Personal view: Urge to regulate buses shows that lessons of the past are ignored
By John Blundell (Filed: 03/10/2005)
There are weasel words that tell you when pernicious ideas are at work. For example, if experts tell us matters must be "organised rationally", "integrated" or "co-ordinated" they only mean authority must coerce the rest of us.
We celebrate this month the 20th anniversary of the late great Nicholas Ridley's 1985 Transport Act that liberalised so much of our wheeled traffic. It is difficult to recall the seedy ineptitude of the nationalised railways, buses and lorries.
When a writer really knows his subject he cannot fail to surprise. I had vaguely assumed that bureaucratic control of transport was born in 1945 after the Labour landslide. However, John Hibbs, main author of the forthcoming The Dangers of Bus Re-Regulation, reveals a landscape of absurdity that would be comedy but for the decades of distortion and waste. Fatuous rules are almost as old as the wheel itself.
Buses seem to invite bureaucrats to feast as a carcass does flies. Whether it was horse-drawn carts, stage coaches, horse-drawn omnibuses, trolleys, trams, local bus services or inter-city services, the regulators were there impeding the market "discovering" what people may prefer. The Stage Coach Act of 1832 was devised to impede the impertinent arrival of steam trains. The Town Police Act of 1847 stopped horses hauling people to destinations without thickets of permissions.
The philosophy of intervention was fully developed and articulated after the First World War by Sir Eric Geddes and constraints on entry and competition were gradually introduced throughout the 1920s and 1930s. Cartels were reinforced and economic rationality in pricing and management was jettisoned.
Railways were favoured while in most parts of the country bus travel is far more important. The lack of marginal cost pricing led to route closures and the industry lost all incentive to control costs. With a very few noble exceptions (such as Stagecoach's brave and brilliant Brian Souter) most of the men in suits of the bus industry have sought regulation to bar competitors entering the market. What is urged now is a local monopoly. Competition in prices or routes or timing would only confuse the public, they argue.
John Hibbs' historical sweep of urban transport confirms what I suppose I knew intuitively - that people were as foolish in the past as they are today. As matters stand, the 2000 Transport Act is poised to neuter the remaining vestiges of competition and leave all real powers to local authorities.
A new threat emerges too. The European Commission wants to regulate buses to deter the "chaos" of the marketplace and "unfettered competition". The principle of subsidiarity does not apparently stop Brussels from regulating buses in Milton Keynes, Cardiff or Stirling.
This arresting little book took my imagination to unexpected places. Do roads need to be public property? Could they not be run by companies either owning them or on long-term leases? Should roads not be priced? The Inner London experiment from Ken Livingstone is but a blunt instrument compared to digital devices that can read each vehicle journey.
Could we not scrap vehicle taxes and fuel duty too? Are buses really what we want? It may be that a hybrid, half taxi, half coach may evolve. So much of new building assumes ever more cars but with real, not just token, pricing would car demand stall?
My favourite quote from this study is from FA Hayek's Nobel Prize lecture of 1974. This is very illuminating: "It is indeed the source of the superiority of the market order... that in the resulting allocation of resources more of the knowledge of particular facts will be utilised which exists only dispersed among uncounted persons, than any one person can possess. But because we, the observing scientists, can thus never know all the determinants of such an order, and in consequence also cannot know at which particular structure of prices demand would everywhere equal supply, we also cannot measure the deviations from that order."
In other words, the diffused, pluralistic, seemingly muddled market allows us all to collaborate far better than any command and control policies. It is counter intuitive and the clever sillies just cannot get it.
Nicholas Ridley was bold but the instinct to regulate and direct is still alive and active. The argument over buses is only a cameo of the wider fight for liberty over compulsion. Regulation, even the most benignly intended, expropriates choices. It also distorts the price system and prices are signals that carry information.
Markets need several qualities. A crucial one is freedom of entry. The instinct of every local authority seems to be to create a municipal monopoly and bar new services.
We may regard the iconic London red buses as a badge of the capital known around the world but what would be wrong with a multiple patchwork of different colours and liveries and different sizes?
It is possible that the public transport evolving in Cairo, Istanbul and Manila may have more to teach us than both the T&GWU or the EU Commission. The only way to find out is via the market process of discovery.
The 1985 Act was a victorious skirmish but the battle continues.
John Blundell is director-general of the Institute of Economic Affairs
"The Dangers of Bus Re-Regulation" is forthcoming from the IEA, price £12.50 including P&P
Sounds like a good Xmas stocking filler that one. I think Captain Cab would enjoy that one.
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