So what went wrong with Philip Hammond’s proposed millennial railcard?

Oh, Phil, where did it all go wrong? Image: Getty.

Millennials just can’t catch a break, can they? Bad enough they have to deal with insecure work, over-priced housing and a future in which Sussex look like Mad Max: Fury Road; now, they won’t even get their railcards.

The government’s plans for cut-price rail cards for those aged 26 to 30, announced by Chancellor Philip Hammond in last autumn’s Budget, had already run into problems. March’s pilot schem saw the website where you signed up for a cards almost instantly fall over, unable to cope with the level of demand. Many of the more pro-active millennials, who spent an hour or more on the phone in an attempt to get their rail cards, were eventually told that there weren’t actually enough to go around.

Now, it turns out, this is as good as it’s going to get. The Spectator’s Katy Balls, wearing her other hat over at The I, revealed yesterday that the scheme has been delayed, because of a row over who’s going to pay for it. How long this delay will last it’s impossible to say – but I don’t think we can rule out “indefinitely”.

It’s tempting to view this as the latest example of the society-wide phenomenon in which the younger generation are getting repeatedly, and painfully, stuffed by their elders. It’s hard to imagine a promise of goodies for the over 50s being quietly abandoned in this way. Quite the opposite: subsidies to that generation are treated as inviolable, even when they look suspiciously like a waste of public money. Subsidies to the young, by contrast, are often framed instead as a somehow illegitimate attempt to buy votes: witness the row over Labour’s proposals for free bus travel for the under 25s.

But while intergenerational inequality may be a factor, the proximate cause of the delay is more prosaic. As Balls quotes a Treasury source as saying: “No-one wants to pay for it.”

Think about how a cut price rail card actually works. The rail network is privately run, so the card means that private companies will be required to accept lower fares from some passengers – even if they squeeze out those who are paying full-whack. To ensure the train companies aren’t disadvantaged (you may be fine with that; contract law isn’t), the government has to plug the gap.


The problem is, we don’t actually know how big that gap will be. Changing fares will change behaviour: you’d expect more young people to take subsidised trains, and perhaps more older people to think the train is suddenly a bit over crowded and to avoid it. The Treasury will have modelled this, when working out costs – but the fact demand was high enough to immediately crash that website suggests it may not have modelled it very well.

So: rolling out the cheap rail cards will require some bit of the government to accept responsibility for paying a bill without knowing how big that bill will be. Departments have budgets and targets to hit, so nobody is keen to do that.

And so, while that turf war continues, those lucky millennials will be denied one of the few things this government has ever promised to do for them.

There’s another way of reading this story – that it’s just the latest in a whole series of policies this government has announced to get good headlines, without giving the slightest thought to how it might actually work.

In that bucket you can also put Universal Credit, and starter homes, and the expansion of Right to Buy to housing associations, and even, if you’re so minded, Brexit. All of these things sound great, to a certain segment of voters, in a 300 word news story – but they all fall apart when you actually have to deliver them.

It’s tempting to view this news as yet another example of the British government screwing things up for millennials. But the real story, I suspect, is of the British government screwing up for itself. It’s learning slowly and painfully that, try as you might, you can’t govern by headline.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

Want more of this stuff? Follow CityMetric on Twitter or Facebook

 
 
 
 

“Stop worrying about hairdressers”: The UK government has misdiagnosed its productivity problem

We’re going as fast as we can, here. Image: Getty.

Gonna level with you here, I have mixed feelings about this one. On the one hand, I’m a huge fan of schadenfreude, so learning that it the government has messed up in a previously unsuspected way gives me this sort of warm glow inside. On the other hand, the way it’s been screwing up is probably making the country poorer, and exacerbating the north south divide. So, mixed reviews really.

Here’s the story. This week the Centre for Cities (CfC) published a major report on Britain’s productivity problem. For the last 200 years, ever since the industrial revolution, this country has got steadily richer. Since the financial crash, though, that seems to have stopped.

The standard narrative on this has it that the problem lies in the ‘long tail’ of unproductive businesses – that is, those that produce less value per hour. Get those guys humming, the thinking goes, and the productivity problem is sorted.

But the CfC’s new report says that this is exactly wrong. The wrong tail: Why Britain’s ‘long tail’ is not the cause of its productivity problems (excellent pun, there) delves into the data on productivity in different types of businesses and different cities, to demonstrate two big points.

The first is that the long tail is the wrong place to look for productivity gains. Many low productivity businesses are low productivity for a reason:

The ability of manufacturing to automate certain processes, or the development of ever more sophisticated computer software in information and communications have greatly increased the output that a worker produces in these industries. But while a fitness instructor may use a smartphone today in place of a ghetto blaster in 1990, he or she can still only instruct one class at a time. And a waiter or waitress can only serve so many tables. Of course, improvements such as the introduction of handheld electronic devices allow orders to be sent to the kitchen more efficiently, will bring benefits, but this improvements won’t radically increase the output of the waiter.

I’d add to that: there is only so fast that people want to eat. There’s a physical limit on the number of diners any restaurant can actually feed.

At any rate, the result of this is that it’s stupid to expect local service businesses to make step changes in productivity. If we actually want to improve productivity we should focus on those which are exporting services to a bigger market.  There are fewer of these, but the potential gains are much bigger. Here’s a chart:

The y-axis reflects number of businesses at different productivities, shown on the x-axis. So bigger numbers on the left are bad; bigger numbers on the right are good. 

The question of which exporting businesses are struggling to expand productivity is what leads to the report’s second insight:

Specifically it is the underperformance of exporting businesses in cities outside of the Greater South East that causes not only divergences across the country in wages and standards of living, but also hampers national productivity. These cities in particular should be of greatest concern to policy makers attempting to improve UK productivity overall.

In other words, it turned out, again, to the north-south divide that did it. I’m shocked. Are you shocked? This is my shocked face.

The best way to demonstrate this shocking insight is with some more graphs. This first one shows the distribution of productivity in local services business in four different types of place: cities in the south east (GSE) in light green, cities in the rest of the country (RoGB) in dark green, non-urban areas in the south east in purple, non-urban areas everywhere else in turquoise.

The four lines are fairly consistent. The light green, representing south eastern cities has a lower peak on the left, meaning slightly fewer low productivity businesses, but is slightly higher on the right, meaning slightly more high productivity businesses. In other words, local services businesses in the south eastern cities are more productive than those elsewhere – but the gap is pretty narrow. 

Now check out the same graph for exporting businesses:

The differences are much more pronounced. Areas outside those south eastern cities have many more lower productivity businesses (the peaks on the left) and significantly fewer high productivity ones (the lower numbers on the right).

In fact, outside the south east, cities are actually less productive than non-urban areas. This is really not what you’d expect to see, and no a good sign for the health of the economy:

The report also uses a few specific examples to illustrate this point. Compare Reading, one of Britain’s richest medium sized cities, with Hull, one of its poorest:

Or, looking to bigger cities, here’s Bristol and Sheffield:

In both cases, the poorer northern cities are clearly lacking in high-value exporting businesses. This is a problem because these don’t just provide well-paying jobs now: they’re also the ones that have the potential to make productivity gains that can lead to even better jobs. The report concludes:

This is a major cause for concern for the national economy – the underperformance of these cities goes a long way to explain both why the rest of Britain lags behind the Greater South East and why it performs poorly on a

European level. To illustrate the impact, if all cities were as productive as those in the Greater South East, the British economy would be 15 per cent more productive and £225bn larger. This is equivalent to Britain being home to four extra city economies the size of Birmingham.

In other words, the lesson here is: stop worrying about the productivity of hairdressers. Start worrying about the productivity of Hull.


You can read the Centre for Cities’ full report here.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

Want more of this stuff? Follow CityMetric on Twitter or Facebook