A Goldsmith fashions his own demise

Well, he said he would if Heathrow went ahead, and he has gone and done it. I hope you don't mind if I sit back and enjoy it from my seat in the grim, North. I would have voted for expansion for Blackpool or John Lennon myself. Plenty of capacity and anything is better than the planned fracking.

The one fact we can assume from the situation though, is that Tory HQ in London has had plenty of time to consider what to do if Prime Minister May chose tarmac over the sexy, old Etonian.

Many of you here, no doubt, had already guessed they would shoot Zac's fox by not standing against him. Just a little disagreement amongst the sixth form boarders, nothing to get the whole school worried, don't you know. United front. With, 'Neat solution old chap' echoing down the quad.

But what a chance for the Labour Party, up the ante, and also not stand a candidate? Interesting. Take some faux, outraged, moral high ground and bring it straight back to pure 'Blue on Blue' fire. (Always assuming the electorally challenged, Lib Dems, play with a straight bat). Now, even a very average cavalry commander, in battle, seeing utter disorder in the enemy ranks would simply turn his horses around and charge straight through the gap.

But Labour's top brass in Parliament, is cursed by senior commanders who have long records of persistent, misjudged, half-hearted, confused failure when fantastic opportunties present themselves.

So take the wisdom of  serial offender, Staff Officer, Tom Watson here:
https://www.theguardian.com/politics/2016/oct/26/labour-frontbenchers-urge-party-not-to-contest-richmond-park-byelection

In short, faced with heaping pain on the enemy, all Watson can contribute is the lazy idea, that Labour is a 'national party' and focus on the old internal issue of always fielding a candidate no matter what.

So the question is, how many here agree or disagree with Jabber the Hut above: Labour is still a 'National Party' and we can show this ideal in any way we like, except by winning a general election?

There's an LVT message here...

This from Guido.

Seems like those that want the work and wealth creation want the expansion. Those that don't need that work or wealth, or have other objections, don't want the expansion.

Surely a bit of tax rate differentiation would help resolve this?

First rule of Land Value Tax club...

... don't talk about Land Value Tax unless you know about land values.

The LVT campaign linked to an article in The Guardian about Business Rates. By far and away, the single largest BR bill is on Heathrow airport, if you add together the airport, the maintenance area and Terminal 5 (ignore cargo terminal), it's £150 million a year. The next biggest is Sellafield, at £32 million.

(The LVTC article appeared to suggest that Heathrow was overtaxed. Sellafield might or might not be; in terms of 'alternative use of the land they are occupying', they are wildly overtaxed, but what they are paying for is 'the right to run a nuclear power station' which as we know is worth ££billions. Even if the right is only worth £1 billion, then £32 million a year BR looks about right

UPDATE: LVTC blog has now amended the article to clarify their stance, excellent.)

Returning to Heathrow, their BR bill is tuppence ha'penny, frankly.

What Heathrow airport is paying for is not so much the site itself (all 3,000 acres of it!) but the privilege of using London's airspace and quick transport links into London.

Acording to Heathrow's website, there are about 480,000 aircraft movements a year (one landing plus one take-off).

Check: one every forty seconds, 14.5 hours a day, 363 days a year = 473,000. Looks about right. There are different figures for the number of passengers, so let's take the mid-point 65 million.

[Update: Curtis adds, rather curtly: Where do you get "14.5 hours a day, 363 days a year"? Heathrow is open 365 days a year and planes are in action from 0430-2330 every day.

Answer: I was doing a rough check to see whether 480,000 aircraft movements looked plausible, and it does. Maybe it's 1 plane every 47 seconds x 17 hours a day x 365 days a year. This is what is referred to as 'missing the wood for trees'.]

Divide our BR bill of £150 million by 480,000 movements = £ 313 per aeroplane landing and taking off, or about £2 per passenger. Seems pretty good value to me.
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There's far more to it than just BR of course.

The biggie is actually Air Passenger Duty. Let's assume that Heathrow airport generates half of all APD in the UK (it might be two-thirds, who knows?), that's £1,600 million a year. Ten times as much as their BR bill.

Heathrow is running at capacity, so whatever taxes they pay, they are clearly not so high as to depress demand/output.

APD is a tax on transactions (the worst kind of tax); a flat per 'plane tax would be far better; but best of all is to scrap APD and hike Heathrow's BR bill to £1,750 million all-in. That's £3,300 per aircraft movement or £25 per passenger (return trip).

Relieved of the faffy and inefficient APD, airlines will be able to increase ticket prices accordingy, and the regulator would then allow Heathrow to increase its landing charges from £20 to £45 per passenger.

(Clearly, it makes more sense for Heathrow to charge per aircraft movement than per passenger. All things being equal they want fewer aircraft movements (expensive and risky) and more passengers (very lucrative, they spend money at the airport), but there you go.)

"Heathrow airport's new Terminator 2 opens to passengers"

From the BBC:

Heathrow's new Terminator 2 has killed its first passengers, with the airport insisting it has learned lessons from the last two or three films.

The first flight, a United Airlines from Chicago, was shot down in flames at 05:49 BST. Passengers on the second of 34 United flights scheduled for Wednesday were scythed down at baggage reclaim by a Terminator disguised in a Beefeater costume.

The Terminator will be introduced in stages to avoid the chaos in 2009 when Terminator Salvation opened and audiences struggled to cope with the flimsy plot and lack of Arnold Schwarzenegger.

[Heathrow expansion] Yes, but that's not really a "cost", is it?

From This Is Money:

Failing to build a third runway at Heathrow will add £300 to the cost of an average return fare from the airport by 2030, according to a new study.

The report by consultancy Frontier Economics, commissioned by Heathrow, said there was no doubt the South East needed new airports.

And it warned costs would soar at Heathrow if no new runway was built, with demand for flights significantly outweighing supply...

The study also estimates that passengers are paying an extra £95 at present at Heathrow than they would if it had another runway.

Yes, let's assume that because demand has increased but supply is constrained, the amount which airlines can charge for tickets is £95 higher than it would be if there were more supply (more runways).

That's clearly a "cost" from the passenger's point of view.

But the total real "costs" to the airlines and airports are entirely unaffected by demand, their fixed overheads are unaffected and the per-plane cost (fuel, staffing) is also entirely unaffected.

So what this means is that airlines are making a £95 per passenger super-profit (also known as "rent").

It's the same when demand suddenly falls (post 9/11, for example) or when flights are halted because of bad weather or Icelandic volcanoes. The air travel industry's costs were largely unaffected but income fell, so they made losses.

The bitter irony here is that the NIMBYs and anti-expansion campaigners are doing whoever owns the scarce landing slots a huge favour.

Multiply that £95 by 95,000 passengers per day (half of arrivals+departures) times 363 days a year, that's a cool £3 billion extra rental-monopoly-artificial scarcity income.

Further irony is that Air Passenger Duty raises about £3 billion a year, so all the government is doing is clawing back the rental income (in a very crude and inefficient fashion). This duty is, from the point of view of the airlines a real cash "cost", but does not add much to ticket prices.

Reader's Letter Of The Day

From this evening's Evening Standard (page 45, 15 October 2013):

AS a non-resident, Sir Richard Branson is not [liable to] UK income tax, and as far as I am aware his main UK business interest, Virgin Atlantic, pays the correct amount of corporation tax.

But there is one area where Virgin Atlantic is sorely under taxed. The airline's five percent share of Heathrow landing and take-off slots is now worth £100 million, although they were originally given away free by the government in the Eighties.

The value of these slots is dictated by Heathrow's location and enforced scarcity. Much of the true cost of air transport is borne by residents under the flight paths, and without publicly funded transport links, Heathrow would be a less attractive destination.

A tax on the slots' value would be fair compensation for public costs, and a good source of revenue, as unlike air passenger duty they would have no impact on ticket prices.

Mark Wadsworth

Landlords attack coalition rent-control plan...

Landlords have criticised proposed new price controls on the monthly rents they can charge tenants.  

Eric Pickles on Thursday said that landlords yearly rent rise between 2014-18 should not be more than the retail price index (RPI).

But the Association of Residential Landlords said this could restrict investment and have major consequences for tenants and construction workers.

Landlords charge tenants for use of local facilities, including the labour market, emergency services and the use of schools and hospitals.

ARLA had submitted a plan, rejected by the coalition, seeking to guarantee 15% of buy-to-let mortgages and raise housing benefit payments by 4.6% above RPI inflation.

Pickles, Minister for Local Government and Communities, said in a statement "The proposals will put an end to over a decade of rents rising faster than inflation or wages.

"Tackling the upward drift in rent is essential to safeguard the UK's globally competitive position. The challenge for communities is to maintain high levels of local service while reducing rent. We are confident this is possible and that our proposals create a positive climate for further capital investment, in the residents interest."

But a spokesman for ARLA said: "This proposal is the toughest our members have ever faced. The coalitions settlement could have serious and far-reaching consequences.

"We want to continue to improve things for tenants. Instead, these proposals risk not only our member's balance sheets but the attractiveness of the UK as a centre for international property speculation. We will now carefully consider our political donation and lobbying plans before responding fully to Mr Pickles."

Surprisingly small numbers

From The Evening Standard:

Flybe owns about 6% of Gatwick’s slots. Selling off some or all of these — to operators which could include easyJet, British Airways or Norwegian — could bring in, according to Liberum Capital’s estimates, as much as £12.5 million.

I have no idea whether Flybe owns the best slot or the worst slots, but assuming a mix of both, that means the total value of the landing/take-off monopoly rights at Gatwick (after taxes etc) is around £200 million.

From the BBC, late 2011:

British Airways owner IAG has agreed a binding deal to buy BMI from Lufthansa for £172.5m, but has warned the deal could lead to job losses. IAG, which also owns Spanish airline Iberia, will gain 56 more slots at Heathrow airport in the deal...

BMI, which is based in Castle Donington in Leicestershire, operates flights to Europe, the Middle East and Africa. It has 8.5% of the landing slots at Heathrow, the UK's busiest airport, which are seen as the main attraction of a purchase.

Again, I don't know what sort of mix BMI had, but dividing £172.5 million by 8.5% gives us a total value of the landing/take-off monopoly rights at Heathrow (after taxes etc) of around £2,000 million (£2 billion).

Heathrow appears to have double the capacity of Gatwick (Wiki) so presumably the extra £1,600 million is explained by where the other ends of all Heathrow's slots are?

Fun Online Polls: Airport expansion and elections

The results to last week's Fun Online Poll (thank you everybody who took part) are as follows:

At which airport would it be best to build additional runways?

Thames estuary (new airport) - 40%
Luton - 29%
Stansted - 13%
Heathrow - 10%
Gatwick - 8%

So there we go, despite me putting forward the arguments for Luton (good traffic links north and south, by road or rail, far enough away from big towns not to bother people but near enough for people to able to commute there etc), the people have spoken and Thames estuary it is.

I'd be interested to know what the arguments for starting from scratch with the Thames estuary are.
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And lo to this week's Fun Online Poll.

There are plenty of statistics on how many people voted for which party and thus how many don't vote, and reasonable estimates of swings from one party to another.

Because I'm now in the business, I'd be interested to know "How do you make up your mind how to vote at elections?"

Vote [sic] here or use the widget in the sidebar.

They own land, give them money!

From The Evening Standard:

Cash compensation could be paid to west London residents if a third runway is built, the man leading the airports commission revealed today.

Sir Howard Davies said he would look at whether financial payments should be given to people under the flightpath if Heathrow expansion or rival schemes at Stansted or Gatwick get the go-ahead.

Fun Online Polls: QE and airport expansion

The responses to last week's Fun Online Poll were as follows:

Would it make any big difference if the UK gilts held by the Bank of England were cancelled?

No (the correct answer) - 53 votes
Yes (the wrong answer) - 23 votes

So well done, seventy per cent of you. The other thirty per cent ought to stop reading and believing what other people think and read up on some basic bookkeeping.

If you want to understand any productive business (cars, films, dentistry, plumbing, whatever) then there are thousands of things you need to know about or have experience in, and I doubt that anybody knows everything about any of them. Banking, on the other hand, is a pure paper exercise, you start with blank pieces of paper and write numbers on them. You are allowed to write as many positive numbers as you like, provided somewhere is prepared to accept the corresponding negative, and provided you are prepared to accept your original bit of paper going round in a circle and ending up as a negative number on the other side of your balance sheet.

Money is not a thing in itself, it is a unit of measurement, and without there being somebody somewhere who wants to borrow money* (i.e. is prepared to be in debt) then 'money' cannot come into existence. If you take all the financial assets (including the cash in your pocket) and all the financial liabilities, it always nets off to precisely nothing.

* Even in a system where the only legal tender is gold coins, 'money' cannot exist until somebody wants to borrow a gold coin and somebody else is prepared to lend him it. In that split second, a new financial asset and a new financial liability have been created out of nowhere (the number of actual gold coins in existence stays exactly the same).
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Yesterday, James Higham asked which would be the best place to build new runways in the south east of England (assuming that this is necessary or desirable, let's skip that debate).

So that's this week's Fun Online Poll.

Vote here or use the widget in the sidebar.

Flights from Heathrow to China etc.

1. Let's take the facts as stated in a recent Evening Standard article as given:

- London's four main airports are running at capacity.
- London businesses want there to be more direct flights from London to the BRIC countries, Brazil, India, China etc.
- People who live near the airports don't want any more flights or runways because of the noise.
- Expanding airport capacity is not only politically difficult but also very expensive and takes years to sort out.

2. What you also have to know is that inbound tourism is hugely important to the London economy, foreign visitors spend £13.6 billion a year in London; and that London airports employ 100,000 people directly and handle about a million aircraft movements a year.

3. What would be nice to know is quite how airline landing slots are allocated, it appears to be a bizarre mixture of old international treaties which nobody dares break; what the government of the day thinks; all sorts of back room deals between airlines, airport operators, regulators, local councils, EU subsidies; and the grey market in slots. But we'll never find out, so we'll have to assume that the system is half-way rational.

4. Heathrow is mainly international stuff, it handles 2.7 million passengers a year to/from the USA and 1.9 million to/from Dubai. But there are plenty of local flights as well (i.e. where a journey by train would be a reasonable alternative): 1.2 million to/from Manchester and Newcastle. And there are also 2.7 million to/from Amsterdam and Paris, not only are those journeys do-able by train but I believe that a lot of those people then take connecting flights to elsewhere.

5. Again, AFAIAA, the reason why people go via Amsterdam or Paris is because of the stupid Air Passenger Duty - you pay a much smaller amount to fly there than you would if you flew direct (there's little or no APD on the main onward flight). Which is a wildly inefficient use of people's time (queuing up twice over) and airline fuel (aeroplanes are quite efficient when they are whizzing along, what wastes fuel is landing and taking off). And it means that those airports earn money which we could be earning instead.

6. So how about we just accept that the total number of aircraft movements is fixed and a given and that air travel does place a burden on others? Aircraft noise is annoying, but whether an aircraft flies over your house on a short haul to Leeds-Bradford airport or to Hong Kong doesn't make any difference.

7. So it strikes me, all they have to do is reduce the number of short haul flights and use those slots for long haul to the BRIC countries instead. Instead of flying people to Amsterdam or Paris who then get on another aeroplane to elsewhere, we can send them straight where they want to go. And instead of ferrying people to and from the rest of England, we can use those slots for taking people on long haul flights etc.

UPDATE: Jorge in the comments points out that a passenger only gets the APD saving if he books two entirely separate flights, e.g. one from London to Paris and then another from Paris to [end destination]. If you book "[End destination] via Paris" then you pay full APD. I would have hoped that was clear anyway.

8. As mentioned, nobody really knows how the airlines end up with the slots they end up with, but the best thing the government could do in the short term is to replace the counter-productive Air Passenger Duty (revenues £3 billion a year) with a flat rate duty of £3,000 per plane per landing/take-off (or whatever is needed to make the figures balance, or maybe £5,000 for Heathrow and £500 for Leeds-Bradford). That would give the airlines every incentive to shift from short to long haul, take away a bit of business from the Dutch and the French, make internal flights more expensive (thus encouraging people to use rail or road) and make international flights cheaper.

9. Pretty much a win-win, in other words.

10. It's a bit like Land Value Tax for the airspace. It makes the airlines pay for the external cost (the noise pollution); it means less fuel per passenger-mile on average; it brings business to the UK; and it's a levy on the monopoly value of the slots - the highest price ever paid for the best slots was $52 million each, i.e. the value of the right to land and take off once, on one day a year, for the foreseeable is £90,000 (and that's the net value after deducting the Air Passenger Duty, which can be over £10,000 per plane if you're going far enough), which amortised over ten years is £9,000 per flight, so a £5,000 per flight duty wouldn't even make a dent in that.

UPDATE: Jorge points out another advantage, it's better use of a slot if a large aeroplane takes hundreds of people a long way instead of a small aeroplane etc. Yes, from the point view of the slot owner (the airline) obviously, but I believe that by and large large aeroplanes make more noise than small ones, so the argument that the per-plane duty is a charge for the noise pollution would be weakened.

State-protected monopolies are worth more than actual profits

From the BBC:

The owner of British Midland International (BMI), Lufthansa, has said it has not yet decided on a buyer for the carrier. In November the German airline signed an agreement with BA owner, International Airlines Group (IAG), to work towards a final deal. However, the agreement was not exclusive and Lufthansa has now said it also has a deal with Virgin...

BMI, which is based in Castle Donington in Leicestershire, operates flights to Europe, the Middle East and Africa. It has 8.5% of the landing slots at Heathrow, the UK's busiest airport, which are seen as the main attraction of a purchase. If IAG were to purchase the group it would give it control of more than half the landing slots at the airport.

However, rival Virgin Atlantic has said the deal would be uncompetitive. "British Airways' hold over Heathrow is already too dominant," a spokesperson said after the IAG deal was announced...

Lufthansa bought the 50% of BMI owned by its then chairman Sir Michael Bishop in 2008, taking its holding to 80%. It decided to sell it as the carrier's losses widened. BMI has reported a loss of 154m euros ($213m; £133m) for the first nine months of this year, hit by rising fuel costs and social unrest in some of its destinations in North Africa and the Middle East.

From The Guardian: "IAG had emerged as the frontrunner in November when it confirmed that it had reached "an agreement in principle" to acquire bmi, which would take its share of slots at Heathrow from 45% to 53%... Both bidders are now conducting due diligence, amid reports that Virgin Atlantic has bid £50m for the loss-making carrier."

Good points on London airport expansion

From a reader's letter in the FT:

Aircraft take off and land into wind – this reduces the ground speed required for flight and the length of runway required. In the UK, 80 per cent of winds are westerly [i.e. blow from west to east), so at Heathrow, aircraft are predominately flying low and slow over Greater London to land on the two westerly runways.

Heathrow, like most airports, has a mandatory 3 degree glide slope approach which results in a descent of 300ft per mile on the ground. This means aircraft over the centre of our capital city are descending through 1,500ft over our most populated areas.

If we consider London to be a circle, the worst possible position for an airport is therefore in the 9 o’clock position – where we have inadvertently built our biggest airport. Far better to have these low and slow aircraft landing at airports in the 12 o’clock (Luton), 3 o’clock (Thames estuary) or 6 o’clock position (Gatwick) where their approaches will not affect such large areas of population.

Aircraft accident data show that the majority of incidents occur on the approach to land; when an aircraft is at its most vulnerable, low and slow...

If you think that through, then the 3 o'clock position is not ideal either; which goes for London City and a possible Thames estuary airport. For sure, aircraft climb far more steeply after take off (and then they always seem to veer off wildly to port or starboard, I sit in my back garden watching them) than they descend before landing, but the same general east-west rule applies; aircraft would still be banking steeply over the greater London area. I'm no expert on these matters, but AFAIAA, the second most dangerous part of air travel is the take-off bit, so better safe than sorry.

Air Passenger Duty Fun

There was a nice bit of special pleading by the big airlines in today's papers, see for example The Metro, along the lines of "nobody move or the puppy* gets it!":

Virgin say Air Passenger Duty (APD) raised £2billion in 2010 but that figure could hit £3billion a year under proposals being considered by the government.

Virgin, British Airways, Thomson and First Choice say it is too high and unfair. A family of four flying in economy class to Florida would pay £240 in duty this year. A trip to Australia would cost them £340 in duty.

Virgin’s chief commercial officer Julie Southern said: ‘We already know that more than half of long-haul flyers say they would consider cutting down their number of long haul flights if there were further rises in APD.’

As privatised tax collectors, they would say that, wouldn't they?

As we well know, if people can make government-protected monopoly profits from an activity, the monopoly right itself is very valuable, being the capitalised net present value of all the future extra income you can generate (which is purely a balancing figure between the scarcity price and the true cost) and which cannot be competed away.

Any tax on this monopoly right cannot be passed on to consumers (by definition the scarcity price and true costs remain unchanged), it merely claws back some of the value of the monopoly right. The monopoly right of which I speak is of course the value of the landing slots themselves, and AFAIAC, people who make money from government-protected privileges are just privatised tax collectors.

There's a good summary on the subject by Deloittes here, which appears to be from 2008. On page 8, it says that British Airways' slots are worth around £2 bn, being mainly the 41% of slots at Heathrow which they own. The CAA tell us that in 2008, Heathrow's capacity was 28.1% of total UK airport capacity.

If we multiply those figures up and add on existing APD receipts, we get a ball park capital valuation for all landing slots at all UK airports of £19 billion. This is subject to large margin of error, but it will do for now.

Hey ho.

Now, if you wanted to raise £3 billion from UK aircraft movements without the puppy* getting it, why not scrap Air Passenger Duty and slap a £3 billion annual tax on the value of the slots? Or even better, just auction them off every year - the auction price will never exceed the value of the monopoly profit (unless people get their sums or forecasts very wrong), ergo, consumers unaffected, there's no need for airlines to fly ghost flights, reduces barriers to entry etc. The fact that this would blow a £2 billion-sized hole in International Consolidated Airline Group's market capitalisation might be a good thing or a bad thing, depending on which side of the fence you are.

* Substitute "hard working families", "hard pressed pensioners", "the asset-rich, cash-poor" depending on context.

Made up numbers round

From The Evening Standard:

A third runway at Heathrow will not benefit Britain as much as previously claimed, ministers admitted today. They accepted that a new way of measuring the cost of pollution, introduced just six months after the Government-backed Heathrow expansion, means the economic boost from it would now be lower...

The Department for Transport put the monetised net benefit of another runway at £5.5 billion using the then published values for the shadow price of carbon and assuming the number of flights were to rise to 702,000 a year. But last July the Department for Energy and Climate Change introduced an assessment method for the cost of carbon based on mitigating the effects of pollution rather than the damage caused...

A Lib-Dem analysis of the plans based on the changing cost of carbon found that environmental damage from another runway would cost £4.5 billion more than originally assessed — a total of £9.3 billion.

*sigh*

As any cost accountant knows, the relevant cost is the lower of:
a) the cost of the damage, and
b) the cost of preventing the damage.

For example, if you have a few slates missing from your roof, the cost is the lower of:
a) the cost of the damage from the leaks etc (many £1,000s), and
b) the cost of getting a roofer in (a couple of £100),
= a couple of £100.

Conversely, you might have a pinprick leak in your outdoor swimming pool*; the relevant cost is the lower of:
a) the cost of the damage (an extra few £1 a year for pumping in slightly more tap water than otherwise), and
b) the cost of draining the pool, digging a huge great hole and having a bit more sealant applied (tens of £1,000s),
= a few £1 a year.

Under The New Maths, the cost of the pinprick leak in your outdoor swimming pool is in fact tens of £1,000s.

Twats.

*/sigh*

* I don't have an outdoor swimming pool in my garden, and I doubt whether many of you do either, but it was the first thing that sprang to mind.

Collective Ownership & The Invisible Hand

Those two phrases tend to split opinion along traditional left and right wing lines.

The lefties love the idea of Collective Ownership ('CO') because they think it means centralised state ownership, and the right wingers hate the idea for the equal and opposite reason. Right wingers appreciate the concept of The Invisible Hand ('TIH') but lefties deny it even exists, which is why they want everything to be nationalised, regulated, centrally planned etc.

Actually, CO and TIH are much the same thing: consider a large plc with tens of thousands of shareholders - instead of each shareholder owning a desk, a delivery van, or some computer records and employing one or two people, they each own a small percentage of a larger whole. The business and all its assets are owned collectively. In theory, shareholders could vote to liquidate the company and take the assets pro rata to the number of shares they own, but in all but the most extreme cases, they would lose out sorely by doing so - you're better off with £5,000 worth of shares than you are with a second hand delivery van, for example (or else you'd sell the shares and buy a second hand delivery van).

Similarly, you could say that this pooling is TIH at work; if there are economies of scale, people end up better off by owning a small share of a larger pie than the whole of a very small pie.

[Further, that plc might have tens of thousands of employees. Of course, they do not 'own' the business in a legal sense, but in economic terms, they very much do, and they speak of 'their colleagues' or 'their desk' or 'their cash till' or whatever. In the long run, an employee has much the same interest in his employer doing well as a shareholder does.]

"What's the point of all this musing?", you may ask.

Let's be old fashioned and assume that this plc is run for the benefit of its shareholders. It may be that they have a shop (or factory) near you, which you visit frequently because you shop (or work) there, but it is making losses and they close it down. As a customer (or worker), you will be a bit miffed, but if you are also a shareholder, you will benefit. TIH continues working.

Or it may be that the plc wants to open up a new shop (or factory) near you. Maybe you don't like this, because it will mean more traffic on your road. Or maybe you do like this because you'll get a job there. If they open the shop or factory, some win, some lose, but the economy as a whole wins. TIH is still working.

The problem is that NIMBYs will always have a stronger voice than people who are looking for a job (because there are more of them). Imagine that every business had to get the permission of everybody within a certain radius of its stores or factories before it opened one or closed one, we'd end up with some quasi-socialist nightmare. No new shop or factory would be allowed to open, and existing ones would not be allowed to close (or would be subsidised, like 'rural post offices').

Oh ... this is exactly what has happened to this country. As this story illustrates, TIH has been largely smashed to pieces in this country by the Home-Owner-Ists; it cannot guide people to the overall optimum outcome. The story concerns NIMBYs and Greenies, both staunch opponents of economic progress, ganging up against the third Heathrow runway, but the same principle applies to anything and everything.

"With you so far" I hear you sigh, "So what's the solution?"

OK, as a thought experiment and not a serious proposal, let's superimpose the CO model that we had with a plc on land ownership. Everybody hands over their land to UK Land plc (which then owns all UK land) in exchange for shares to the same value. UK Land plc collects market rent on everything and dishes it to shareholders as regular dividends, so that instead of owning a house worth £200,000 and living 'rent free', you own £200,000 worth of shares in UK Land plc, pay £8,000 a year rent and get £8,000 in dividends. Shares in UK Land plc would be freely tradeable, of course.

UK Land plc would thus have one aim - to maximise its rental income on behalf of its shareholders. When deciding whether to allow a third runway at Heathrow it would compare the possible fall in rental values of houses in the flight path against the increase in rental values (more jobs in the area, they can collect more rent from BAA etc) and if this gives a positive result, it would go ahead (I'm assuming that it would, for the purposes of this post).

The same applies to power stations, sewage works, new houses, roads - things that help the UK economy and which enhance rental values overall go ahead; other stuff doesn't. Land would be put to its most efficient use without the NIMBYs and Greenies blocking everything.

So, turning back to the people affected by a third runway, some don't like aircraft noise, but they wouldn't have to worry about the capital value of their home, because the capital value of their shares in UK Land plc would go up ever so slightly; and if the rental value of their house goes down, they can either stay there and pocket the difference (their dividend income from UK Land plc also goes up ever so slightly) or move elsewhere. Others are happy to live near Heathrow because they work there and want a shorter commute. And so on.

But all shareholders in UK Land plc would benefit from the new runway, even if they live in the Outer Hebrides. Almost by definition, the gains would outweigh the losses. TIH would sort out who lives where on the basis of free markets; rather than the Home-Owner-Ists first deciding where they want to live and then dictating everything else that happens via a rigid planning system.

Just sayin', is all.

Reader's letter of the day

From The Metro:

I loved seeing the greenheads crying after the Heathrow expansion got the go-ahead. Given that the smoking ban was brought in against the majority of pub-goers' opinions, I say to all the Heathrow protestors: taste democracy.

Jo Amos, London.

Third runway problem solved (2)

Although I have faith that BAA have done their calculations properly and that the third runway makes economic sense, the idea of knocking down the entire village of Sipson is a bit of a stumbling block.

From The Evening Standard:

... the people who live in Sipson's 700 homes are resigned to losing their fight.

... Campaigner Lynne Davies, 60, a retired florist, said: "I have lived in Sipson for 50 years. My brother-in-law built my house and now we have a Spanish company coming in with compulsory purchase and offering us peanuts*. They have only offered us market value, moving costs and 10 per cent commission when they get planning permission. That's not a good deal. I don't want somebody telling me what to do.

The best way of balancing competing property rights is LVT of course and a parallel tax on the value of the landing slots to compensate those affected by noise, but short of this, what BAA ought to do is buy up ten acres of farmland a few miles down the road and build a carbon copy of Sipson, with the same street names, same houses, only make everything ten per cent bigger and better. The market value of the 700 houses in Sipson may be £200,000 each, but rebuilding them (including drainage, electricity, broadband) etc would be half that. They can even bung in a nicer park, give the pub a bigger beer garden/car park, whatever.

BAA should then invite the entire population of Sipson onto a fleet of coaches, drive them a few miles down the road, ply them with free drinks and offer each resident or property owner a straight swap, new for old. Some will jump at the chance, others will dig their heels in, but hopefully those who like the idea of shifting the whole village, lock and barrel will put pressure on the stick-in-the-muds and commonsense will prevail. BAA could even offer to bung in £50,000 towards everybody's mortgage or something, this would still work out cheaper than paying market value.

Hey presto, problem solved.

Part 1 of this series over at Ross.

* Er, "... market value plus moving costs and ten per cent commission" is not what I'd call peanuts.

Nulab appointee jumps on bandwagon

The hypocrisy of these actor luvvies complaining about the Heathrow expansion was covered admirably yesterday by the Institute of Economic Affairs and rather more robustly by The Daily Mash.

From today's Evening Standard:

CELEBRITY critics of the third runway at Heathrow were accused of "hypocritical behaviour" by a government minister today. Transport minister Lord Adonis suggested that vocal opponents such as Oscar-winning actress Emma Thompson should explain why they regularly flew all over the world themselves. In an interview with the Evening Standard, he said: "People who are frequent flyers have to square that with wanting to deny others the opportunity to fly by constraining airport expansion... therefore rationing flights and making them more expensive."

I hate this government so much that it causes me great pain to admit that they've done something right for once.