coming back to bite us all, it appears (though this has been no secret) that the PPP investment in to the London Underground has been as disaster. Gordon Brown went against the advice of Bob Kiley (one of the world's leading transport experts) and the Mayor and went for a PPP arrangement. This is a worrying trend - it seems that Brown listens to no-one but himself even on issues he knows nothing about. The result is that the Metronet shareholders are looking like they are going to jump ship, leaving the tax payer to pick up the bill no doubt.
So the government are going to offer incentives to get a few motorists to try out their road pricing scheme. Motorists who become guinea pigs for the governments tax raising plot will be given a discount on fuel duty in return for strapping a little black tracking box in their car. This is as a result of the Government's genuine shock and surprise to just about every single person in Britain when they responded badly to the road pricing plans via the anti road pricing e-petition that got 1.8m signatures and mass media coverage. And who said Labour is out of touch?
So the government wants us all to ditch our cars and get on public transport? And why should I, you ask? Well, it's a nice little earner for the government for a start. The Office for National Statistics has revealed another spectacular failure for John Prescott (has he had any successes?) and the transport policy of the Labour Government. Bus fares have risen by 52.9 per cent over the past decade. While train fares rose by 46.2 per cent between January 1998 and the start of this year. However, according to the AA, the driver of a small family car has seen their motoring bill rise from 41.52 pence a mile in 1997 to 56.15 pence in 2005 - or 26 per cent. All, I'm sure you will agree, are ridiculous increases in their own right, but it turns out that drivers have got off lightly compared to those who followed government advice.