Saturday, 28 March 2015

Don't forget to check my new wordpress blog for new entries as this site is no longer maintained.

My new blog site can be found HERE.

(https://machorne.wordpress.com)

M

Thursday, 12 February 2015

Just a reminder

Several new blogs on my new Wordpress blog site, which may be found HERE.

Do please visit the new site and bookmark me there.

It is time consuming to maintain two sites and I cannot keep this one going as well (especially with its known 'issues').

Thanks

Mike


Sunday, 11 January 2015

London Underground - What was going on a hundred years ago in 1915.

I have posted an article on this in my new Wordpress blog which may be found at https://machorne.wordpress.com or by clicking THIS LINK.

The move has been necessitated by excessive pop up advertising on this site that has created some concerns. I also think Wordpress is the more professional product (for now).

I will retain this site for archive purposes and will post notifications of new blogs here for those who get automatic notifications (but you might want to use the 'follow' button on the new site, and 'unfollow' this one).

Tuesday, 6 January 2015

New Blog

I have posted a new blog item on my Wordpress Blog, which may be found HERE.

I will keep this 'Blogger' blog for archive purposes, but unless there are howls of protest I won't add to it as it is time consuming copying stuff across and maintaining two blogs.

I think Wordpress has persuaded me it is the one to operate (though it is far from perfect from a blogger point of view!).

Latest blog is a review of 1915 events on the Underground.

M

Sunday, 28 December 2014

"The Blunders of our Governments" - the name says it all

I don’t intend to make a habit of doing this, but I have felt moved to write a brief book review.
The book is called ‘The Blunders of our Governments’ and I was initially put off by the sensationalist-sounding title of a book that appeared much too thin for such a large landscape of possibilities. Finally, I was intrigued enough to look within. The book was purchased forthwith and I’ve been unable to put it down since.
Far from being sensationalist, the book is an incisive examination of the workings of government over the last 35-40 years or so. A number of seriously poor and extremely expensive decisions have been identified (the ‘blunders’) and are used more as case studies to illustrate the defects inherent in government decision-making and how long the wrong paths are followed until inevitable collapse or reversal follows. The writers studiously avoid making any party political points and observe that the colour of parties is largely irrelevant in their capacity to take foolish decisions.
There are some surprises. First the sheer enormity of the wasted money is breathtaking. Secondly, there were some disasters that I’d never heard about, such as the short-lived assets recovery agency. Of interest to readers of this blog is the coverage of Metronet and how the PPP was allowed to happen. The Poll Tax is one of the earlier examples offered. Nobody, it seems, wanted to be the one to point out it couldn’t work, though they all thought it. It is so very difficult to listen to the constant bleating about the need to save taxpayer’s money in the context of a dysfunctional organism that can waste tens of billions of our money time after time with no lessons learned (the book hints at hundreds of billions over the period of its review – yes billions with a ‘b’). The main ‘surprise’ is the near complete immunity that our politicians and senior civil servants have from any kind of resulting sanction. If a company director (but maybe not a bank director) was as reckless and incompetent as some of the actors in this horror story have been they would have been locked up. One reason, of course, is the frequency with which ministers move.
Some myths are debunked. For example the myth that a minister is in any way accountable for the actions of his department. Unless a specific decision can be pinned on an individual minister there is (and never was) any mantra that says they must either resign or be made to go, and the odd cases where this has occurred (eg Lord Carrington) are exceedingly few and untypical. It is true many ministers do resign or are encouraged to go, but usually this is for, let us say, ‘personal’ reasons rather than political ones.
The book, in seeking to discover how appalling decisions are arrived at and then pursued, observes that nobody is ever, actually, in charge. Either nobody, or in a very real sense, too many people. And often the wrong people. At no point do the authors suggest that the people making policy or finding ways to implement the machinery decided upon are in any way unintelligent or less than well-intentioned. One of the problems, it seems that the ministers live in a very strange world of their own, a world that predisposes them to imagine that everyone else lives as they do. The bright people (often consultants) who help to develop policy have little experience of the world either. The bright and helpful officials who are then asked to deliver the resulting policy are either not consulted at the right point in the process, or, astonishingly, in many cases they are not consulted at all. There is a whole section on this extraordinary way of going about things.
I do not jest. You can’t make this kind of stuff up!
The book finishes with a range of helpful and practical suggestions for improving matters, but in essence it concludes that the main problem with government is nothing to do with party politics or any of that kind of thing, it is the way the entire structure of government is arranged. It just isn’t fit for purpose, and it seems ill-adapted to a complicated, connected world where increasingly events and policy opportunities are entirely out of its control.
I do commend the book. I had quite independently concluded that government systems and processes were not fit for purpose, so I suppose I would be keen on an evidence-based book which had arrived at a similar conclusion. With an election next year, I think as many people as possible should read this book before the next luckless batch of political cannon-fodder comes preaching at our doorsteps to read out their prepared PR-speak briefs at us, whilst taking care not to say anything that will commit themselves to anything firm. Ask them what they are going to do to sort out the mess the book alludes to before the final twenty per cent of the population finally gives up on politics! If parliament isn’t going to fix it, then who is then? There is in fact a whole chapter about the lack of parliamentary scrutiny to which the worst cases were subject, and how meaningless a contribution an average MP from any party can make to a potentially unravelling disaster.
There is something very wrong with the decision making process itself, the book asserts, and there are in fact no constraints placed on what is attempted to be done, however inane. If disaster is possible (and Murphy’s law suggests that if disaster is possible then at some point it will happen), government policy will plough headlong into it and the only question is how big and expensive it will be. There isn’t even any evidence of risk analysis being carried out, let alone any contingency plans to handle any unravelling, or even a Plan B in case it fully unravels. This would be unforgivable in any modestly large project, but is that much harder to understand, or forgive, when the magnitude of these errors are considered.
I am afraid that if you do read the book, the scale of apparent incompetence, and the money wasted thereby, might make you quite angry at what people are doing in our name, without any kind of come-back at all. It isn’t often a book will do that.
I have no doubt that the authors have done a good job with a difficult subject. One is Millennium Professor of British Government at University of Essex and the other is Master of University College Oxford. I feel that it is very likely the facts reported are likely to be substantially accurate and the inferences drawn measured and reasonable. (They are more measured than I could have achieved).
By the way, there is an entertaining epilogue of current potential ‘disasters in waiting’ to give you something to think about during the New Year.
The Blunders of Our Governments. Anthony King and Sir Ivor Crewe. Oneworld Books. 496pp. No more than £9.99.

Extending the Underground – the numbers game

Introduction

I have for some little while been writing a book about how London Underground has expanded since it was first built. You will already realize its origins came in two bursts: the first was 1863-1868 when the first steam-operated sub-surface lines were opened and the second was in 1900-1907 when most of the central London deep tube network appeared. After each network got going, the original system was expanded to form what we have today. But the circumstances around which expansion took place, and even more expansion did not take place, is not covered at all well by the standard historical works. A huge amount of material has been left out and the nature of the difficulties that made any kind of expansion nearly impossible is quite overlooked. My book is still not ready for the world, so I thought it time to make known a few of my findings in the hope that they will be useful.
The thrust of my book will be that we have an incredible system in London, but not until the 1960s was one penny of public money contributed towards it. The problem was that the system was so marginal in making a return, and in truth probably didn’t make a real return at all, that private finance could not be freely obtained either. The outcome was a typical British fudge, the kind of thing that the British are apparently rather good at, and money was raised for extensions that were neither large enough or numerous enough, but fantastic when they happened. After WW2 things went from bad to worse and not only investment was very difficult but timely renewals (for which provision should have been available) suffered too. This has left us with a system that is in exceedingly variable condition and much harder to maintain than it should be (for which the ill-fated PPP was supposed to deal, but that is for another day).

The Core System

I will start off with a mere observation. In Victorian and early Edwardian times there was no shortage of schemes for improving railway transport in London. Railway Acts of Parliament tumbled through the parliamentary machine and probably more than half never got built. Companies were formed and prospectuses were issued for the most implausibly ambitious schemes. Given the difficulty that even the better amongst them had in raising money, it is curious that so much effort was wasted on concepts that had little chance of going anywhere.
Then there was an ‘event’. After that event there were virtually no further wild schemes for expansion of the Underground by the buccaneers who were so evident previously, and nor did the established companies rush to put schemes before Parliament. The ‘event’ was the near bankruptcy of the Underground Group during 1908 and its voluntary receivership to allow financial restructuring of a type which got it out of its immediate difficulty but made life awkward in later years. I think I am on fairly firm ground if I state that after 1908 there was no occasion when the Underground Group ever sponsored another extension of the system, anywhere, without some kind of third party support. At any rate, the rush to build Underground railways in London took on a very different complexion.
This, not entirely trivial, change of course seems to have avoided much prominence by those covering London Underground history, yet it is the very basis of why most of the Underground’s subsequent extensions were built where and when they were, or at all. Since most of the Underground’s mileage in fact constitutes extensions to the early lines then light should surely be shed?
The 1908 problem resulted from several factors, but the main ones are that the system of lines financed by Edgar Speyer and Charles Yerkes cost more to build or electrify than was expected and when opened or improved generated less traffic than was hoped for (these were not the only reasons but made dealing with any other issues virtually impossible). This was not only instantly discouraging for anyone thinking that more lines were needed but threatened bankruptcy of the Underground Group itself. Essentially what happened next was that repayment of a very large quantity of loan notes was only possible by issuing new bonds with a long repayment date and a near-exorbitant rate of interest, required to attract finance to a company that appeared a little unstable. It worked, but at a huge price for which Londoners should be grateful but of which they probably had no understanding at the time.

The Need to Expand

The situation now was that the Underground Group and its various subsidiaries wanted to expand, and needed to expand, to make better use of the new or revitalized lines, which had lots of capacity available and were proving expensive to run for the traffic actually being carried. The problem was that the companies had no spare money and no practical means of borrowing any. With the existing finances in disarray, the only way of obtaining money for an extension is if, as a direct result of that extension, the revenue increased sufficiently to pay the additional operating costs, the cost of financing the extension and included suitable provision for keeping it up to date. If the existing central London system couldn’t be certain to do that, any extension (by its nature less busy) would seem likely to make the financial position worse and not better given the traffic levels expected. Not only would this make raising money very difficult indeed but the directors had a legal responsibility to their shareholders not to behave recklessly by embarking on any scheme likely to disadvantage further its shareholders, who were already enduring some financial pain.
It is important to understand how all this worked. Take a modest, but hypothetical, extension of a railway line on a railway where the existing shareholders are receiving a dividend of (say) 2% against an expectation of 7% claimed in the original prospectus (the ordinary shareholders own the company and usually appoint the directors). A new extension is desired, but has to be paid for. Soundings amongst the shareholders indicate there is no chance whatever of their risking any more of their own money on buying new ordinary shares. If they had spare cash, they would be better off investing it elsewhere, such as nice safe government bonds. Furthermore, railways were usually forbidden by Parliament to borrow money in any proportion greater than a third of their total shareholding, and were often already mortgaged to the hilt. So, nothing happens.
But there is one thing a railway wanting to extend can do, but it isn’t cheap: it can issue shares that guarantee a worthwhile return. These shares come in a wide variety of forms but typically take the form of ‘preference’ shares to which is attached a stated rate of income. This income is not guaranteed, but because preference shares are paid out of profits before any distribution is made to ordinary shareholders (hence the name) a railway would have to be doing disastrously badly for a preference shareholder to get nothing. [Some Underground railways did do disastrously badly, the Metropolitan District, for example, only rarely paid a dividend to ordinary shareholders and preference shareholders rarely received their full amount either (and most tube lines struggled to pay more than 1% on ordinary shares)]. For this reason preference shares had to make the ‘promised’ return quite high or nobody would be interested. Amounts between 4% and 6% were quite usual. Preference shareholders rarely had the same rights as ordinary voting shareholders. Of course, because the voting shareholders were now shunted to the back of the queue for receiving any return on their money, they, too, had to be happy that they would actually be better off and that their railway would be a better business as a result of the proposed extension being built.
So we now have a position where an extension is financed by means of a mixture of preference shares and further borrowing, which was also expensive (probably also 5 or 6%). In addition, borrowing required, at least in theory, some provision for paying it back, which was not necessary in the case of shares. Because extensions had to be financed this way, it made them even more expensive than they otherwise would have been, and therefore even more difficult to justify.
Let us look at an example of a hypothetical extension perhaps in the 1920s
An extension will cost £2 million to build, and therefore £2 million must be borrowed. The financing cost even at 5% is £100,000 a year. The additional costs incurred as a result of operating the extension (staff, electricity, maintenance and so on) will be (say) £225,000. The total annual costs to be met are therefore £325,000.
Traffic, once it has settled down, is expected to reach an average level of 15 million trips a year and it is estimated that the average fare paid will be 6d, generating £375,000. Costs appear to be £50,000 less than income, so we do it? No we don’t. Here are some reasons.
  1. The 15 million a year figure takes ten years to build up to that level and does not arrive overnight when the extension opens. A loss is inevitable initially and this needs factoring into the costs.
  2. We need to ask where the people come from. Many will be new people filling up empty suburbs, but some, say a quarter, will transfer from bus services also run by the Group. If we considered that transfer of passengers (albeit a good thing) will reduce bus profits by (say) £15,000 a year, then that cannot be counted as new money from the perspective of the group as a whole, and we must discount it too. This can equally work the other way around if bus feeder services are possible, but we will assume not in this particular example.
  3. The shareholders and lenders expect a return on their money from the moment they part with it, while the extension might take three years to build before it becomes revenue earning. Provision is therefore made for paying interest immediately out of capital, so more capital needs to be raised than is actually needed for the railway. That has a cost.
  4. Raising the money isn’t free either. Commissions have to be paid to the brokers and possibly discounts have to be offered if people don’t rush to subscribe to the shares.
When all these factors are taken into account, we find we are actually borrowing £2.1 million and perceived financing costs are more like £375,000, when all the factors I have mentioned are considered (and there are other’s I haven’t mentioned, like parliamentary costs). Meanwhile it seems that actual revenue (that means ‘extra’ money after allowing for passengers transferring from other modes) looks to be nearer £355,000 a year, and the extension, in reality, appears likely to be loss making. We therefore do not do it.

The Need for Another Way

The point is that many railway extensions are fairly marginal because of the high costs of building and operating them. What has put the above example into the ‘unbuildable’ category is the method of financing. We are adrift by a mere £20,000. If the financing costs were 3% and not 5% then we would be looking at a £20,000 profit and not a £20,000 loss. The way the money is raised is therefore absolutely crucial, and has hugely affected the way the Underground has expanded.
The only extensions proceeding after 1908 on the basis of raising finance this way were Bank to Liverpool Street, Edgware Road to Paddington and Paddington to Queens Park, but these received some financial support (or its equivalent) from the Great Eastern, Great Western and London & North Western Railways which assisted schemes that were not all that expensive and quite likely to be busy anyway. There were certainly no more extensions built on this basis (it will be recalled that services to Watford and Ealing ran over main line railway tracks and the financial arrangements were completely different and involved little Underground capital).
So, how did the extensions and reconstructions come about? First, both the Underground Group and the Metropolitan Railway (which had exactly the same problem) did a lot of planning. The Underground planned on an extraordinary scale under the leadership of the good Mr Pick, whilst the good Mr (shortly to be Lord) Ashfield worried about how to pay for it. Pick never intended his official’s ideas to represent any kind of plan for virtually none of it could be funded, but the process flushed out where the Underground considered new lines would be needed. Nearly all of the proposals in mind were in the open air or involved inter-running with main line trains. By 1920, some discussions had already taken place with main line railways about the possibilities. This was sensible as (with some exceptions) the main line railways found it very expensive and disruptive to handle large quantities of local traffic, which wanted to travel, all at once, for just four hours a day. The Underground was better equipped to do this and would also divert the traffic away from main line terminals which in those days were quite unsuited to such crowds.
I will set out what actually happened in my next blog, and why Pick’s grand ideas were initially sidelined for reasons of expediency. That we have the suburban extensions we do is at least in part down to Ashfield’s remarkable circles of friends and his great fondness for lunch.
More anon.

Sunday, 14 December 2014

Blogger or Wordpress? That is the question

I have been finding this blog site very clunky to use. I often have to go into the coding to achieve very basic results or put right some very eccentric things that go wrong, especially with spacing. Tabular work is nearly impossible without huge persistence. In addition I am getting reports of strange things happening at the viewer's end, such as third party pop-ups appearing.

I thought I would investigate Wordpress. This has its own challenges, but I think the appearnce is cleaner and it seems slightly more adaptable to my needs.

I have therefore duplicated this blog at machorne.wordpress.com, if you want to have a look, or you can click the link HERE.

I will run the two in parallel for a bit (which is not as easy as it should be) and then see which one to run with. I have imported the whole archive. Some of the formatting is thrown out slightly, but not so much that I will correct it as it is only an archive.

If anyone has any opinions about which 'platform' is best at the receiving end, I would be interested to hear. Sometimes it is not possible for me to replicate what the viewer actually sees.

M

About Me

I have always lived in London and taken a great interest in its history and ongoing development. This extended into the history of its transport services, about which I have written a number of books - I have spent most of my working life working in the industry and observing changes from within, mostly to the good, but not always so. I continue to write, and have a website with half finished stuff in it so that it is at least available, if not complete. Several new books are in hand. I have many 'works in progress' and some of these can be found on my website; the we address is http://www.metadyne.co.uk