John Penrose: Is the traditional Tory belief in free enterprise leaving the station?

7 Jul

John Penrose is Chair of the Conservative Policy Forum, and is MP for Weston-super-Mare.

As flesh is put on the bones of the recent Plan for Rail, it will send a clear signal about whether the Conservatives are still the party of free enterprise. Rail passengers need choice and an entrepreneurial spirit, not a return to a state monopoly.

The new Plan for Rail starts really well, by invoking the buccaneering, entrepreneurial early days of Britain’s railways when the ‘iron web’, invented in this country in 1825, spread across the earth, transforming everything and everywhere it touched.

Huge amounts of private investment, ultra-fast innovation and creativity on everything from locomotive designs and signalling to passenger comfort and fares were driven mercilessly by daily competition and passenger choice.  This forced train companies to raise their game every time their rivals came up with something new. Fortunes were made and lost but, crucially, no matter which firms succeeded or fell away, passengers always won. So that starting-point matters, to show the direction and ambition of the new Plan.

And yet, and yet…… there’s devil in the detail, because the Plan is a pretty high-level document that hasn’t nailed down all that passenger-powered choice and entrepreneurial va-va-voom quite yet. There are no guarantees – and it could still come off the rails.

Why? Well, because there’s a more recent piece of railway history that’s much less impressive than the inspiring vision of those buccaneering early days. British Rail was an awful, clodhopping nationalised monopoly, with dreadful staff morale, unreliable services and unhappy passengers. It stank of failure by presiding over long-term declines in rail travel, and no-one shed many tears when it died.

Even then, after an all-too-brief period of post-privatisation creativity and growth, the entrepreneurial oxygen that had barely started to reach Britain’s railways was choked off all over again by Franchising, which swapped the awful state-run monopoly of British Rail with almost-as-awful privately-run ones that firms had bought in auctions instead.

But a monopoly is still a monopoly and, if passengers haven’t got any choice of which firms’ train to catch, everything suffers. When the timetables melted down, or trains were delayed or cancelled, we still couldn’t switch to a different firm’s service that was still running instead.

So there are plenty of bad examples in Britain’s railway history, as well as the inspiring one the new Plan is highlighting. Once the details emerge, which of them will it be?

The problem is this. At the heart of our railways is the track network and, rather obviously, train firms need it to run their services. So whoever controls the tracks controls the market; it’s a natural monopoly that, if we’re not careful, can charge rail firms and their passengers rip-off prices, or underinvest in the network so it doesn’t work particularly well or reliably, because rail firms and their passengers can’t take their business elsewhere.

So the new Plan has to inject choice and competition to stop this happening. And that means giving passengers a choice of different train companies on their local route, so if they don’t like one, a different firm’s train will be along in a few minutes instead. It puts passengers in charge, because neither the rail firms nor the track network can take them for granted when things go wrong.

Where customers already have choice, in rail freight and a few passenger services dotted around the network, the results are pretty good. The services are far less brittle, for a start, because no single entity can dictate the entire timetable. Fares tend to rise more slowly. There are fewer delays and less overcrowding. Rail firms can innovate with new routes. If one firm is crippled by strikes, you and I can still get to work on another firm’s trains.

There are examples in other types of transport too, like air travel; Heathrow or Gatwick let you fly to Paris or Rome on a choice of different airlines, not just one. Why not do the same for railways?

The Plan For Rail’s new ‘concessions’ model could push us in the right direction, or away from it. If there are only a few, big concessions while the newly-created Great British Railways controls the network, sets the times trains run, and determines the fares customers pay, then we will just be repeating the mistakes of the past by recreating the same old rail monopolies with a different label. The fat controllers in charge of the track and the rail firms will know they don’t need to worry about passengers, because we won’t have any choice.

But if there are lots of smaller concessions, and it’s easy for non-concession rail firms to try out new routes, types of service and levels of fares that compete against them without having to get permission from politicians or bureaucrats first, then passengers could be in for a bonanza.

Ultimately, we are either a political party that believes in free enterprise and which puts customers and passengers ahead of fat-cat bosses and bureaucrats, or we aren’t. The new Plan for Rail is a moment of truth; will we practice what we preach, or go for a corporatist, bureaucratic, monopolistic fudge instead? I’m hopeful, but only time will tell.

John Penrose: Better regulation. How we can cut costs while maintaining standards – by giving power to the people

16 Feb

John Penrose is Chair of the Conservative Policy Forum, and is MP for Weston-super-Mare.

Markets aren’t the ‘law of the jungle’ as the political left always claims. Competition needs rules to work properly so that consumers have rights when something goes wrong, staff aren’t exploited, the environment is protected, and monopolies or cartels can’t take over.

But beyond these basic pro-competition rules, too much red tape slows Britain’s businesses down, focusing them on lobbying their regulators instead of delighting their customers, and making them less creative, efficient and dynamic.

The difference is crucial. It’s the dividing-line between potentially-dangerous ‘deregulation’ which might sweep away vital standards that protect us and our environment from being injured or damaged; and ‘better regulation’ which maintains the standards, but applies them in the least-costly, unbureaucratic way possible. If we can cut the size and weight of these regulatory millstones around the neck of British businesses, our post-Brexit, post-pandemic economy will rebound faster and create many more new jobs once things get back to normal.

But how? Better regulation isn’t easy, because every system in Whitehall and Westminster is set up to produce new rules. It’s how politicians, civil servants and regulators forge their careers, so all the vested interests are very close to home. Better regulation systems have to be extremely tough if they’re going to work properly. Or at all.

It’s a challenge we can’t ignore, because international rankings put our major competition and consumer regulators behind their equivalents in USA, France, Germany, EU and Australia. We have stopped making progress on cutting the costs of red tape and, in recent years, have gone backwards. Some sector regulators (Of-this and Of-that) intervene heavily, creating regulatory burdens which make entire industries more ponderous and less focused on their customers than they should be. Investors and business leaders say that officialdom moves too slowly in an increasingly fast-paced digital world. The system needs to be updated, improved and refreshed.

Today sees the launch of a review which offers some of the answers to these questions. It’s called Power To The People, and it’s a recipe-book of changes to make post-Brexit, post-pandemic Britain into a free-trading, global powerhouse so our businesses, exporters and investors can become more competitive, creative, successful, digital and agile too.

What are the recipes? Some cover the entire economy, like stronger powers for consumer watchdogs such as your local Trading Standards teams or the Competition and Markets Authority to crack down on rip-offs, so you and I know the system will be on our side if something goes wrong. Plus there are new Country Competition Courts, so that entrepreneurial startups can fight back if bigger and longer-established local rivals gang up on them unfairly. And there are updated rules to make each digital online shopping trip just as safe and fair as walking down your local high street or shopping mall.

But one of the review’s centrepieces is a stronger anti-red-tape ‘better regulation’ regime, with much sharper claws to make sure we don’t cut or dilute the quality of everything from food standards to workers rights or animal welfare, but that we deliver them much more cheaply, digitally and less bureaucratically than before.

It’s something we’ve done well in the past. David Cameron’s governments cut the red tape burden between 2010 and 2015 with a ‘one-in-two-out’ system that worked pretty well. Its main drawback was that it was pre-Brexit, so it couldn’t stop all the EU rules and bureaucracy that were still being created in Brussels.

So now we’ve got Brexit done, everything ought to be easy, right? Well, yes, in theory – but reality is never quite so simple as it looks on paper, because in 2016 the ‘one-in-two-out’ system changed, and things went into reverse. By 2018, we had a target of cutting the cost of red tape by £9 billion, but ended up increasing it by £8 billion instead.

The good news is that, if we can break out of our recent rut, the opportunities for post-Brexit Britain to cut red tape costs should be huge. We ought to be able to create an enormous Brexit dividend by sharpening the claws of the well-proven ‘one-in-two-out’ system, and then using it to replace bureaucratic EU rules with modern, digital equivalents which deliver the same standards at a fraction of the cost and time.

The first step is to replace rules and regulations by stronger consumer choice and competition wherever we can. If you and I have more and better choices about what we buy, and who we buy it from, we won’t need nearly as much protection because we can simply vote with our feet by taking our business elsewhere.

In other words, new rules and regulations should be a last resort, not the first tool out of the box. And they should be simple, specifying what has to be achieved rather than a process to be followed, so creative firms can work out the cheapest and most efficient way to get something done, and change how they do it whenever new customers or new technologies come along. It’s a great way to future-proof our rules, so we don’t get stuck with analogue answers in a digital world.

For example, we can rebuild natural ecosystems faster and cheaper by repealing EU rules which force water companies to build expensive, high-carbon water treatment plants, when striking deals with local farmers to reduce pollution risks or slow water runoff upstream could be a far greener and cheaper solution instead.

Public contracts can play a role too. They’re a third of all public spending, but EU procurement rules are horribly slow, and too difficult for small firms to navigate. The result is lots of red tape and worse value for taxpayers because entrepreneurs are frozen out. Post-Brexit Britain could deliver far better public services with a new, more digital, faster, automatically-transparent process that is both easier for entrepreneurial firms to compete through, and also more resilient against corruption and fraud as well.

With any luck, Government Ministers will think these recipes are tasty. They asked for them, after all: Power To The People isn’t government policy, but it was commissioned by the Chancellor and the Business Secretary. It proves they’re on the lookout for fresh new ideas and, at a time when Ministers are besieged with multi-billion-pound pleas for help from struggling industries everywhere, the proposals in this Review will be some of the cheapest, best value for money and strongest economic medicine they can buy. I hope Ministers will welcome them with open arms.

The full report can be found at www.johnpenrose.org.

John Penrose: Here’s how we can put ‘levelling up’ at a centre of a One Nation agenda

8 Aug

John Penrose is MP for Weston-super-Mare.

When politicians talk about opportunity, life chances and how to escape poverty, they tend to make two particularly well-worn assumptions.

The first is that the best route to success is middle-class, white-collar professional work; an office job that doesn’t involve overalls, oily rags or heavy lifting. Something like law, accountancy, teaching or IT.

It’s not a stupid assumption either; these are all well-paid, high-skill jobs which have international scope, open doors to huge networks of helpful contacts, and offer clear, well-understood career paths as well.

But it leads most politicians, whether they are from the political left or right, to focus heavily on improving access to good academic teaching and qualifications at schools and universities, and less on the dozens of other routes to success in modern Britain.

The second presumption is that there’s a finite amount of opportunity, so that someone who starts with more must give up something for everyone else to succeed. It’s a zero-sum view of the world; the sense that what’s holding you or me back is obstruction by other people who don’t want to be leapfrogged on the ladder of life. This ‘opportunity hoarding’ is emotionally comforting because it gives us people to blame if we aren’t happy with the way our lives are turning out, but is the precise opposite of what both One-Nation Conservatism and ‘Levelling Up’ is all about.

Opportunity should be infinite

We believe that opportunity is – or can and should be – unlimited, providing we organise ourselves properly. The answer to the advantages and better life-chances of one person’s excellent education isn’t to destroy the good school they went to, but to make every other school as good as theirs, or better. And the answer to spiralling house prices and generation rent isn’t to demonise private landlords, but to build lots more homes (in the right places) so everybody can afford to buy one if they want.

In other words, levelling up is generous, big-hearted and open-handed. That’s why I’m really excited by the breadth of ideas in this collection of policy proposals. Of course education – particularly in academic subjects – matters hugely, but these ideas range far more widely than that. They acknowledge that, for many people, being good at academic exams isn’t the best or only route to happiness and success, and that other things matter too.

Character and community

Like what? Well, let’s start with character traits and community attitudes towards people who are ambitious; do their families and friends build them up, or cut them down? And do they instil emotional resilience and encourage people to bounce back from failure, or tell them they shouldn’t have tried in the first place? How do we instil those attitudes in communities and families where they haven’t been strong for generations?

Then there’s independence and self-reliance. Whether it’s running your own business or owning your own home, having control over more parts of our lives makes us feel happier, more secure and more fulfilled than depending on the good opinion of a landlord, a boss or a bureaucrat. So what will help more people take the first steps towards either or both of these things?

Confront the tough questions

Some of the things that matter most are difficult to discuss, because they ask hard questions that it would be easy to shy away from. Like why some places, or social classes, or races, are more or less successful than others in modern Britain?

What is the secret sauce which makes London and the south-east so much more productive than almost every other part of Britain, and how do we apply it everywhere else as well? And, equally, why do so many Chinese and Indian children do so much better at school than their black, Bangladeshi or white working class male classmates, and how can we close the gaps?

The squeezed middle

And then there’s the ‘squeezed middle’. The middle-income, middle-class, mid-career families who will inevitably end up shouldering most of the costs of the Covid-19 pandemic. Not because it’s their fault, or because they have the broadest shoulders, but because it happened on their watch. So the extra taxes to repay the – truly enormous – costs of protecting their grandparents from infection, and helping their children make up lost time on interrupted schooling, or the cuts to public services if taxes don’t increase, will inevitably fall mainly to them.

That isn’t fair or right, but it is happening nonetheless. So how do we help? How can we make things like housing more affordable, or retrain people with higher skills in mid-career, so they can earn more in a more productive economy and avoid a lifetime of grindingly high taxes or eroded public services instead?

These essays don’t pretend to provide all the answers – they aren’t a complete or rounded election manifesto – but they offer some thought-provoking ideas about how this One-Nation Conservative government should set about ‘Levelling Up’. They point towards a post-Covid and post-Brexit Britain that is hopeful, optimistic, energetic and positive: where people can succeed no matter where they started from, or who their parents were. Where your success doesn’t come at the expense of mine, so I can be generous and take pleasure in celebrating your achievements, rather than living a pinched or jealous life because you have something I don’t.

A happier, fairer, country, in other words. If you’re at all interested in how we could create it, then I hope you will read on…