A View From The Ice Road

The A322

Last evening Tyler drove the treacherous Ice Road across the frozen wastes where Berkshire used to meet Surrey*. And as he gingerly crawled along, he listened to some buffoon on the radio explaining why two arctic winters in a row do not mean the global warming hippies have got it all wrong.

True, the �200m pa tax-funded Department of Climate Propaganda Met Office has once again made a complete horlicks of its winter weather prediction (predicting only a one-in-seven chance of a cold winter). And true, they use this same much hyped "expertise" to predict global apocalypse by 2100. But somehow - in some way Tyler couldn't quite fathom - it's much easier to make predictions covering 100 years than those covering 100 days.

Later on Newsnight, official warmist spokesperson Susan Watts explained that the public are pretty dim. And that makes it very difficult to convey the Met Office's outstanding reliability on millennial climate change in the face of their screaming unreliability on forecasting the weather. If only we could all be as bright as her, we 'd understand that climate change is not the same as the weather.

Sadly, because we're so dim, we're instead left wondering why we've got an expensive Met Office that can't do the stuff we need it to do, but can produce reams of global warming guff none of us ever asked for.

But of course, it isn't just the Met Office where the weather/climate priorities are expensively arse about face. Despite the fact that our councils can't even afford to stock up on road grit, Miliband Jnr today announced the Commissars' latest money inferno - a �75bn programme to build another 6,400 offshore wind turbines to save the planet.

Except, post the Copenhagen fiasco, they seem to have dropped the bit about saving the planet - these days it's all about saving the election  economy:

"Our policies in support of offshore wind energy have already put us ahead of every other country in the world... The offshore wind industry is at the heart of the UK economy�s shift to low carbon and could be worth �75 billion and support up to 70,000 jobs by 2020... We did it before with oil and gas in the North Sea and we�ll do it again for offshore wind."

Now if you think you've heard this kind of thing before, you have - back in the glorious 1970s, when it was known as... er, "picking winners". And it cost us many tens of billions with virtually no payback (see this blog).

So against those �75bn windmills, how much have we spent on grit for our death trap skating rink roads? (which IIRC never got this bad in the 70s, even though at that point the climate hippies were telling us the world was freezing to death).

The local councils' version of the story is summarised here. Councils are responsible for gritting the vast majority of our 250,000 miles of roads (only motorways and a few A roads are covered by the Highways Agency). And they say they have treated "the equivalent of 1.7 million miles of road" (although words like "equivalent" always make Tyler suspicious). They reckon it's cost them �12.2m - about �7 per mile.

Unfortunately they are now virtually out of salt supplies, which with more snow promised sounds like a Grade 1 disaster.

Some very obvious points:

• Against the wholesale danger and disruption now being caused by our ice roads, �12.2m is a vanishingly small sum. It stacks up against the �600m per day the chaos is estimated to be costing UK businesses.
• �12.2m is less than 0.007% of total local authority spending this year. It compares to the �450m pa the TPA discovered councils spend on publicity (see this blog).
• Refocusing the Met Office on weather forecasting and cutting its budget by �100m pa would fund an eightfold increase in council supplies of salt and grit

So next time you're stuck in a snowdrift listening to some arrogant buffoon telling you that it wouldn't make financial sense for warming Britain to spend more on gritting, feel free to put your fist through the radio.

*Footnote: The ancient and proud county of Berkshire now exists in name only - after 12 centuries it was abolished by the Commissars in 1998.

PS I know we've made this point many times, but it is important we remember it. Every single Labour government we have ever had has ended in disaster. Usually, it's a straightforward financial and economic meltdown of the kind you expect from socialism. But it can't be coincidence that the abiding image of Labour's last go at government is of wintry streets lined with rotting rubbish - and ours now hasn't been collected since well before Xmas.

PPS I know what you're thinking - Tyler must have made some mistake - surely local councils have spent more than �12.2m on gritting. But I promise you that's the official number from the Local Government Association. Here's the full quote:

"An LGA analysis of council gritting activity over the last three weeks, since the cold snap started, estimated that:

• The equivalent of 1.7 million miles of road have been gritted by council gritting teams
• 200,000 tonnes of salt have been spread on the road
• �12.2m has been spent treating the roads
• 4,000 council staff have been involved in gritting operations around the clock"

M25 Debacle

For some reason the Department for Transport's offical vid forgot to ask him about the outrageous costs

A few days ago, one of BOM's old friends was out and about in leafy Buckinghamshire. Sadiq Kahn has moved up since he ate that poor IT guy who dared to suggest the NHS Supercomputer wasn't going to work . These days he's the Transport Minister, and he'd come to mark the start of the M25 widening project. Standing in front of the DfT's corporate banner, he said:

"Today marks a major step forward in our commitment to building Britain's future and increasing capacity on the busiest sections of motorways and trunk roads. Everyone who uses these important stretches of motorway, whether business or leisure travellers, will benefit from the massive investment."

Commitment to the future... massive investment... if you think that sounds like another huge bill for taxpayers, you'd be right.

Now let's all agree we need good transport infrastructure. And let's all agree our major roads would be much better shape to handle today's congestion had this clothead government not put a hippy moratorium on new projects during its first term (see this blog).

Let's simply focus on the monstrous cost of the current widening scheme, and how it has escalated since first approved.

The M25 project is a PFI deal comprising two elements. First, the widening of some of the motorway, and second the running and maintenance of the entire M25 network over the next 30 years.

The project was first approved by ministers in April 2004. At that stage, the capital works to widen 63 miles of motorway were estimated to cost �1.6bn, and the 30 year maintenance concession would cost �3bn (�100m pa). Giving a total of around �4.5bn (which was the figure quoted by ministers).

Two years later, in 2006, a shortlist of 3 bidders was announced. And in 2008 the winner was announced - Connect Plus, a consortium made up of Balfour Beatty, Skanska, Atkins and Egis Projects (er, yes... the same BB and Atkins who were also involved in the Metronet disaster).

At that stage, the cost was still put at �4.5bn, and an early deal close was eagerly anticipated - not least because it was hoped to get much of the work out of the way in time for the 2012 Olympics.

But the months ticked by, and the close was postponed. And the quoted cost figure stealthily crept up to �5bn. It seemed the project had encountered some late snag.

Then last autumn the banking crisis struck, and the entire PFI market was thrown into turmoil. That's because - as we've blogged before - PFI deals depend crucially on bank finance, and if the banks won't lend, there's no deal.

Well, there's no deal unless the government is prepared to juice up the terms so much that even cash strapped bankers can't resist.

And in the case of the M25 widening, that's precisely what happened.

Because when the deal finally closed in May this year, the cost had escalated yet again - from �5bn to �6.2bn - a 38% increase over the originally quoted �4.5bn budget.

And that wasn't all.

Whereas the original scheme had called for the widening of 63 miles of motorway, under the final deal only 35 miles are to be widened - a 45% reduction.

So once again, taxpayers are left paying hugely more and getting hugely less.

Of course, the government does have an explanation. According to the Highways Agency:

"This [cost increase] was because margins paid to the banks have increased as a result of the current economic climate."

That is, because of the international financial crisis - which as you know, was nothing to do with this government - the commercial banks have racked up their interest charges - the margin they charge on top of market interest rates. So the costs of this deal have naturally escalated.

What a load of piffle.

HTF can higher interest charges possibly explain a cost escalation from �5bn to �6.2bn (let alone the escalation from the original �4.5bn, or the 45% reduction in road widening)?

Let's do the math.

The consortium is raising �925m of commercial bank debt. But the overall cost to us has escalated by a minimum of �1.2bn. So if that increase is entirely accounted for by higher interest charges, it means that such charges are an average �40m pa higher than previously planned. Which implies that the average interest rate charged has gone up by at least 4.3% pa (40/925). And in reality it would have to be much more, because most of that debt will be paid off long before the end of 30 years.

But how can interest rates have gone up that much? Market interest rates (including LIBOR) have come down - not gone up. And although the margins banks add on to those market rates for their loans have increased, the increase is of the order of two percentage points - not 4-5%.

So what's really going on?

Yup, you guessed it - once again, we taxpayers are being screwed to the floor courtesy of the Simple Shopper.

Ministers were so desperate to push the project through, because of all those jobs and grandstanding opportunities (see vid), they were prepared to pay any price. In fact they were so desperate, work started within hours of the final deal being signed.

The consortium, not unnaturally, took full advantage.

And before you squawk about grasping capitalists, let's remember they are only earning a perfectly legal crust. They can't be held responsible for the idiocies of government. We don't blame them one little bit.

No, next time you're fuming in an M25 superjam, grinding your teeth at the higher fuel duties you've been forced to pay to clear the nation's debts, just make sure you remember where the real blame lies.

PS As we've blogged before, we've changed our mind about PFI. In principle, it ought to give taxpayers a good deal, but in practice - in the hands of the Simple Shopper - it's a recipe for rip-off, especially with one-off megaprojects like the M25.