Is every food parcel a nail in HS2's coffin?

[whole diary]

[Red Squirrel]

The aftermath of the Covid-19 crisis will transform the way we live, work and travel in the UK^▸ (United Kingdom), the AA says.

It predicts a permanent reduction in the demand for travel because people have learned during the crisis to use home-working technology.

The implications are profound for commuters and for government finances.

The chancellor currently plans to spend £27bn to curb congestion on roads and £100bn on HS2^▸ (The next High Speed line(s)) – but if demand falls, that may not be needed.

AA President Edmund King says anecdotal evidence from people lucky enough to be working during the coronavirus-enforced lockdown suggests that infrastructure funds might be better spent on broadband to support home working.

[...continues]

Source: BBC^» (British Broadcasting Corporation - home page)

[Celestial]

However I suspect the development of and industrial policy will be much more of complex affair post Corona Virus.  The fact that we were reliant on imports from a very few suppliers for some key goods may drive a industrial policy away from the ultra free-marketeers.  More so if the US carries on its reported policy of hijacking of goods destined for other countries in various parts of the world especially where they are made by US companies.  Increasing UK^▸ (United Kingdom) manufacture of essential goods will go down well in the Tory northern wall seats. 

Even before the Corona Virus there have been shortages of some drugs because of quality issues at a single manufacture, because drug companies had consolidated manufacture in one place.   

Very true. From the early news that dentists' face masks are made in China (I wonder how little that saves), to the admission that we don't have a testing manufacturing capability in the same way the Germany has, presumably because the free market has led us to allow our own bio-science capability to be take over and then closed down.

And re the highlighted bit, I gather that the face masks in question can only be made with Canadian sourced paper, yet Trump has banned their export to Canada.  It would be a wonderful example of Karma if the obvious action was taken by them, although making a point to Trump would potentially risk many lives, so I am sure that the Canadians will be bigger than to take such action. And rightly so.

Edit to make the quoting clear ... Hope I got it right - Grahame

[TonyK]

I'm surprised at Patrick Burns for letting Bill Cash perpetuate the myth that there is a big pile of money somewhere marked "HS2^▸ (The next High Speed line(s)) only" that could be used for  other things. A senior politician will know that most of the work that isn't privately funded will be paid for by borrowing money as it is needed from the markets, at the special low interest rate available to governments. Repayments will come from income ultimately through the fare box, and the general bounce in the wealth of the nation from the increased connectivity. It's a shame we lost our Standard and Poors AAA credit rating when the economy went sub-Standard and p*ss-Poor, but it still isn't a bad interest rate.

It is really not much different from anyone getting a mortgage or a business loan, although with a lot more zeros on the end of the numbers. If you go to the banks and ask to borrow a lot of money for any asset, they will look at your paperwork and decide whether you are good for the money and whether it is financially worthwhile. So asking for cash for a bridge, a road, railway or something similar will involve showing where the shortfall will come from if it doesn't pay for itself. That model will work well when you are building something that will generate income, like a railway, but not when the declared intention of borrowing the money is to use it to give away food parcels, or to squander on hospital equipment that will (hopefully) soon be piled up unused in store-rooms. That is definitely one for general taxation to fund.

So, you could conceivably divert health spending to infrastructure if you had the gall, but it would not be so easy to do it the other way around. I wondered why Sir Bill was so ignorant of the way these things work, until I saw that HS2 goes through his constituency without stopping. His financial acumen is not in doubt, as the saga of his renting of his daughter's flat at a cost to the taxpayer of £15,000 per year, despite owning a flat closer to the House of Commons, shows.

[Red Squirrel]

... dentists' face masks are made in China (I wonder how little that saves)...

An astonishing amount, I suspect. I remember a dentist explaining to me how he could get something like 20 sets of dental instruments from China for the cost of sourcing them more locally.

[ellendune]

I wondered why Sir Bill was so ignorant of the way these things work, until I saw that HS2^▸ (The next High Speed line(s)) goes through his constituency without stopping. His financial acumen is not in doubt, as the saga of his renting of his daughter's flat at a cost to the taxpayer of £15,000 per year, despite owning a flat closer to the House of Commons, shows.

It is where ideology trumps his intelligence.  He sees the world in micro-economics (e.g. renting his daughter's flat) not macro-economics.  They are very different beasts.  The likes of Sir Bill do not see this difference, they see only Mr Micawber for their economic theorist. 

That model will work well when you are building something that will generate income, like a railway, but not when the declared intention of borrowing the money is to use it to give away food parcels, or to squander on hospital equipment that will (hopefully) soon be piled up unused in store-rooms. That is definitely one for general taxation to fund.

This does not quite work as governments are generally seen as better risks than private companies.  That is part of the reason PPP is such a bad idea.  I have heard it said that when asked what effect becoming part of the public sector had, NR^» (Network Rail - home page) were able to say their interest rate dropped overnight.

[TonyK]

This does not quite work as governments are generally seen as better risks than private companies.  That is part of the reason PPP is such a bad idea.  I have heard it said that when asked what effect becoming part of the public sector had, NR^» (Network Rail - home page) were able to say their interest rate dropped overnight.

Pretty much what I meant but didn't say so well. I'm not an economist, but I never thought of PPP (or PFI for that matter) as being sensible for public projects without revenue streams, and that we were only doing it because as a country we didn't have enough money to pay for it. Government has to try to lump the risk onto a private company or consortium, but has to give a sufficient return to make it worthwhile. HS2^▸ (The next High Speed line(s)) is different - it is proceeding on the basis that it will be entirely publicly funded, but that some private funding may become available. The money will be borrowed and repaid over a term of years. If HS2 doesn't go ahead, it won't be borrowed, at least not until some future government decides to start again with a route slightly to one side of the current chosen one, and borrows a lot more.

Starting the report outside a soon-to-be-demolished pub where Ed Sheeran once sank a couple is a bit naff. He lives in Suffolk now, having moved from Yorkshire as a child, so was only visiting Birmingham. If you slapped a preservation order on every pub in Birmingham that Black Sabbath had boozed in, nothing would ever get demolished. It set the tone for what seemed to me a rather one-sided piece, which I didn't think the BBC^» (British Broadcasting Corporation - home page) did these days. Does Patrick Burns live in a grand country pile ten metres outside the compulsory purchase boundary for HS2 or something?

[Bmblbzzz]

... dentists' face masks are made in China (I wonder how little that saves)...

An astonishing amount, I suspect. I remember a dentist explaining to me how he could get something like 20 sets of dental instruments from China for the cost of sourcing them more locally.

Sometimes the economics of such things don't seem to make sense. I once bought a knock-off accessory for my Garmin on ebay. It cost £1.10 including p&p compared to £14 for the genuine article. It was coming from China, I presumed it would be shipped out in bulk and then each individual order forwarded from a UK^▸ (United Kingdom) warehouse. But no, it arrived in an envelope with Chinese postage stamps. Out of curiousity, I checked the Chinese postal rates for the UK; it was more than £1.10.

[ellendune]

Pretty much what I meant but didn't say so well. I'm not an economist, but I never thought of PPP (or PFI for that matter) as being sensible for public projects without revenue streams, and that we were only doing it because as a country we didn't have enough money to pay for it.

One of the key criteria for PPP or PFI was that risk had to be transferred to the private sector.  As you say where there are revenue streams this can be done quite easily. A premium is paid by the private sector to take that risk and so it becomes more expensive than if it were publicly funded by borrowing.  However in some cases artificial risk had to be created to be transferred. Shadow road toll were an example - it cost the government nothing if the road was not used as much as had been anticipated so it was not a financial risk to them. Yet it had become a very real risk to the private funder and so understandably they wanted paying for it. But if government had not transferred it this risk would not have existed - madness!

[TonyK]

Sometimes the economics of such things don't seem to make sense. I once bought a knock-off accessory for my Garmin on ebay. It cost £1.10 including p&p compared to £14 for the genuine article. It was coming from China, I presumed it would be shipped out in bulk and then each individual order forwarded from a UK^▸ (United Kingdom) warehouse. But no, it arrived in an envelope with Chinese postage stamps. Out of curiousity, I checked the Chinese postal rates for the UK; it was more than £1.10.

I bought a USB cable to connect a memory stick to my tablet, which cost £1.02, and arrived direct from China by post. It had been damaged in transit. I emailed them and got another, by post, two days later, which works still, years later. I assumed that the company were taking advantage of the convention whereby the receiving country delivers mail from abroad to the destination without charge to turn a profit.
I saw a documentary about the vast free-trade port that sprang up out of nothing in southern China. It is surrounded by factories, all as mechanised as possible, with a huge container depot. The loading and unloading of ships was automated, and controlled by only two people on site. Delivering a TV set from there to Southampton costs an estimated £6. Probably another £20 to get it to the shop from there.