Politicians should be looking after the taxpayers’ interests instead of pretending they can save a failing business, writes Brian Monteith
No matter the direction of travel for Scotland after the referendum, one thing is certain: the mindset of practically all of our politicians – and most certainly any of those that might form a government – will remain mired in the belief they can buck the market and achieve the business equivalent of turning water into wine.
In the past fortnight, there have been a couple of announcements about the future of Prestwick airport, the first by SNP Deputy First Minister Nicola Sturgeon, the second from budget airline Ryanair, but neither offered hope for Scotland’s beleaguered taxpayers, our enterprise economy or those that are unemployed in Ayrshire.
Prestwick has never been the most profitable of airports, even in the boom years, and by the time its New Zealand owners sold it to the Scottish Government for a nominal £1, it was reportedly losing £800,000 a month. These losses were picked up by the Scottish Government with the intention of “saving” the 300 employees directly connected to the passenger side of the airport and the estimated 1,400 indirect local jobs. Nearly £5 million has been spent since October last year and now a further £9m has been announced by Sturgeon, including a refurbishment of the terminal building. How much will be spent in future years? No-one knows.
The investment was welcomed by all politicians of all colours, providing yet another example of how all parties appear to be the same and offer no choice to those that see things differently. Even the Conservatives, who, at the very least, might be expected to defend taxpayers’ interests or, better still, argue for market forces to take their course, welcomed the investment. Why, you might ask? But one only has to look at the political map to see that the Tory constituency of Ayr might be put at risk if the Conservatives were not seen to defend it as much as other politicians.
But why should taxpayers in Glasgow and Edinburgh – whose airports do not receive any such direct state subsidy or safety net – be contributing to Prestwick’s airport that must, by definition, be competing with others throughout Scotland? And why can politicians not be honest with the electorate and explain that throwing good money after bad will only end in tears for everyone?
Prestwick airport’s calamity is not a market failure; it is a political failure. It is the market working, providing attractive, competitively priced flights from hub airports that passengers prefer. The market solution reflected in Edinburgh’s and Glasgow’s growth works for airlines and the airports too, as the greater possible interchanges between flights brings more passengers on board and through the retail outlets.
It is a political failure because it marks out the cowardice of Scottish politicians in refusing to tell the truth that all but a few know and privately admit – that Prestwick’s future as a scheduled passenger airport is likely to be beyond saving. It also betrays their conceit that they can plan for a better economic outcome than entrepreneurs, who are more creative and more used to judging the risks of investing.
Why should MSPs try to keep a failing business trading? What difference can politicians – most of whom have never turned a profit at a school tuck shop – make to Prestwick’s ultimate destination? Throwing public money at a business is no guarantee of success; indeed it can allow just the sort of sloppy business thinking that the real commercial test of attracting private capital would prevent.
Would it not be better to let the airport focus on its strengths of cargo and charter flights while the associated aerospace and engineering is able to blossom under the lower business taxes that would result from ending such corporatist intervention across the whole of Scotland? If the market is telling us that in Central Scotland three airports free from state subsidy or regulatory advantage cannot be supported, why not let the weakest fail and the other two grow?
It would make far more sense and undoubtedly be cheaper to provide a free annual rail pass for the resulting unemployed of Prestwick that can show they have found a job to commute to in Glasgow than to sink more and more funds into an enterprise that has consistently struggled to break even.
It did not take long for Sturgeon’s old-think to come undone. As if to prove the folly of governments second-guessing commercial businesses, Ryanair, the only remaining scheduled carrier operating out of Prestwick, announced last week it was cutting some of its flights and transferring key routes to Glasgow airport instead. Of course, it played all the mood music about continuing to support Prestwick, but anyone who knows anything about Ryanair’s negotiating style across the whole of Europe understands it will use the Ayrshire airport’s predicament to extract an even better deal than it currently enjoys. In other words, the revenues at Prestwick are not just going to be smaller due to fewer flights, there is also likely to be a reduction in revenues from the remaining flights. This will result in falling revenues in cafés, bars and retail outlets. Prestwick will therefore have to fight a cycle of decline.
Chasing after an elusive profit at Prestwick is a folly; yet again, the Scottish Parliament – whether through unionist parties offering greater devolution or nationalist parties offering pseudo-independence – is seeking to live beyond its means. The investment for Prestwick will come at the price of opportunity costs placed upon Glasgow and Edinburgh airports, which shall both face continuing high taxes and subsidised competition – and the replication of such economic self-indulgence will ultimately be funded by our children and grandchildren, who will have to pick up the cost when a reckoning is made.
What this episode tells us about Scotland is that it badly needs a political party that has a genuine understanding of business and how to set it free so that it can flourish. Only successful enterprises can pay taxes on their profits to swell the public revenues to pay for all those services and freebies that politicians believe are vital. Only politicians being honest with us and getting out of the road instead of trying to pull the levers and spin the wheels of Scottish economics, like some Wizard of Oz, can offer us the path to success.
Is there anyone out there willing to break free from the current consensus?