Massive Rail Investment

[CogitoErgoSometimes]

Article here Capital infrastructure projects have to be a good thing and £9bn to upgrade the railways seems long overdue. Finally, a modern electrified network.

Well, personally I'm baffled as to why we're spending money that the poor of our country desperately need just to survive, to upgrade a railway that few people can afford to use anyway.

The principle is that the money spent is an investment in terms of it will create construction & engineering jobs which is desperately needed at the moment. In turn this will have a knock on effect on the economy.

At the end of the investment the theory is that we will have an upgraded railway system which will move people faster and more efficiently which in turn benefits the economy and also create jobs. So for example if I can get to London in an hour now instead of 1.5 hours, I can go get a job in the capital. Or a company may decide instead to move out of London and create jobs elsewhere because they can still travel back quickly.

Like I said though, that's the theory. Practice is a bit more tricky than that.

But as an economic policy, it's certainly a lot better than giving money to the poor because this doesn't generate jobs and keeps people in a welfare trap. Socially you may disagree though.

I'm in favour of using this money to pay for more public sector workers (like nurses). It will filter back into the economy and we'll have more nurses, teachers, police etc.

Nurses, police etc. provide an essential service, obviously, but public sector wages are a year in year out current cost to the exchequer rather than a direct source of income. With infrastructure projects the initial one-off public investment gets the ball rolling, contractors start employing, supply companies fill their order books, whole areas are regenerated, tax rolls into the exchequer (to be spent on nurses etc) and the taxpayer can take a step back and - with any luck - watch it flourish without any additional public spend required

Gordon Brown's initial fiscal strategy included the 'Golden Rule' which said that the government, over the economic cycle, would only borrow to invest in projects that would benefit future generations and not to pay for current spending. He quietly abandoned it after a few years and ended up doing precisely the opposite. Worked fine short-term but not sustainable long-term.

I disagree. 1 nurse will need a house, possibly a car. They will need furniture, food etc, all of which will benefit the economy. It will filter back in.

And this is where economic needs are opposite to political needs.

Economically we need to look at long term investments which will benefit us all in the future. However, elections are every 5 years and especially now when we're half way through and the government is suffering in the polls, politicians are understandably under pressure to do something now or risk not being in power. So the laudable long term goals fall by the wayside and they give way to short term temptations.

LadySybildeChocolate

I disagree. 1 nurse will need a house, possibly a car. They will need furniture, food etc, all of which will benefit the economy. It will filter back in.

It doesn't. If it did then the solution to the country's economic problems would be for everyone to work directly for the government.

Public sector workers cost more money than they produce.

There are nurses already trained but without a job. It costs something like 36k to train a nurse, surely it's better for them to get a job? The less nurses there are, the more overworked the staff are. This leads to health problems, so they need time off which costs money. If there were more nurses the money would filter down, both in a boost to the economy but also in reduced sickness.

The way I see it is that public sector workers fulfill a very important role. A bit like the way in my own personal finances I have taken out a range of insurances. I have private medical cover, home insurance, life insurance etc.

Now I could spend more on my medical cover to give me better insurance. My kids deserve the best. But at the same time money is tight. If I do that then I have to spend less elsewhere.

Or I could take short term hit (investment) and buy some tools with the aim of earning more money by doing another job. That should bring in more money and later I can upgrade the insurances I want then.

Crude analogy I grant you but essentially that's why one off investments are better right now than pouring more money into the public sector.

LadySybildeChocolate

There are nurses already trained but without a job. It costs something like 36k to train a nurse, surely it's better for them to get a job? The less nurses there are, the more overworked the staff are. This leads to health problems, so they need time off which costs money. If there were more nurses the money would filter down, both in a boost to the economy but also in reduced sickness.

And that all costs money. It costs more money to employ public sector workers than it costs to not employ them. Doesn't matter how you try to look at it, they are a cost. Taxes rise for every public sector worker you have on the payroll.

Edgar, IMO shared equity schemes are not the right way forward to deal with the housing crisis in this country. They're not bringing down the cost of housing in line with people's incomes, all they're doing is giving a small segment of the population an opportunity to offset some of the purchase price. Traditionally, the eligibility for these schemes is quite narrow.

What we need is a massive investment in social housing, to take the pressure off the private sector, which would hopefully see renting return to its natural position as cheaper than a mortgage. Presently, it would cost me more to rent my house than to buy it, which is an insane state of affairs. Renting would be a much more attractive proposition for many if tenants didn't feel they were paying the same money (or more) as home-owners but with nothing to show for it at the end. The subsequent fall in demand for home ownership may help to see housing return to sensible levels.

IMO shared equity schemes are to housing what Labour's bonkers plan to increase the numbers of students in university was to education. It appeases the middle without tackling the actual problem.

Dahlen

What we need is a massive investment government spending in social housing, to take the pressure off the private sector, which would hopefully see renting return to its natural position as cheaper than a mortgage.

Fixed that for you.

Presently, it would cost me more to rent my house than to buy it, which is an insane state of affairs. Renting would be a much more attractive proposition for many if tenants didn't feel they were paying the same money (or more) as home-owners but with nothing to show for it at the end. The subsequent fall in demand for home ownership may help to see housing return to sensible levels.

There's one major problem I foresee. Where are you going to build these houses? Most of the jobs are in London and the South-East. The roads around here are jam-packed thanks to 13 years of Labour investment away from SE England. The schools are at capacity, as are the medical facilities, thanks to 13years of Labour investment away from SE England and 13 years of unlimited immigration.

So do you build the houses in SE England, and commit yourself to building new schools, new hospitals, new roads, new railway lines to handle the extra housing? And how do you overcome the (quite valid) objections of people living in semi-rural areas to your decision to turn their green belt in to high-rise?

Or do you build them in areas like the North-West, which has 1.5 million long-term unemployed?

Flatpack, all good points. What I'd like to see with 'big' issues like this is cross-party solutions. To really turn housing around, a much longer-term view needs to be taken. Most politicians are incapable of seeing past the next election.

You're absolutely right about the population density in the SE and the problems associated with that. One solution is to get more businesses operating from elsewhere in the country, but that can only be done over time, not overnight.

I'm also not entirely convinced that there is a housing shortage as such. There is certainly a shortage of cheap housing that people can actually afford to buy, but properties worth more than £200,000 are often very slow to shift, if at all, over much of the country save again the SE where such a price would be considered cheap.

So again, we come back to needing to tempt people out of the south east. But instead we put the Olympics in the most densely populated area of our country. But that's probably another thread.

The BBC moving to Salford is a step in the right direction. IF we can get other big interests to follow suit, we could change things. It is possible - about a millennia ago Bristol was the busier trading centre in the UK. How we do that, I'm still thinking about.

Out of interest, what would be your solution for encouraging more businesses to go elsewhere?

I don't think you need to build on green belt either. If you concentrate on modernising other cities outside of the SE, there are ample brownfield sites and lots of houses already available.

investment in social housing is definitely needed. But it's not a long term investment in economic terms because once the houses are completed they no longer generate more income or jobs. In fact they then become a massive cost since the councils are then responsible for the upkeep and renting them out at lower than market values (aka subsidies).

What we need are investments which in the long term promote economic growth. That's why roads & railways are the obvious choices. Well roads would be if it weren't for the fact they are not considered green enough. Another area which would be on my top 5 would be schemes to encourage high tech manufacturing.

But wouldn't one help to lead to the other? If you have lots of people employed in the building industry all over the country, all spending money into the local economies, that produces growth in that area as well as being good for the larger national picture, meaning that there will be more jobs available, more people moving in, and less people in social housing relying on HB to pay the rent and more people in them paying rent out of their incomes. I think we could also operate a sliding scale of rents, so that people who may be on hard times pay nothing (all paid for by HB as before), while once they are working and their income goes up, so can the rent until it reaches 100% of market value.

Dahlen

Out of interest, what would be your solution for encouraging more businesses to go elsewhere?

Government hands control of business rates to county and city councils. At present government takes 92% of business rates. I would cut that to 75% now, with a target of 25% in 10 years' time.

Let the run-down areas of the North operate their own business rates. All of a sudden it'll become worth moving to Hull, because your business costs are half what they are in Croydon.

I don't think you need to build on green belt either. If you concentrate on modernising other cities outside of the SE, there are ample brownfield sites and lots of houses already available.

Labour classified gardens as 'brownfield', and then gave councils extra money for hitting their targets for 'brownfield site use'. The result? Whole streets of houses with large gardens demolished, and town houses and flats built on the sites.

So it's a tricky business to get that right.

Dahlen. Yes, in the short term that would indeed work. Whilst the houses are being built the benefits would be exactly what we need. But once the houses have been completed they would no longer bring in any economic benefits, unlike a road or a railway/airport which would still encourage trade.

I agree social housing, once built, is always going to cost more than it makes, but that's the price of a civilised society that doesn't see people living in slums I think. However, some money should surely be coming in if a significant proportion of them were let at 100% market value to tenants who are working.

Also, while they may not reap benefits directly, hopefully the economic growth started when the houses were being built, should have boosted the local economy enough for the council to receive more than its ongoing costs through other forms of revenue, such as business rates, etc. Which plays in nicely with flatpack's suggestion.

It's true that our infrastructure is creaking under the strain but I don't necessarily think that using the public purse to build better railways and roads is automatically the correct answer. Over the last twenty years or so a quiet revolution has taken place. Many people have no need to be in an office at 09:00 every day and could happily work from home for a few days each week. Broadband can partially replace the commute for many people - it does for me. However, businesses have been pretty slow to adapt to this new reality. For example, the railways still offer season tickets by date rather than by number of journeys - if you don't travel every day, you don't get the benefit from the ticket. Simple little changes like this could add up to very big effects.

We should also question the reasoning behind train transportation. Too often, the headline figure of (for example) London to Glasgow is quoted with the inference being that faster is better. I'd argue that if you wanted to travel from London to Glasgow and you chose the train, you'd need certifying. Despite the fact that the railway is subsidised, air travel is both quicker and cheaper in spite of having to pay air passenger duty - the very opposite of a subsidy! Where railways are better is in providing mid-length journeys. The railway network should be optimised for this and, unfortunately, high speed rail isn't a requirement for this sort of service; capacity, flexibility and cost effectiveness are.

The reason for high house prices / rents is due to the madness which is our planning system. When the only difference between agricultural land (approximately £10k per acre where I live) and land with permission to build private dwellings on (approximately £200k per acre where I live) is the paperwork, whoever issues that paperwork (local government) is responsible for the problem.

We saw last week that Britain's population is going through the roof and will continue to increase for the forseable future. Despite this, where we can and can't build has remained largely unchanged since the Town and Country Planning Act of 1947. It's time to overhaul this legislation, gradually increase the area of land we can build on and slowly drive down the cost of housing over the next 25 years or so.

No! We don't want to increase the amount of land we can build on. We need green spaces.

The more houses you build, the more the population will rise. The more roads you build the more cars will be on the roads. It's a physical law of some sort, I believe ...

Presumably, if there is too little affordable new housing in the SE, people will have to occupy all the empty buildings/renovate the old ones. That would also provide lots of jobs. Also, new people coming in will take one look and decide to live elsewhere.

I take Mr JP's points about working from home - I agree it's the way to go - but we do need faster trains, just to get people out of their cars and planes, which are so damaging for the environment.

If we nationalised the railways, we would have low fares, efficient service and all the profits etc would go back into the public purse. What's not to like?

there really aren't many empty buildings round here. people rent if they are going to be away a long time- the only ones empty would be tied in legal dispute.

more building space is needed - there isn't a shortage of green space - the hug majority of land is still open space!

that said a plan for 70 homes on a former nursery has been held opposed by locals for the last 3 years, and looks to making the full 5..the space there is doesn't get planning permission without lengthy and expensive wrangles.

The thing is though, unless you have massive investment into public transport in a way that this country has never seen, you just won't get people out of their cars. In most of the south east there are decent bus services even in semi-rural areas because the sheer number of people there make it worth while for the service to operate. The same isn't true elsewhere in the country, where one bus every three hours between the hours of 8 and 6 is as good as it gets. That's impossible for many to use for work, etc. The rest of the country has different geography, different demographics, and different needs.

You're not going to get people out of their cars. People who work with technology can work from home, but those involved in manufacturing can't, nor can nurses, police, teachers, street cleaners, shop keepers, HGV drivers, etc, etc. Business owners who have the opportunity to make deals online, seem to prefer meeting in person for various reasons. I'm afraid the car is here to stay.

If politicians really cared about the environment they would be ploughing money into researching greener fuels or making electric cars a realistic alternative in rural areas (or even part financing manufacturing in this area). It's just used as a cover for garnering more tax though.

As an aside, there are many studies suggesting that people who work from home are more likely to suffer from depression, and I think it's important for people to have face-to-face contact in order to maintain human relationships. However, MrJP could well be on to something with a balanced week, with some work at home, some at work.

No-one's talking about getting rid of cars - just reducing their use.

People round here cycle to work because there is very little parking in the city centre. You'd expect businesses to have been affected but they seem to be flourishing.

I checked for 8 train tickets for a trip of 60 miles, then would need a taxi for the last 10 miles - the cost was 500 pounds for the eight tickets. I telephone a local cab company who advertise on their webpage they have an 8 seater mini bus, the cost 220 door to door 140 miles return.