Mises Daily Articles
The Madness of Red Ken
This is a tale of folly and destruction by a London socialist on the good people of London, how he imposed a distorted system of road pricing in the form of a new tax that is currently wreaking havoc on London enterprise. It is a tale that I hope never repeats itself on your side of the pond.
Ken Livingston, the Mayor of London, is known as Red Ken. In the early 80s he was leader of The Greater London Council (GLC), since abolished. I remember as a child it was common for local boroughs to declare themselves "People's Republics." You would have the People's Republic of Islington, Lambeth, Hammersmith and Fulham, etc.
All these areas would take down their flags and lift up over the town halls the solemn red flag. Public money would regularly go to support the Irish Terrorists Sinn Fein who were running a killing campaign in London at the time, and any other left wing cause. Your area would suddenly be declared a "nuclear free zone." Presumably, the cold war bombs would take note of this and fly off somewhere else if Armageddon ever happened. The GLC was so profligate it nearly bankrupted all local government in London.
Eventually, Margaret Thatcher had enough of the "loony left" and she successfully abolished the GLC, whose base was County Hall, that fantastic building directly opposite the Houses of Parliament. It was even sold to a Japanese hotel company as a final victory for Maggie.
You would think that that was the end of that, but no—these loony left types never die; they cannot do productive work so they stick around in politics like a slow-burn, malignant cancer. Many on the defunct GLC went on to become Labour Party MPs, including their leader, Ken Livingston. He became the first democratically elected Mayor of Greater London. So 20 odd years after abolishing his seat of power, he is back, and God help us.
His main election pledge on becoming Mayor was that he was going to sort out London's traffic problems. The key policy would be to introduce the Congestion Charge (for more info on the charge see www.cclondon.com), a £5.00 per day charge to all private vehicles with the exception of motorbikes, to enter what is deemed the congestion zone, which basically covers the West End and the City of London. The idea, Ken will very happily tell you, came from the Great Free Market Apostle, Milton Friedman.
A secondary benefit will be that the environment will be better and people will have fresher air to breathe, giving improved health, etc. Of course, at no point in time will any jobs be affected. In fact, employment will go up as people will be able to get around quicker and do more things, and since the business environment will be far more pleasant, the centre of London will be a far more desirable place to work and be in.
All well-intentioned stuff.
As readers of these pages will know, however, what a lefty says and tries to do in practice invariably causes the exact opposite. Although this is not an a priori law and cannot therefore have apodictic certainty, it is however steeped in experience. I am sure that very occasionally you can produce a left winger who actually devises a policy that actually says what it does on the bottle.
"C" (for congestion) day was on February 17, one month before the start of Gulf War 2. The two very solid businesses that I have owned and developed over the last ten years, www.billfields.co.uk and www.directseafoods.ltd.uk possess, amongst other things, two depots in Central London supplying meat and fish products to the very best of the central hotels and restaurants. The Congestion Charge has instantly stopped 100,000 cars per day driving into the zone.
This is hailed as a great environmental success, but my London businesses are on their knees. On the very day it was instituted, like-for-like turnover dropped by 9.86% in the meat depot and 9.15% in the fish depot. It has never recovered. This has put both of the London depots into a loss making situation. Loath to make the immediate head-count choices I should make today, we have instead gone out aggressively pitching for new business. These two London depots have expanded their customer bases on the meat side by 10.71 % and the fish side by 5.5%, but still turnover is falling, so head-count will have to take place. We will be putting 10–12 out of my 120 staff on the dole.
So much for promoting good working practices in London.
It is also worth noticing that I have a fleet of 45 vehicles, of which 27 of them deliver into the congestion charge zone 6 days per week. You can see the math: 27 x £5.00 x 5 days (Saturday is free, small mercies) x 52 weeks = £35,100 p.a. So Ken has successfully stolen £35,100 from me. Direct theft from my personal pocket. It seems the only way I can avoid it is by selling up or ceasing to trade.
Now, I have no problem in paying for road use. In fact, in an ideal world we would all pay for road use based on consumption, just as we do for the vast majority of our goods: clearly, it is this that Milton Friedman, Ken's new-found hero is proposing, not just a straightforward highway robbery tax. However, at present I pay for my road use once by paying road tax. Again, taking my 45 vehicles and multiplying the road tax per vehicle (£160) the cost to me is £7,200 p.a.
This is not all I currently pay: I pay a second time on fuel tax and the math on this is even more alarming: we spend £21,000 per month on diesel of which a colossal 80% goes to the Chancellor of the Exchequer, or £16,800 per month (12 months = £201,600 per year). If this were not enough, I now pay thrice for road use with the £35,100 in congestion charge. The road tax, we are told, pays for the central government's road programme, the rest goes to the funding of the never-never land known as the welfare state.
Of those 100,000 cars not coming into London, there are people like my wife who cannot now be bothered to shop in Selfridges on Oxford Street in the middle of London. Why? Because it is in the congestion zone. Is it the £5.00 charge? Not entirely. It is compounded by the hassle of having to phone up and pay, or log onto the internet and pay or, worse still, trying to find a shop that sells congestion charge tickets or a garage to pay for entry.
Oxford Street is reporting a whopping £2m per day loss of trade since the inception of the charge every day, seven days a week. Shops and restaurants are already sacking staff and what is important to know is that this has nothing to do with the Gulf War 2. This is entirely due to congestion charging in central London introduced by Mayor Ken Livingstone, one month earlier.
Westminster Council has told me that their parking meter receipts in the 1st four weeks of the congestion charge have gone down by £1m. Total revenues are £90m p.a. from the parking meters, so they are projecting revenues of £77m this year or 14.5% less income on a key line that for the council has been very static. Revenue from rubbish collection by the City of Westminster has fallen by 5% in the 1st month of the congestion charge, another good indicator of the decline of commercial activities.
But what about the working man and woman? Well the working man in the congestion charge zone is being made redundant by people like me and the tens of thousands of London businessmen who employ everyone in the private sector as we have all had 10% of our customer base extinguished overnight. They are then hit again as they have to pay to get in to work.
Take the case of the Smithfield Meat Market workers. They start at anytime from midnight to 3:00am when there is no public transport to take them to work—so they come by car. They leave work after 7:00 a.m. when the Congestion charge kicks in. So you see there is no choice for these workers, any more than there is me and my businesses which work on this sort of time base. If you assume the average male working man's earning of £24,000 p.a., "take home" pay is approximately £1,250 per month. The average month has 21.75 (Monday–Friday) working days, so that's 21.75 x £5 = £108.75 per month—or a massive 8.7% of net disposable income.
What a disgrace that night workers such as this have had a 9% tax to work nailed on them. Needless to say, what does this do to the incentive to work? Ken's answer is for all those fat cat bosses who are earning billions and billions of pounds to pay for their staff to come to work. Oh yes, I forgot—that's us. The problem is, Ken, you have sucked all those billions out of the London economy. So no can do.
Socialists like Red Ken and his loony left co-conspirators never learn or never want to learn basic lessons of economics. If you put the price of something up and the supply stays the same, at the margin, less will be demanded as other things fall into people's priorities. Price access to London, less people, those at the margin will not go in. They will not spend the money on all the goods and services that they usually would. This swiftly translates to lower profits, declining investment, and capital destruction.
My meat businesses survived the BSE crisis in '96 and the foot and mouth crisis of 2001. You really do not expect a fellow human being to wantonly attack your livelihood with such punishing vigour and regularity. Only a politician could do it. I sincerely hope one of Ken's buses which have the freedom of the city runs him over and that the electors of London demand a cancellation of this wicked scheme.
On an environmental note, 20 million people live within 20 miles of London in the Greater London conurbation. We have all accepted congestion and pollution as part and parcel of life and this is traded off against all the benefits one gets from living in or close to one of the greatest urban centres in the world. Why do the politicians insist on deciding what level of pollution is or is not acceptable? Ken hails the better air he has created as a huge part of the success of the charge and he wants to extend it to cover all of London. I am sure all people, whilst we like less congestion and better air, would rather have viable businesses and jobs.
I used to be tongue in cheek to anyone who asked what my feelings were toward my support for the road systems. My answer was that I would rather meet highway robbers such as the infamous Dick Turpin on the highways and byways than Red Ken; at least I might have an honest conversation with a gun pointing at me, such as: "Sir, stand and deliver, your money or your life?"
I actually mean it now. I fancy my chances with Dick Turpin, while with Ken and his gang it is just a straightforward £35k theft, and a wiping out of profitability within my London businesses. No weasel words with Turpin. According to his demand you still have a choice: pay up or be prepared to fight.
Well then: refund our taxes, denationalize the roads. Return them to the private sector and let us pay by usage. What could be more equitable? Stop this madness.