Much ado about little

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In an apparent attempt to make a great deal out of very little, there was a certain amount of over-reaction to yesterday’s news about the removal of VAT from the Severn Bridge tolls.  On the one hand, the Secretary of State for Wales declared that this would create "exciting opportunities for businesses and investors looking to make their mark in Wales"; whilst at the other extreme we had dire warnings about an influx from Bristol into Monmouthshire forcing up house prices and putting untold pressure on schools and surgeries.

The economics behind these predictions are sound enough in principle, according to the theories.  Changing the price of something affects the demand for it and people respond accordingly to the stimulus.  But there is another question involved in this, and that’s the ‘reasonableness test’: in the real world, it’s not just whether the arithmetic is correct, but whether the projected final totals look as if they might create the effects predicted.

Let’s do some simple sums.  The difference between the old toll of £6.70 and the new one of £5.60 amounts to a princely £1.10.  Assuming one trip a day, 5 days a week for around 45 weeks of the year (allowing for holidays etc.), someone commuting daily to Bristol would save a grand total of £247.50 a year.  However, assuming a cost per mile of around 12 pence, moving to a location only 5 miles further away from the place of work would eat up the whole of that saving, and end up costing more in travel costs.  If the tolls were scrapped completely, the saving would amount to a more substantial £1500.  That starts to look more significant, and provided that the increased travel distance to work isn’t more than 28 miles, there might still be a small saving, but the greater the extra travel distance, the closer to negligible the saving becomes.

So how many people would really take a decision to move home – with all the disruption and costs involved in doing so – solely on the basis of such a small sum?  Common sense suggests that the number will be low.  That is not to discount the importance of other factors such as a gap in house prices, but in the scale of things, the reduction in tolls is small. 

For businesses, of course, the economics work out rather differently, so Alun Cairns’ claims about the ‘opportunities’ depend on multiplying the effect by the number of crossings for which a business would have to pay.  For businesses involving little travel between Wales and England, the reduction or abolition of tolls makes little difference; they will naturally locate on the side of the estuary whether they trade.  For those needing substantial movements across the estuary, they are likely to locate on whichever side requires least crossings.  Reducing the tolls affects the decision in neither case.

It’s a pity though – I actually wish that the claims being made did stand up to detailed examination.  I’d really like to believe a government could achieve so much in terms of changing behaviour or promoting economic development from such a small change in policy at a comparatively low cost to government revenues, instead of merely generating photo opportunities for ministers.

Merely eliminating the negative

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The Secretary of State for Wales told us at the weekend that cutting just over a pound off the cost of crossing the Severn bridges will ‘power [a] new business boom with Bristol’.  It’s probably just as well that he made no attempt to explain how the one thing leads to the other, although it would be interesting to have seen him try.  It’s simply not credible that such a small change – or even the larger change which is in the pipeline when the tolls are abolished – will have as large an effect as he claims.

It’s certainly true that the tolls have, from the outset, been a disincentive to companies basing themselves in Wales.  It may not be a huge extra cost, but small costs repeated many times can become large sums, and it’s easy to see how that becomes a factor in deciding on location.  But the absence of a negative isn’t the same as the presence of a positive, as my old maths teacher would have said, and the removal of a disincentive doesn’t magically create an incentive.  The idea that a reduction in tolls – or even their abolition – can suddenly create new economic growth is fanciful at best.  During the years that the tolls have been in place, companies have already taken their decisions on location, and they aren’t suddenly going to change those because of this change; creating a more level playing field for future decisions isn’t the same as tilting it in our direction in respect of past decisions.

But when the promised land predicted by prophet Cairns fails to arrive, it will no doubt all be the fault of the Labour administration in Cardiff.  He seems to think that he’s done his bit now.

When is a promise not a promise?

Tweet After reading Vaughan Roderick’s post the other day, it wold be tempting to respond “when it’s made by a Liberal Democrat”.  However, that would be a little unfair; that party is not unique in promising one thing and then delivering the opposite.

Yesterday, the party committed itself to scrapping the toll to cross the Severn Bridges if the party found itself part of a government again after the UK elections next year.  Or did it?  How much of a commitment was it in reality?

In the first place, it’s not in their manifesto yet, only in one of those curious documents called a ‘pre-manifesto’; a mechanism usually used by parties to publicise policies which they’re thinking about including in their manifestos (or for those of a more cynical bent, policies to which they’d like to attract attention but without making any real commitment).  So, is there a guarantee that what’s in their ‘pre-manifesto’ will also be in the final document?  Apparently not.

And secondly, if they do find themselves in government again next year, it can only be in coalition with either the Labour Party or the Conservative Party.  Are the contents of the Lib Dem manifesto then guaranteed to form part of the coalition agreement?  Well, no – they just become a basis for negotiation.  Unless, that is, the party is saying in advance that this is a ‘red line’ issue and that they will not agree to any coalition programme which does not commit to abolishing the tolls.  Are they saying that?  Apparently not.

So, whilst the headlines stated “Lib Dems commit to scrapping tolls”, the actual story is that the party is thinking about maybe including the scrapping of tolls on a shopping list of items which might, and probably won’t, get included in a programme for coalition government.  There’s something of a gap between the headlines and the reality.

Tolling the roads

Tweet The alacrity with which both the UK Government and the Welsh Government have denied any plans to charge tolls on any new motorway around Newport leaves an unanswered question about who leaked the suggestion that they were, and why.  Flying a kite, perhaps, to see what the reaction would be?  But whose kite? 

The incident also exposes more than a little hypocrisy amongst Welsh politicians.

A number of those now decrying the idea of tolling any new motorway have previously said that they favour retaining tolls on the two Severn bridges, and setting those tolls at a level which is higher than the maintenance costs in order to generate an income stream which can be used for other capital projects.  It’s a tax by any other name.  I struggle to understand why a toll to get round one obstacle (the Severn estuary) is such a good idea that it should be turned into a tax, whilst a toll to get round another obstacle (Newport) would be unworkable and an economic disaster.  At the very least, they're being inconsistent.  One is left wondering if the only great 'principle' behind their position here is 'What can we get away with?'.

Tolls for using roads are certainly an unpopular idea, but I'm not convinced that they’re always and necessarily a bad idea.  It depends on the economic hinterland and what we’re trying to achieve.

In an economy which is highly centralised and which depends on long supply chains and frequent long distance movement of goods and people, and in which some areas are central whilst others are peripheral, road tolls will never look sensible when viewed from the perspective of the periphery.  It’s just another cost which stands in the way of economic development in Wales.  And since that is the only economic model of which most of our politicians can conceive, any tolls look like a bad plan for Wales.

On the other hand, if we had a more localised economy, or at least a plan to move towards one, tolls which disincentivised long centralised supply chains could actually help to drive things further in the right direction, by making it cheaper and easier to stay local.  Tolls can also encourage people to use other modes of transport (and indeed, it's surely at least possible, if part of the problem at Brynglas is the high percentage of vehicles using the M4 for short local trips, that a toll on the relevant part of the existing M4 might actually do quite a lot to relieve the pressure without building a very expensive new road).

So for me, the problem with the proposal for tolls (or non-proposal as it turns out) isn't with the tolls themselves, it's with the economic model under which we live, and the utter unwillingness of the politicians to envision or pursue an alternative.  Change that, and my response might be very different.

But from either perspective, I still don't understand why charging a higher than necessary toll to cross a bridge is such a good idea when charging a toll elsewhere is such a bad one – that doesn't make sense under either economic model.  It’s amazing that so many politicians seem to be getting away with holding such a contradictory and inconsistent position.

End, stick, wrong

Tweet A report commissioned by the Welsh Government suggested that scrapping the tolls would be worth £107m a year to the Welsh economy.  The response of the First Minister has been to demand that the tolls from the Severn bridges should be redirected to Wales once the bridges revert to public ownership.  I’m struggling a little to understand the logical process which got him from the one to the other.

There is a good – albeit highly unpopular - argument for road tolls on environmental grounds, as a deterrent to the use of road transportation, whether for people or for goods.  There’s also a logical argument for tolls on the basis that people should pay for the public services they use at the point of use rather than through taxation, although it’s not a view with which I agree. 

I have never, though, understood the principle behind charging only for those bits of road which happen to go over bridges or through tunnels.  Certainly, bridges and tunnels can be more expensive to construct than nice straight bits of road on flat land, but they’re pretty much useless without those roads leading to them. Certainly, the bridges will continue to need maintenance once they are in public ownership, but then, so will the rest of the motorways of which they form a part.  Considering them other than as an integral part of the whole route seems to be an odd way of looking at them.

I’m also confused by the arguments put forward by the First Minister in justification for the tolls being diverted to Wales.  He seems to be arguing that tolls should be reduced to the level necessary to maintain the bridges, but that if it was paid to the UK Government, that money would then be perceived as being used to fund Department for Transport funding in England.  That's more an argument about whether we trust the people setting the tolls than it is for who should get the lolly. 

If the tolls are set at no more than the level required for maintenance (assuming that one can justify that logic for tolls in the first place), and if whichever government receives the tolls is also responsible for the maintenance, then does it make any difference at all which government that should be?  It makes sense only if government is actually planning to set the tolls higher than the level required for maintenance and use the cash for something else - which seems to be as much part of the planning of the Welsh Government as it does of the UK Government.  It’s a plan for a backdoor tax; but there is no more logic in that backdoor tax belonging exclusively to Wales than there is in it belonging exclusively to England.

The Western Mail’s editorial used an analogy with a castle, saying that “just as it would be ludicrous for the occupants of a castle not to have control of a drawbridge, so it makes sense that the Welsh Government should have a strong say on the future of the Severn Crossing”.  It’s not an analogy that worked terribly well for me – the point about a drawbridge is that it’s as much a barrier as it is a conduit.  In the case of a castle drawbridge the castle's occupants are hardly likely to want to share control of that drawbridge with those outside the castle walls.  (And who decides which side of the estuary is the castle?)

What Wales needs is good unhindered access to markets, on the same financial (i.e. toll) basis as the South West of England, rather than the highly uneven playing field which bridge tolls have created.  What we don’t need is politicians and parties squabbling over who should get the profit from restricting that access.

Feeling a bit like Clover

Tweet Toll Roads have never been a popular idea - particularly in this part of Wales, where Rebecca and her Daughters knew exactly how to deal with them.  And I guess that they'll never be popular with anyone who has to pay the tolls.

The main reason used by Governments in favour of tolls has been that it's a way by which users of the transport infrastructure pay towards the costs of providing it.  In short, a way of transferring infrastructure costs from general taxation to a usage charge.  I'm not a fan of that approach in general, and indeed, it seems to run directly contrary to the main thrust of the new Economic Renewal Plan which is about investing in infrastructure to enable growth.  Businesses have long argued - and I've agreed with them - that the tolls on the Severn crossings are a direct disincentive to basing their activity on this side of the estuary.

I'm more open-minded about the environmental argument (even though that is unlikely to make the concept any more popular).  Switching travel from cars to buses or rail by reducing the cost of one and increasing the cost of the other certainly has its attractions.

What I've never been convinced about is the idea of selective tolling on bridges and tunnels.  They may well be the most expensive parts of the road network, but they are still part of a whole, and treating them differently seems an odd thing to do.  It's also often taxing a 'captive customer'; the alternative to paying to cross the Cleddau or the Severn involves a lengthy detour and a lot of extra time.

Certainly, during the last General Election I argued for the abolition of tolls on the Cleddau bridge, which have become a nice little earner for Pembrokeshire County Council, used to subsidise other expenditure.  I have to admit that I was a little surprised to see in this morning's paper that Plaid Cymru are in favour of tolls, albeit set at a lower level, over the Severn estuary, as long as the money is kept in Wales and spent on other infrastructure.  It sounds awfully like the argument used by the county council for retaining tolls on the Cleddau Bridge.

I could have sworn that the sign on the wall used to read "no tolls good, bridge tolls bad", but it definitely says "no tolls good, Welsh tolls better" now.  My memory must be failing me - it must be my age.