Rewriting history, recession edition
Says Railway Eye, a cynical and Tory-leaning transport blog:
There is certain information that voters and taxpayers might reasonably expect a Government department to know.
Or at least have a reasonable stab at.
Such as just how risky NatEx’s very aggressive bid for the East Coast franchise was; bearing in mind that the previous operator had failed to deliver with a lesser bid.
This is a stupid, nonsensical myth. For one, GNER failed on the East Coast Main Line because its parent company Sea Containers went bust and hence the DfT didn’t have confidence in its ability to meet financial contingency plans – its revenues never fell short.
For two, four companies – the four companies who know the most about the UK railway market – bid similar amounts as National Express for the East Coast franchise.
Up until the end of 2008, I was working as a strategy consultant. I was quite good at it; one area in which I fell down (in management’s eyes) was my pessimism [*] about clients’ projections.
So, on a particular project I ran in Spring 2008, working with our economics unit – one of the most respected that there is, and one of the ones that’s now making doomsaying predictions about government debt (…’which we’ll gladly help you reduce, if you’ll take our advice on cuts’) – I got them to take the lowest possible scenarios for growth that anyone considered vaguely sane, and factor them in as a ‘worst case’ [**].
For the US, that was 0.9% growth for 2009. For the UK, I can’t find the figures, but it was in the region of 1% growth for 2009. UK economic growth is currently expected to be about -4% for 2009.
The point isn’t that my lot were inept. They weren’t; they were reflecting the negative end of what anyone capable of holding down a job at a bank, government, NGO or economics think-tank [***] considered plausible. Hence, for the Treasury, and for National Express, and for every other bugger, to base their expectations on growth in 2009 being a third of what it was throughout the early 2000s was reasonable, and sufficiently conservative that you actually had to fight (senior, older, previous-recession-experienced) people to get that much through.
And yes, it was wrong, and yes, the next few years are going to be painful as a result – but suggesting the decisions made when literally nobody who wasn’t mad thought we were going to have a proper recession were therefore stupid decisions, rather than good decisions that happened to be proved wrong based on information that wasn’t available at the time, is far stupider than the original decisions ever were.
[*] ‘lack of commercial something or other’.
[**] some of the partners had survived prior recessions, so we didn’t actually call it ‘worst case’. Which is probably just as well.
[***] this is not a high bar.