Friday, October 19, 2012
2 From Redwood's - Corruption In Britain's Infrastructure Projects & Getting The Best Bank Of England Head
The first was in reply to an article he wrote about the need to rebuild our national infrastructure. Much of this I have said before but the serendipitous opportunity to compare with Chinese corruption, which seems much less damaging, the support, & the opportunity to put it together in a short form is worthwhile.
The second, about who should be the new head of the Bank of England is valuable not for what I said but for the informed replies it got.
Who Pays For Infrastructure
The elephant in the room is that infrastructure projects in Britain cost at least 8 times what they should [the new Forth Bridge at £2.3 bn when the previous one cost £19.5m = £320m in today’s money; Crossrail’s 110 km of tunnels at £34bn when the Norwegians are cutting tunnels at £4m per km; the Dome costing £46 million to actually build but £675 million when the paperwork was done; new nuclear plants at £5bn when the Westinghouse AP1000 is on sale internationally at £800m].
Nobody is willing to give any explanation for this. The closest I have got, through an FoI is that “government projects have increased 4% more than the RPI” for over 50 years (which does indeed compound to 8 fold growth) & that the only explanation for this the civil service have is that “oil prices went up 10 years ago”.
Massive fraud would be one explanation. Massive bureaucratic parasitism too. Clearly the oil price rise, applying for only a few years and also applying to the RPI cannot be a remotely truthful answer.
We are told that we are going to need £500 infrastructure spending over the next 8 years. If the government ended this parasitism and allowed costs to fall to what they should be & are in much of the rest of the world that would be no more than £63bn.
I don’t think there would be any need for government guarantees in that case. The free market would provide all the new infrastructure needed or even wanted.
Neil Craig: “Massive fraud would be one explanation. Massive bureaucratic parasitism too.”
Coincidentally I just ran across this saying that corruption in China costs 3-4% of GDP
“Middlemen expected cuts of between one and six per cent. “If a project is four and a half billion, the middleman is taking home two hundred million,” Wang said. “And, of course, nobody says a word.”
We should be so lucky. In Britain it would cost £40 billion (like HS2) and of course nobody says a word.
Putting HS2 in a doubled Norwegian tunnel (700 km x 2 at £4 million) the entire way would make it cost £5.75 bn.
An inside Bank job?
Technically the resume means they could headhunt somebody from Singapore’s central bank. Looking at that country’s success in finance as in other things, they should but I assume they won’t.
The magazine Global Finance rated the six best central bankers in 2012, (based on inflation control, economic growth goals, currency stability and interest rate management) as:
Glenn Stevens, Australia
Mark Carney, Canada
Stanley Fischer, Israel
Zeti Akhtar Aziz, Malaysia
Amando Tetangco Jr., Philippines
Fai-Nan Perng, Taiwan
They were all given ‘A’ ratings. No European was given better than ‘B’. Mervyn King received a ‘B-’.
Stevens and Carney have been considered according to press reports. But why would they resign and go to the BoE? Their predecessors or deputies however could be credible candidates. Indeed Ian Macfarlane of Australia who did a brilliant job for 10 years (7 ‘A’ grades!) would be ideal. Moreover, no historical baggage in Whitehall or Threadneedle Street.
Fine suggestions. Too often our elite choose only to compare ourselves with other EU countries. But who can argue that an Australian isn’t compatible with our system? Such a person fits John’s requirement of being able to work with politicians but, unlike Mervyn King is clearly in a position to stand up to political demands.
It would undoubtedly also enhance the £s credibility in international markets.