Sue Kedgley's latest economic lunacy

Petrol prices rise (as do diesel prices). Demand for buses goes up in response, buses start overcrowding. The solution proposed by Wellington Regional Council? Increase fares, as it will moderate demand, recover the increased cost of fuel and reduce net subsidies. A great chance to lower costs to taxpayers, give bus companies more money from passengers that could be used to increase service capacity and encourage more people to walk or cycle instead of riding the bus.

No no, it's so wrong. Ignoring the value of increasing fares, Kedgley wants the money tree to be plucked to subsidise them more!! She wants people who aren't riding buses, ratepayers, to pay for those who do - to encourage people to overcrowd the buses.

It is sheer economic lunacy.

The opportunity now is for bus subsidies to end, for bus passengers to pay the costs of providing them with services, reducing demand from those who are price sensitive (and likely to walk, bike or not travel instead), providing room for those who are willing to pay, and incentivising the bus companies to put on more services to make money from the higher fares. However, Sue doesn't care about the much harangued ratepayer.

When the left is wrong about rail

Idiot Savant naturally is cheering the renationalisation of rail. Maybe no one bought him a train set when he was a kid. As is sadly the case of far too many on the left, he’s swallowed hook line and sinker the myth around Tranz Rail. There are elements of truth, but the story is far more complicated.

Though he treats the privatisation of New Zealand Rail as if it were something criminal saying “Unfortunately, the people responsible for that corrupt privatisation are still walking free” Yes, one of course is the Chairman. However, what about those responsible for this outrageous nationalization? Why are those who have taken taxpayers’ money and paid for a company around double its market price ever able to show their faces in public again? If a company director did a deal to buy another company well over the odds in price, he better demonstrate it would generate returns – actually Kiwirail will cost the new shareholders a fortune, and for what?

Well according to Idiot Savant the “private sector's focus on short-term profit led to asset stripping and running a minimal service”. Like he’d know. He is pretty much just churning out the leftwing propaganda from the era. Like he noticed that the privatised Tranz Rail increased long distance passenger rail services and ran them as such for some years before the impact of significant airfare discounting and cheaper car and petrol prices eroded patronage. The privatized Tranz Rail carried more freight per tonne km that the railways in New Zealand EVER did before. Just bigger longer trains on longer distances, many at night are invisible to most. Yes it didn’t spend up large on track, but a report in the mid 1980s said that the track had effectively been goldplated – overengineered for purpose in many cases. Privatised Tranzrail expanded its carriage of milk by rail and coal by rail, and even reopened the odd branch line for regular freight services (Dargaville). It bought a brand new ferry, which turned out to be a bit of a bad purchase, and started the Lynx Fast Ferry service which was eventually killed off by complaints against waves in the Marlborough Sounds that saw a speed limit imposed under the RMA. The last time a ferry had been bought by the government owned railways was 1983 and before that 1974, buying another and leasing a fast ferry was hardly “asset stripping and running a minimal service”.

He goes on “No matter what happens, freight and people are still going to be moved, but the market is unable to see far enough ahead to provide for it” Really? Noticed how privatised airports tend to be no worse, and often better equipped that state owned ones. Notice how ports all effectively run as local authority owned businesses, unsubsidised. Notice how many railways were actually built by the private sector, indeed the entire US rail freight sector is privately owned and operated – and yes it carries very large volumes of freight. Some of France’s motorway network is privately owned and provided and the rest are government commercial companies. The market wont provide? More a lack of imagination, permission and crowd out by the state.

He continues with the idea that “road transport pay its real costs, rather than continuing to be effectively subsidised by the government.” He doesn’t actually know what that means I am sure. It’s often trotted out by the anti-truck pro-rail believers (it is a religion after all), when the evidence is that the road transport that competes with rail does pays its share of roading costs. You might argue about negative externalities, but then nobody pays that in any economic or non-economic activities (or charges for the positive externalities). It’s just part of the leftwing environmental religion around transport.

He then says National wouldn’t possibly level the playing field between road and rail “Instead, they're likely to "leave transport to the market", entrenching existing inequities and repeating exactly the same mistake which led to rail being run down in the first place.” Well again he’s well out based on the last National government, but then I wouldn’t ever guess what the John Key Labour lite administration might do. National before sought to require roads, like rail, to be run by profit oriented companies. What it will do in the future is anyone’s guess, but the key point is that the long held myth by rail enthusiasts that road freight has some enormous advantage over rail needs to be exposed.

There are problems with the current system of road funding, financing and management, but nothing will dramatically change the amount of freight that goes by rail for a simple reason – rail is only efficient at moving bulk or containerized freight over relatively long distances, with few exceptions. Subsidising it more is subsidizing those already using it. It’s about time the worshippers of the grand sacred religion of rail engaged their minds.

Oh and if you still subscribe to the rail good, truck bad theory, I've fisked that one before as a study commissioned by this government demonstrated that in some cases trucks have a lower environmental impact than trains per tonne km transported (in some they are higher and in some are the same). So if it's not economically efficient, if the environmental advantages are dubious and sometimes illusory, then why buy the railway at all?

Indeed Idiot Savant, why do you want taxpayers to subsidise:

- Solid Energy's coal exports to Asia;
- Fonterra's dairy export business;
- Forestry companies logging and wood product businesses?

Awfully funny position for a socialist methinks.

UPDATE: Rodney Hide tells it like it is - it's going to cost hundreds of millions of dollars for taxpayers without any return.

Jim Anderton talks the same mythology of Idiot Savant, claiming rail is a natural monopoly. Funny how it finds it hard to compete with road freight and coastal shipping, this really isn't the characteristic of a natural monopoly is it? He scares us into thinking the Nats might sell it again - frankly who cares as long as taxpayers don't have to pay any more?!

Reading the PM's speech she makes a key mistake:

- Rail does not necessarily have a fourfold energy advantage over road for freight movements, that is long dated (1981) and discredited figure. The true figure is probably closer to 2-2.5 given improvements in roads, truck technology and the types of freight now moved. The truth is that there has been no good study done of this since then.

Tories offer solution to West Lothian question

With devolution of many policy matters regarding Scotland from Westminster to the Scottish Parliament, the unfair situation has emerged that while matters such as education and health for England remain a matter for the House of Commons, Scottish MPs in Westminster can vote on matters that only apply to England. Don't forget this applies to Gordon Brown also. His constituency is Scottish, but he apparently has the right to govern England on matters that wont ever affect his constituents.

This is the West Lothian question. British Labour wont confront it, because it likes having Scottish Labour MPs able to vote with the government. However, David Cameron is willing to confront it. The Daily Telegraph reports that the Conservative Party will require that only MPs from England will be able to vote on matters regarding England. Other MPs will not be permitted to participate.

This is a sensible position to take, it avoids any nonsense of more assemblies and the like, and removes the nonsense of matters of England being voted on by MPs from other constituent countries of the UK when it doesn't affect their constituents at all. Amazing, the UK Conservative Party isn't disappointing on this issue!

Government announces annual transport funding programme

Land Transport New Zealand (the government's land transport funding agency until now) released its final National Land Transport Programme outlining how it intends to spend your fuel tax, motor vehicle registration and licensing fees, and road user charges for the next financial year.

From 1 July it merges with Transit New Zealand, so that the funding agency gets to fund its own activities - whilst local authorities get to compete with that. Yes, Labour has reversed some of the transport reforms of the 1990s which ensured transparent competitive bidding for transport money. After all who needs to ensure value for money, or accountability when you can have one big behemoth of a bureaucracy.

$2.439 billion from the National Land Transport Fund, plus around $220 million extra from taxpayers. Yes Labour is spending your motoring taxes on transport.

$908 million is for routine maintenance of roads, the administration cost of the relevant agencies (which isn't small), the Police policing the roads (see this is managed separately but is very hard to get accountability for), and research and development associated with managing road networks.

Another $402 million is for periodic and preventive maintenance on roads, which is about renewing the whole surface (and includes bridges and the like). The precision of spending on maintenance is important and better than most countries (certainly better than the USA). Even so, Chris Olsen Chief Executive of Roading New Zealand (an industry association of contractors) says the maintenance spend is inadequate. Certainly it is at an efficient level, but it would be interesting to know if local authorities and Transit are concerned. The funding system should avoid underspending on maintenance, if politics is kept out of it.

Beyond that we have new construction with just over $1 billion being spent on roads, most on state highways. My only question is whether local roads are getting enough, especially since local authorities have to get around 45% of funds for new local roads from hard stretched ratepayers. There is a case for local road improvements being funded by road users, but ensuring local authorities are accountable for this is critical, and it is one reason I supported requiring local authorities to put their core arterial and collector networks into roading companies.

The Greens complain that not enough of road users' money goes to subsidise public transport, this year $325 million is going into it, which is nearly ten times the amount in nominal terms compared to when Labour first was elected, and $86 million more than last year. It is $100 million more than what is going into upgrading local roads - remember local roads carry half of all traffic movements and comprise over 80% of the network, but public transport's share of journeys is less than 10% nationwide.

On top of that another $49 million is to be spent on "community focused activities" (encouraging people to change travel behaviour), walking and cycling, and subsidising rail and sea freight. All activities that don't actually pay a cent into the National Land Transport Fund.

Now one thing politicians like to do with this announcement is claim that they are personally responsible for the decisions of a statutorily independent board for funding pet projects.

So it's worth having a look at this enormous document to see what really is happening with a handful of high profile projects. I thought I'd look at:

SH20-SH18 "Western Ring Road" in Auckland
Kopu Bridge replacement approaching the Coromandel Peninsula
Transmission Gully in Wellington

There are bound to be others that interest people, but well these all have a profile, some of which is undeserved:

Western Ring Route: Five sections of this route need completion, and money has been allocated to complete four of these. This will mean the Upper Harbour Motorway is finally completed allowing fast efficient trips between the North Shore and West Auckland bypassing Hobsonville. It also will mean a continuous motorway from the Southern Motorway at Manukau through to Mt Roskill, with a second Mangere Bridge relieving the bottleneck north of the airport. However it does still mean a problem between Mt Roskill and SH16 - the Waterview connection. The PM wants a massive tunnel to be built on this section (the only part of the route proposed for tunnelling curiously enough), when it could just be built on the level with overbridges like all of other sections. $5.5 million is to be spent investigating this further. All in all 4 out of 5 for the Western Ring Route, the parts worth building are being progressed at a fast pace. However there really has to be some sober thinking about the Waterview connection. Current estimates have it costing more than all of the other segments of the road built combined (and that is six individual projects), so one has to ask why this part has to be goldplated and greenplated?

Kopu bridge: $100,000 of funding to complete design. Nothing about starting construction. Hmmmm. Surely a 2 out of 5 for that, perhaps there are RMA reasons? Perhaps it too has become too expensive?

Transmission Gully: Well that $1 billion folly will get $1 million spent on completing the investigation phase, but more importantly $13 million on detailed design in the next year. That is serious money for design alone, but the total design cost is $41 million. That is more than the total road budget for some councils. So big money ploughing into it, but resource consents not yet achieved or enough property purchases. So maybe 3 out of 5 for progress, but it is an enormous waste of money.

It would be nice to think National will change things, will refocus funding towards projects that are economically efficient, less money on public transport just because it is "nice to do". It would be more nice for the Nats to change things to be more commercial, less political and seek the funding provision and management of roads to be decided based on what users want, not what politicians think is the populist "road of the year".

The Nats once did have such a policy - there is no good reason not to at least go back to that.

Police truce with mafia

This is how John Bolton, former US Ambassador to the UN, described the Bush Administration deal with North Korea in the Daily Telegraph today.

He effectively says the collapse of the concrete tower, dramatically presented to television is not as significant as the collapse of the Bush Administration's foreign policy:

"North Korea has violated every significant agreement ever reached with the United States, and all indications are that the North is again following its traditional game plan. It is quite adept at pledging to give up its nuclear programme, having done so several times in the past fifteen years. Not once, however, has it actually taken decisive steps to do so. Indeed, quite the opposite."

His article describes how North Korea has played the West as a fool, time and time again. There is no evidence that it has stopped any activities whatsoever, its announcement that it has nuclear weapons and the subsequent deal to NOT allow full inspection of its facilities and NOT dismantle its nuclear weapon stocks shows how North Korea continues to play.

North Korea had transferred nuclear technology to Syria, which both deny, even though the ample evidence that the infrastructure destroyed by Israel in Syria was almost identical in layout to the Yongbyon facility, and that the lead North Korean engineer working at Yongbyon had visited the facilities in Syria. Israel thankfully destroyed this facility, but don't expect the so-called peace movement to be grateful - many of them will only start to be concerned if a nuclear weapon goes off in Tel Aviv, but even then I'm sure that would be "Israel's fault".

Bolton warns:

"Europeans appear overwhelmingly to favour the election this November of Senator Obama, in many respects because his foreign policy is so congenial to their tastes. It may be comforting now to think that the unilateralist cowboys are about to retire to their ranches. It will be less so when we are all confronted, as we will be inevitably, with the continuing reality of Iranian, North Korean -- and other -- nuclear weapons programs."

There isn't an easy solution to North Korea. There is no military option as it would provoke an attack of devastating proportions. However, there should be no negotiation.

North Korea has only learnt through deterrence to not attack the South or Japan, since 1953, although it has repeatedly engaged in terrorist and espionage attacks. It is one of the most evil regimes on the planet - negotiating with child torturing scum is not likely to produce an outcome morally superior to deterring it with the trigger threat of annihilation. North Korea after all has no compunction whatsoever about letting around a million of its citizens starve to death, about having tens of thousands of men women and children be slave labour in gulags and executing those who try to leave. To think that a regime capable of such profound evil is willing to negotiate an end to having the ultimate means of threatening the world, is naive. North Korea is a regime we will have to wait out for death or a coup - meanwhile, let Kim Jong Il know that if he dares start a war, North Korea will suffer massive retaliation and this time South Korean, US and allied forces will go all the way to the Yalu River - and complete the job.