economic liberalism

...and is not "liberal" either.

There are often attempts by ministers (Jacqui Smith is mentioned in Sunday's Independent for example about the recent prisoner data loss) to shirk their responsibility for government cock-ups. There are also left wing commentators who crow that these incidents are clear proof that "neo-liberal" policies of "privatising" government functions are evil and should be stopped; that the "free market" does not work in the public sphere.

But I don't consider such contracting out of work as either liberal nor as implying that ministers are no longer responsible for their incompetence. Nor, even, are they truly "privatisation". To me the doctrine that says some things are better done by profit motivated companies (or other, non-government organizations) does not mean merely sub-contracting to a government service level agreement.

Yes, such arrangements may save on costs or similar. But all they are doing is delivering the same policies and procedures designed by government. This is the "corporatisation" of government. It is inherently protectionist - the government grants usually monopolistic contracts to firms, sometimes even, like Capita, that started life as a bunch of civil servants deciding they could do better for themselves by making a profit out of what they do.

No, real privatisation, so called "liberalisation" of government functions, should mean the state divesting themselves completely from interference in that policy area. For example, just because DVLA contracts out its computer systems and administration does not mean the registration and licensing of vehicles and drivers has been "privatised". Not bothering with a DVLA at all and allowing insurance companies to work out ways of ensuring the drivers and vehicles they are prepared to insure comply with what they consider to be safe would be. i.e. a different way of working, free from government entirely, and open to proper competition where new ideas and ways of achieving similar ends can be developed. Finding new structures, free from the dead hand of government to do the things we need, rather than what politicians think we ought to need.

Similarly with ID cards or passports - it is not "privatising" simply to contract out the development and implementation of a government policy to profit making firms. Indeed, this is anathema to true economic liberals - for it is corporate welfare, money for old rope if you like. My idea from yesterday about getting rid of government validated passports entirely and instead letting people buy their own guarantee of identity if and when they need one using a new mechanism such as digital certificates would be liberal; the true privatisation of functions the state previously chose to regulate and deliver itself.

And of course, such liberalisation may not end up being delivered by "for-profit" corporations at all.

So Jacqui, stop trying to hide from your responsibilities. You have cocked up just as surely as if the person with the memory stick were your permanent secretary. You are incompetent. Indeed doubly so - for not only have you failed to do your job, but you've even failed to make sure the simpler option - getting someone else to do it for you is done properly.  You should go.

The Competition Commission has suggested, perhaps commanded (I no longer know what sort of power the CC has given that most competition issues are meant to be dealt with on a Europe-wide basis) that BAA ought to sell some of its airports, and in particular two of the three main London ones. I am uneasy about this for two main reasons...

First off I am deeply suspicious about the timing of the Competition Commission's investigation which seemed to be a (possibly coincidental) reaction to those foreigners (Ferrovial) taking over a British company which had owned those airports for a significant time. If there was a problem with monopoly, surely it should have been taken into account when BAA was first privatised.

And second it is a big step to try and force someone to divest themselves of their own property, especially when it's not as if they are "absentee landlords" but working, and presumably working quite successfully (other than the debt burden) the property.

But there is another problem. The monopoly is not really about the airports themselves - and indeed making them compete directly by being owned by separate owners wanting to maximise their income from each individual airport is likely I would have thought to result in heavier use of all of them, increasing the discomfort for the folk who have to live as neighbours of these smelly, filthy, noisy facilities.

It is exacerbated by the fact that what they really control is access to the airlanes that supply those airports. Airlanes that are, in the economic sense, "land" - part of "unimproved" natural resources with finite space - and in this case also time - (though of course safety technologies can increase the capacity a little) for all the potential users. This is part of the commons, and Ferrovial/BAA and the longer established airlines profit directly from the monopolistic enclosure of those airlanes.

Like the Electromagnetic Spectrum they are part of the "commons" and should be leased at their full economic rent from the state for our collective benefit. They are most commonly called "landing slots" and are worth a huge amount of money - Deloittes reckons that peak day time slots at Heathrow are worth up to £30 million per pair in summer, and there are 9,562 (4,781 pairs - one to land and one to take off on) per week in high season, with an overall limit of 480,000 per year at the moment.

The slot situation is currently, by common consent, pretty chaotic. The government has capped the amount BAA can charge and capped the amount by which it can increase the charge, but 97% of all slots at Heathrow for example are not open to effective competition as they are sold at this capped cost to airlines who have been there the longest, so called "grandfather rights". Heathrow is the only airport in Europe at which there is a significant amount of secondary trading in a "grey" market which is where the £30 million per pair arises. All this profit, the economic rent, goes to the airlines and Deloittes goes on to calculate that BA's slot portfolio may be worth up to £2bn if it were included in its balance sheet as an asset compared with its market capitalisation of around £2.7bn!

The CAA should be auctioning airspace rights to all airports at whatever the market will pay, whilst airports themselves should be responsible for charging the airlines for the use of the "improvements" - the terminal access, ground facilities and so on.

This would force traffic that doesn't actually need to use these massively oversubscribed London airports out to existing regional airports first, often reducing travel times - why travel from Lancaster to London to get a plane if the destination you want is available more cheaply from Manchester - as well as bringing increased economic activity to the areas around those regional airports - airports are a huge draw for international businesses. And unless the overall capacity of slots convenient for travelers' points of origin and destination is actually more than required, would generate a goodly sum for the government in a more market efficient way than say fuel taxes.

I hope we will be having a debate at South Central regional conference on Heathrow's third runway proposals. I believe the rigorous eradicating of this money for nothing monopoly on the part of the airports and airlines through nationwide slot auctions would actually obviate the need for the extra imposition this third runway would cause on teh surrounding areas without affecting overall the competitiveness of Heathrow for flights that really need to use it.

Yesterday in my piece about the Policy Exchange think tank's suggestion that Oxford and Cambridge ought to be allowed to expand to as many as a million homes I mentioned the work "Car Free Cities" by J H Crawford which I came across a decade ago when looking into Oxford's last Local Plan. In it he postulates a city of a million people with a topology and transport system that means that any two addresses anywhere in the city would be no more than 35 minutes apart by foot and rapid transit system.

The city is made up of many districts of about 12,000 population like strings of beads along one of three overlapping rapid transport loops. Every home is less than five minutes walk from open countryside. And whilst the densities within the districts are amongst the highest on earth (similar to Seoul, for example, although nothing is more than three stories in the reference designs) only 20% of the total 100 sq mile (10 by 10) area is developed at all, leaving all the areas between the beads and strings as open countryside or managed parkland or whatever. Overall then the density is not a lot greater than Oxford's current density and less than the average of Greater London as a whole.

So, for a bit of fun, I superimposed Crawford's one million population city topology onto the ten by ten mile square centered on the current centre of Oxford. Now sure, a million population is only probably about a third of the million households the Policy Exchange report was ultimately suggesting, but if anyone says to you that it would simply be impossible to imagine a million people in the area between Wheatley and Eynsham, Littlemore and Kidlington, you can say you have seen how, and with no traffic and only 20% of the land developed to boot! It would currently take me over an hour to get from the end of one of these loops to about a third of the way out the adjacent one, incidentally.

Now nobody is suggesting that we do this, least of all me. I'm just demonstrating that it would be possible, indeed whilst making more of the green belt actually because all the space would be accessible in minutes rather than in half an hour in the car, it would reach right into everyone's neighbourhood - with open country no more than 400m from every front door. Fitting such principles into existing cities is of course much more difficult than an academic sitting at a drawing board with a blank sheet of paper. They need not be loops for example but twelve strings with termini at the end of each. It would increase average journey times but not the overall maximum of 35 minutes door to door and could be fitted in along existing radial roads as a series of villages.

Incidentally, the picture on the right here shows some of the housing in the ward with the highest density in England, at least that I can find - a "middle level super output area" either side of the Cromwell Rd in Kensington & Chelsea.  I notice from Net House Prices that there have been 267 £1m plus residential property transactions in the last eight years in this post code area.  This is getting pretty close to the densities that would be required in a city such as that in Crawford's book.  It's hardly slum clearance stuff is it!

When I saw the first press mention of the "Cities Unlimited: making urban regeneration work" report from the Policy Exchange think tank in the Oxford Mail yesterday screaming that "Oxford should get a million new homes" and I noticed prominent Lib Dem economics boffin Tim Leunig was involved I'm afraid I at first reacted with my heart, yelling "Not In My Back Yard, you heartless economist you" before engaging my head.

You see, all too often Tim has come out with some great ideas that have been instantly presented as the works of the devil himself. There were "community land auctions" which, for those who didn't think about it too much, was presented as the state confiscating land from private owners at a fraction of its value. Then more recently his idea for allowing people to sell the social housing home they rent in order to buy another one of their choice elsewhere which would in turn become a social housing home. Even I had to think about that one for a while before I thought it was anything other than a great council house give-away scam. Such is the fate, almost inevitably I suspect, of people who write about "agglomeration economics" and "gross value added" measures of local economic activity.

And so it is also with this report. It is, despite the economic jargon at times, quite an easy read, with what I find to be compelling arguments. It is counter-intuitive for sure, for anyone who has worried about what to do about the "North South divide" and traditional regional policy which has been focussed on using regeneration money to try and repopulate declining towns, to keep people where they are and bring the economic prosperity to them. It has enough controversial suggestions for any mischievous media outlet or politician in denial to pick out the one that seems to say most about their area and have a go at it.

And boy, have they had a field day with it. If you're vaguely northern, or Welsh, you are to be outraged that the report says regeneration has failed, and not only failed but unlikely ever to recover your town's fortunes. If you're in Oxford or Cambridge you've got a million new homes to get outraged about. If you're anti-Tory you will like the portrayals of it as demanding no more money should go to Labour heartlands in the north. It is, in some senses, a perfect storm - there's something for absolutely everyone to criticize about it. But I would suggest they read it first as it is apparent that many who have commented on it, from John Prescott down, have not.

Yes, it does say that the regeneration money lavished on declining cities and towns (and over the past four decades not just Labour's tenure) has been wasted. Of course, the Labour ministers and MPs who championed this money more recently going into their heartlands are outraged. But the report, or rather its predecessor data collection exercise, "Cities Limited", shows pretty conclusively that this failure is real - that, whilst they may be declining slightly less slowly in comparison with more prosperous areas than before the money was spent, they are certainly not catching up, or keeping up. But it does not, as Adam Bienkov writes at Liberal Conspiracy, call for that money to end, for the rest of the country to just "fuck off".

Actually quite the opposite. Anticipating an incoming Tory government will naturally be likely to have fewer "champions" of these northern former industrial towns, it suggests instead of these grand technocratically led regeneration projects controlled from the [London] centre, government should give pretty well the same total amount of money to the local authorities based on need but for them to spend on what they see fit for improving the quality of life in their own towns and cities. This, it says (or rather another predecessor report called "Cities for Success" said) will lead to stronger, better scrutinized and more responsive local government producing "quality of life" projects that people actually want, rather than what some central planner looking at house prices from Whitehall thinks is good for them.

So it's a document about devolution and decentralization of regeneration. About freeing those local authorities in declining areas to choose how they respond to that depopulation rather than how the centre says they should. It is not that spending money on a place always fails, it is that the over-riding concern of regeneration money and regional policy to date has been that these places need to be repopulated by that money, people actively encouraged not to up sticks and leave, despite the obvious fact that they stand to have greater opportunity and more possibilities for increasing their wealth by moving, when in fact the money might be best spent making the quality of life for those who remain far higher.

In fact, it says that this current regeneration policy has even worse effects. Because regeneration areas are still, despite the billions, growing at a slower rate than the successful areas, in insisting that they should be repopulated come what may, regeneration policy is "condemning" the people it persuades to remain or return there to a slow lane of growth. And that because the exodus is led by the more mobile, enterprising, adventurous and usually better skilled parts of the population, it means that what is being left behind is denuded of its greatest assets - the skilled people that might make it attractive for new businesses to set up there.

And of course, the other main controversy is about what those skilled people wanting to better themselves should do. Clearly, London is a huge draw - I always think if it personally as a black hole with government and the City at the singularity and threatening to swallow anything that falls into its event horizon which has been expanding for centuries. Others of course say they like London. So why would they want to prevent others having the same standard of living and opportunities as they do.

Adding an extra million homes around London, says the report, would be the equivalent of adding an extra two miles to the outskirts. Traveling along the M40 at Hillingdon at 70mph for example this, he says, would mean that it would take someone an extra two minutes to reach the countryside. Are we [in London that is] so selfish that we would deny that opportunity to others from "up north" for the sake of it taking an extra two minutes to get to open countryside? Conveniently, the response from the Lib Dem PPC for Hastings yesterday, reveals the answer:

Nick Perry, Lib Dem parliamentary campaigner for Hastings & Rye said, “I am a Northern lad hailing from St Helens, and our move to Hastings last year was a dream come true, however the calls from this Tory think tank are nothing short of bizarre."

So that's it is it. What's good for Nick Perry, indeed a "dream come true", is too bizarre to contemplate for everyone else who may want to better themselves. Ironically, had the Hastings Lib Dems read the report first they'd notice that Hastings is actually one of the exceptions in the South East. That it suffers by being connected only to the periphery of London's orbit and so would not be an ideal place for adding lots of people unless there was significant increased connectivity.

So, perhaps I can get more worked up about the section that talks about a million homes for Oxford and Cambridge, if I can't get excited about the thought of London expanding by two miles in each direction. Well actually, whilst personally I am in Oxford precisely because it is small, and probably would be one of those who would leave if it became terribly much bigger, that's because I can. My IT skills can be put to use anywhere. I could move to Liverpool and get similar pay in a similar academic institution to what I'm in here. But for others it's harder. Oxford and Cambridge, outside of London, are the only two UK academic institutions that get more in research money than they do for teaching students. On the global scale they are our only two really big knowledge generators. Leunig's position seems to be that if they are to remain it that position globally, and they'd damned well better as there is precious little else our economy will thrive on if not knowledge generation in the new global village, they too have got to capitalise on "agglomeration economics", to attract a real thriving community from around the world and the UK that services the expansion of the best brains in Britain in their subjects.

Of course here in Oxford, we can't even agree on whether it is right to have four thousand extra new homes, let alone a million. Our heads are simply not in the right place to hear the logic of what Leunig is telling us. But even if it does become someone's policy, should we be so scared of it? On the one hand, yes, clearly haphazard development of a million homes in a rural county is not on. But if we're looking at a new world order, with population migrations the like of which Britain has not seen since the Industrial Revolution urbanized Britain's population and gave rise largely to those northern towns, then we ought to be looking at new urban forms as well.

Here's a model from a book called "Car Free Cities" by a chap called J H Crawford I came across a decade or so ago in my reading up for the last Oxford Local Plan, that shows how a city of a million population can be fitted into a ten by ten mile area with development on only 20% of the square, where, thanks to rapid transit systems every home is no more than thirty five minutes traveling distance from any other location in the city, every home is less than five minutes walk from open countryside and which could be developed in phases linked into or threading between existing communities.

So, the worst I can say about the report is that "the truth hurts". The truth is that current regeneration projects have and continue to fail to bring less well off former industrial areas up to the standard and the ability to match in future seen in the more prosperous south east. It is cruel and heartless in the light of this to prevent people migrating from those areas to where their skills will be better rewarded and it would be but a small imposition on London in particular to host another million or so homes. We risk our place in the global future if we fail to recognise this reality and grasp the opportunities it presents to make more people better off than regeneration ever can. At the same time we need to make local authorities and local people in declining areas responsible for their own projects to make their quality of life better, whether in decline or otherwise. We need to empower them and finance them, and watch them compete with each other for the best ideas.

At the same time we need to free up from planning constraints land in the south east to accommodate inward migrants. We need to ensure also in the process that space is made for semi-skilled and unskilled also to come from those declining areas so that the balance of people moving out of them is not skewed too heavily towards the skilled sectors.

And all the signals that make this apparent are related to land value. That London is not yet at its optimal size is proven by the fact that people still pay more for their home than the capital cost of the home - ie that land still has some residual value that people are prepared to take a gamble on rewarding them by more than it has cost them to move. That some of the "Pathfinder" areas should not have housing replaced is indicated by the fact that housing costs less than it costs to build. We'd be better buying spare houses and allowing families in the neighbouring houses to expand into hem than knocking them down and replacing them, hoping against hope that they will fill up with bright young things who do not want to join the London black hole.

But there must be something I would criticize the report for, surely, and yes, there is indeed. Tim is always saying that his ideas are a new way of thinking about land, superior to and more suitable for the modern world than that other suggested reform a hundred years ago, Land Value Tax. But the report opens with a complaint that despite trying everything regeneration has failed. Well we haven't tried everything - we haven't tried land value tax. And if any of this report is to be taken on board and implemented we need LVT first. To ensure the timely release of non-housing land for housing, to ensure that Oxford is developed to its current optimum level before adding more, and so on. If Burnley has, as the report suggests, a negative residual land value, then people settling there under my suggested system of land tax and citizens' income , are going to actually be paid for living there. Any firm setting up there will face no taxes, either on its workers, profit or its location; it's going to be around 30% better off just for that and may indeed help attract skilled work back into tax free areas.

The report praises the London Docklands development. Docklands was primarily initially successful (key to regeneration is getting a critical mass of occupiers into a newly regenerated area quickly so it can start to form a community) because the LDDC declared a rates holiday for a decade. Rebasing our tax system to land values rather than incomes or productivity would help focus sustainable communities and give massive incentives, natural incentives, for communities to attract new settlers, especially in jobs that are not necessarily competing on a global scale. With that caveat, that full scale LVT should predate any of the changes suggested in this report, I think I support virtually everything else in it.

It's not comfortable reading necessarily, but I've long held that the rise of global communications and the internet is an epochal change the likes of the printing press or the steam engine. When the steam engine came along it reshaped Britain. Why should we expect, Cnut-like, to stand in the way of the next epochal technology changing the way we live on these islands?

One thing I would say though, Tim, if you read this - I reckon calling your own report "barmy" probably makes for worse press!

Again, I'm starting a new post to respond to some very interesting comments by Tim Carpenter. My inept attempt at a Drupal template means it's almost possible to follow a thread of comments and especially given this is going to be another long response I think it deserves an airing on its own.

For anyone coming new to this debate, it follows on from my original "three point plan" for equity and economic justice and some clarifications and responses I gave yesterday to comments on that original by Tim Carpenter, Head of Policy at the Libertarian Party UK.

Tim, thanks for taking the time to respond. However I think we are, as a colleague used to say to me "talking past each one another". Paul Lockett has put it all a deal more eloquently than myself , and for that, and if I have caused any confusion, apologies.

I am a geo-libertarian (of the "geo-mutualist" variety if you will). The main thing you seem not to have appreciated is that in calling for the "Single Tax" I mean just that - the com