Oh dear. As
much as I disliked Keir Starmer’s Labour - and I reeeaaally did dislike them - from what I’ve heard from Burnham’s
Labour Party so far, I predict things will be even worse under Burnham. In
fact, I’m going to make a bolder prediction: by the time of the next General
Election, there is going to be widespread consensus from the right, centre and
left (well, as much as there ever can be) that Burnham’s term in office has
been the worst this country has ever seen.
Starting with today’s cavalcade of economic illiteracy, that most bus fares in England will be capped at £2 from the start of next year, and the clearly economically sub-literate new Chancellor John Healey’s claim that this policy will cause "no burden to British taxpayers". I’m not writing this post because I think this £2 price ceiling is going to be one of the worst things about the Burnham premiership – I’m writing it mainly for illustrative purposes to show that, in Burnham, we have a leader who has never shown even a passing intention to appear like he knows what he’s doing on anything to do with the politics and economics of our country – and that this one policy is illustrative of what a disaster his whole reign will be.
Ok, let’s be candid on this particular showboating policy: a £2 fare cap is not clever, not helpful, and certainly not free. This is not even complex – it’s GCSE-level economics: price fixes always have to be paid for by someone. So, who really pays? Well, contra Healey, if a bus journey costs, say, £3.50 to provide, and the government forces operators to charge £2, the remaining £1.50 doesn’t vanish into the ether. The Treasury must reimburse operators for the shortfall. That’s going to cost hundreds of millions in ongoing subsidy. That is a burden on taxpayers, no matter how many times Healey insists otherwise. Moreover, if there is any underfunding of the scheme, councils will be forced to top up subsidies or cut other services. A national fare cap simply shifts the pressure downward.
Also, bus operators ultimately pay too, and they might even cut services in doing so. If subsidies don’t fully cover the gap, operators absorb losses. And when operators absorb losses, they respond in the only way they can: by cutting routes or reducing frequency, and maybe even shedding staff. If subsidies don’t keep pace with rising costs, operators will be forced to cut routes and staff – it’s basic arithmetic.
A sensible politician would never force a business to sell below cost. It distorts prices and hides true costs. Artificially cheap prices encourage overuse and discourage efficiency. Furthermore, an economy in which operators become reliant on government reimbursement rather than private revenue makes everything less secure, not more.
Policies like this badly misallocate resources too. A universal fare cap subsidises everyone - including people who can easily afford full fares, and penalises the many who never use buses but are already taxed to the hilt.
No, this is everything we can come to expect from a Burnham government – it’s a political slogan; a bribe; a faux-compassionate headline‑grabber, not a serious policy or strategy. Expect Burnham’s government to be a shambles – and we can revisit this prediction in a few years’ time.
