Interview: Professor David Myddelton
They Meant Well
Government Project Disasters
SM
Hello, I am Steve Macaulay. I am interviewing today Professor
David Myddelton about a subject which is in the papers a lot – it’s
about government projects that went wrong. The title of the book
that David wrote, and that we are talking about today is They Meant
Well – Government Project Disasters.
So David, give me an outline of the message that you are putting
over.
DM
Well I think the message is in the title really, which my publisher
didn’t much like. He thought it was too kind to governments. But it
was a kind of anomaly. Adam Smith has a famous saying about
the invisible hand, how people who aren’t trying to do good
nevertheless are led by an invisible hand to serve the public
interest. Well this is the other side of that coin. People who,
despite their worthy motives, make a complete mess of it at
taxpayers’ expense.
SM
Now what you did was have a look at half a dozen key famous
examples and looked at the output from that. I guess one of the
things that strikes me is that they are all rather British in a way – the
sort of famous muddling through. We got there in the end, but don’t
look too closely at how we got there.
DM
Well we didn’t get there in the end. I mean the R101 crashed in
flames, so that was a disaster. The groundnut scheme produces
actually zero groundnuts. So they didn’t all produce the goods and
of course I did write about British government disasters, so it’s not
surprising it was all British. I just thought it would be (a) too
ambitious to use other countries’ examples; and the second part of
the deal, as you know, is political and I have lived in this country all
my life, so I know quite a lot about the politics. I just felt very
uneasy about Australian or French or American politics. I would
make mistakes.
SM
So you certainly knew quite a bit, and you researched quite a bit on
these things. Tell me a bit more about which were the projects you
did choose.
DM
Well, we had to look around quite a bit. The R101 – if I take them
in chronological order – the R101 airship, I had read a famous book
by Neville Shute about that. He was employed as chief engineer
on the R100 and of course he later became a novelist. He was
Professor David Myddelton
Neville Shute Norway when he was the chief engineer, but Neville
Shute was his novelist name. And that was very interesting
because it was a competition.
I won’t go into all the background because it is quite detailed, but
governments were changing. There was a Conservative
government, then there was a Labour government, then there was a
Conservative government again and the Labour Minister, Lord
Thompson, he wanted to have just a single government project but
the Labour government insisted with Ramsey MacDonald, insisted
on having a competition between private enterprise and the
government.
To cut a long story short the private enterprise R100 flew safely to
Canada and back and the R101 on its maiden flight crashed for
reasons we can go into if you want.
The groundnut scheme was just a disaster – very ambitious – to
save money producing margarine and the British government
decided to plant 3.2 million acres of groundnuts, peanuts, in
Tanganyika and other parts of East Africa. There wasn’t any rain
and they couldn’t plant the stuff and they couldn’t dig it up. It was
hopeless. It was a very underdeveloped country. It was absurdly
ambitious. They didn’t even have a pilot scheme.
One of the interesting things about the groundnut scheme was,
whereas in every other case the government took years to decide,
they agonised, with the groundnut scheme they didn’t agonise.
After about six weeks they made the decision to go ahead, so that
was a real disaster.
The others, if I just mention them – I don’t want to go on talking
about them too much – one is civil nuclear power. They thought
that was an absolute godsend, but basically they got the costs
wrong. The technology was very advanced and difficult, so one
can’t altogether blame them for that, but the scale of their
underestimating of costs was sensational. I reckon the total costs
in today’s money was at least thirty seven thousand million pounds,
which is a huge sum. They had no idea that it was anything like that
and because all the electricity generating companies and all the
other fuel companies – gas and so on – were state owned at the
time, nationalised industries, there was no market mechanism. So
there was absolutely no incentive to find out what it was all costing.
Concorde, I think people probably know about. That was an Anglo
French project essentially designed, as I understand it, to get us into
the Common Market, which it didn’t. But that was another technical
disaster. Very little weight to spare, so it was always on the
absolute knife edge. Again, they got the costs wrong.
Funnily enough the two heroes of my book really, one was Stafford
Cripps who cancelled the groundnut scheme when they ran out of
money – they had spent twice as much as they should have done
Knowledge Interchange Podcast
Page 2
Professor David Myddelton
and he just pulled the plug which was quite a difficult and
courageous thing to do. And we know Labour Chancellors aren’t
always very courageous – I am speaking the day after our
emergency budget. And the other one was Tony Benn, another
Socialist Minister one would have to say, who insisted when he was
the Minister that the costs of Concorde were made public because
until then on military grounds, I think, they had been kept secret.
The Channel Tunnel was another unusual one because the Tunnel
itself wasn’t my project, the project was the Channel Tunnel high
speed rail link to London. Mrs Thatcher and François Mitterand,
the French President, insisted on the Tunnel itself being a private
operation – which it was, Eurotunnel built it, lost a lot of money. It
wasn’t a complete disaster because transport projects are often very
difficult, but Mrs Thatcher said even the rail link must be fully
commercial. But when she had left office her successors basically
found a let out clause in the Treaty, which said there mustn’t be any
subsidies for the rail link and so in the end they did subsidise it very
heavily.
And of course that opened fourteen years after the Tunnel itself was
completed. So that was a long, long wait and not surprisingly since
you have to travel very slowly to get to the Channel Tunnel, the
traffic, the number of customers was far fewer than they had
expected.
And the final one, again people probably remember, was the
Millennium Dome, which was a relatively trifling project which the
Conservatives who started it, wanted to be a private sector project
but no private enterprise was interested. They couldn’t see how it
was going to make a profit. The government said we expect to get
– or be prepared to get – fifteen million visitors in a year which was
an absolutely huge sum, which they completely failed to get and
there were lots of financial problems. And if they hadn’t got this
French chap soon after they had started, P-Y Gerbeau who had run
Euro Disney for about ten years it would have been a complete
disaster. It was just a pretty large disaster. And the problem there
wasn’t that the costs were too high, it was that the income was far
too low. They got about five million visitors which was far fewer
than they had expected.
So they were all disasters in different ways, but one of my criteria
was finance. Did it cost the government, that is the taxpayer, a lot
more than they had expected? And the answer was, in each case,
yes, it did.
SM
I am particularly interested to say well what can we learn from some
of these things? It seemed to me reading what you had written,
one of the things is, we never seem to learn.
DM
One of the things to learn is government shouldn’t get involved in
quasi commercial projects. They don’t understand markets. They
Knowledge Interchange Podcast
Page 3
Professor David Myddelton
are so political and one of the things that happens, Steve, which,
one has got to say it flat out – these aren’t my words they are
quoted from a famous researcher – but essentially governments tell
lies about the costs and the likely revenues to make the thing look
attractive commercially up front in order to get the project underway
at all. So they are quite dishonest, I’m afraid, about it.
I mean a good example is the Olympics where the original costs
were going to be £2.3 billion and we already know they are going to
be over £10 billion and probably a lot more than that.
SM
I guess one of the things that occurs to me is that some of these
things would never get off the ground without government
sponsorship and that in the end we would rather have these things
than not.
DM
Well which one wouldn’t get off the ground without government
sponsorship?
SM
Well there is a whole host of big projects – the Olympics would be
one really – that we would say well unless particularly in these
recessionary times somebody says well I will stump up the money, I
can’t see that happening really in any big form.
DM
Well don’t forget the Olympics have become absurdly overblown. I
am old enough – you are a young man – but I am old enough to
remember the 1948 London Olympics and they were an austerity
Olympics just after the War and I think, and Boris Johnson I believe
thinks the same, it would be a jolly good idea to have another lot of
austerity Olympics and make them relatively cheap.
I quite agree the government has got to take the initiative on that
sort of thing, but they don’t have to get the taxpayers to pay so
much.
SM
So in your eyes if we trim down, if you like, the taxpayer contribution
that would actually help a lot.
DM
Well trim down to zero because after all governments are hopeless
managers don’t forget too. My line is, if these things are worth
doing the private sector, the market, will do them. And if they are
not worth doing, well why do them?
SM
I am mindful taking the nuclear one, of everybody seems to say
what a great success the French have made of nuclear power and
in a way we are the British muddling through. We made some
mistakes, we carried on, then we stopped it. Now we are starting it
again – and yet the French were quite consistent. They built the
same model over and over again.
Knowledge Interchange Podcast
Page 4
Professor David Myddelton
DM
When you say we stopped it, that’s not quite true. The market
stopped it. What happened was they wanted to privatise the
nuclear generating plants as part of the privatisation plan and the
markets had to pay up and when they saw what the costs were
likely to be, the market said this is not a commercial proposition, we
won’t do it. It was only at that stage, by the way, that they realised
that they had completely underestimated the costs of
decommissioning. People were telling lies up until then, but when
the top people had to sign their names to the prospectus with the
possibility of personal liability if they told lies, then finally they sort of
came clean.
Now the French, yes, they have done very well, but the French
taxpayers have paid a huge cost. And it is interesting you mention
now we are getting back in again. Well, maybe we are getting back
in again because no one thinks wind farms are really going to solve
the problem at all. That is just nonsense. The trouble with the
nuclear stuff is it costs so much. If they can be honest about the
costs, which would be a first, then they can make the political
decision, look it’s incredibly expensive, but we have got to have –
oh, I don’t know, more environmentally stuff or whatever, and so it is
worth it. And we say do it. That would be fine. Pretending to do it
on the cheap and then later having to come along and say ‘Oh
gosh, we got it wrong,’ I mean that is just hopeless.
SM
So, in a way, if we both of us quietly accept politicians are liars, they
cover things up, they change, they don’t really have a handle on the
detail and they don’t know how to project manage things, wouldn’t it
be best if they stayed out of things? But there is this thing called
the National Interest really and I look to myself and say, well when
we started this nuclear programme, we were doing it partly for
military reasons. Money wasn’t at all an object there.
When we started looking at Concorde and the enormous prestige
that Britain has got out of this, when we are looking at the Channel
Tunnel it isn’t just about people moving through the Tunnel, it’s
about having something like this that connects us with Europe, are
we paying enough attention to those things? Because my view is if
the politicians don’t grab the handle on that one, for all sorts of
maybe misguided reasons sometimes, nobody is going to be doing
that.
DM
You say that, but the railways were built by private enterprise. They
weren’t built by the government. The great exhibition of 1851,
which is a kind of precursor of the Millennium Dome, that wasn’t run
by the government – they said they didn’t want to get involved in
frivolity. That was private enterprise and that one made a profit by
the way.
Let me say one more thing that occurs to me here. My title, I meant
it – They Meant Well. I have been perhaps a bit harsh saying
Knowledge Interchange Podcast
Page 5
Professor David Myddelton
politicians tell lies. Very often they deceive themselves: they aren’t
exactly telling lies, that is why they can sound so sincere and
plausible that they can genuinely fool themselves quite often.
It’s like the budget yesterday, it’s absolutely ridiculous, the
assumptions are hopelessly optimistic. I am not saying Alistair
Darling is liar, I am just saying he has allowed himself to be
persuaded that what is politically convenient is true. In fact he is
not a very good front man, so it isn’t very convincing.
SM
What lessons can we learn? I am looking particularly if you like at
the average manager that gets involved in some of these projects –
they are on the receiving end of these projects in some way. They
are hoping to help deliver these successfully and I am thinking what
would a manager say about all this?
DM
Well I think there are two things that occur to me. One is I like the
idea of what I call devil’s advocates up front, people who are
licensed if you like to find fault and in particular to ask the difficult
questions. I think if you are in a team, particularly perhaps a
political team, but in a company too, you want to be onside. You
don’t want to be thought to be niggling away and negative. So I
think you really do need someone – probably a pair of people
actually, who are entitled and indeed required to pick up difficult
points in advance.
The second thing that occurs to me, where the private sector I think
is much better than governments, is abandoning the projects. No
one wants projects to go wrong once you have started on them, but
we all know that if something begins to go wrong it’s difficult to get it
back on track and if you do keep going it can end up being far, far
more expensive than you ever feared it possibly could be. And I
think the politicians have found it very difficult to cancel projects
because of the prestige point that you raise. We haven’t got a big
enough sample, but from the ones I looked at it seems to be mainly
Conservative governments that start these projects and Labour
governments that sort of think about cancelling them, and
sometimes do. I mean, the Labour government cancelled the first
Channel Tunnel which was a government project. So give them
credit for that. And they thought quite hard about cancelling the
Millennium Dome, but Tony Blair and John Prescott were keen even
though they would have been outvoted, I believe, in the Cabinet.
Politically they wanted to do it.
SM
So is the message be very wary of big projects; or is it by all means
dream but don’t translate these things into reality because they will
probably never happen?
DM
Well that isn’t a general lesson I would like to draw. Another thing I
learnt from these projects is where markets are concerned
governments get it wrong. They got the fuel policy completely
Knowledge Interchange Podcast
Page 6
Professor David Myddelton
wrong because they mis-estimated what the market was going to
do. The forecasts for the Channel Tunnel were disastrous – they
expected far more customers than they got. That was partly
because they didn’t anticipate the budget airlines, they didn’t realise
the ferries would keep on going, and so on. On the Millennium
Dome they were out by a factor of about three. And Concorde of
course, they didn’t sell any – apart from the two nationalised airlines
they didn’t sell any planes and Pan American said they wouldn’t
take Concorde if it was given away. Well that is a pretty damning
condemnation.
So, my conclusion is, where markets are concerned, governments
simply do not understand how they work. And if I can – this is not a
digression – you think now well what do governments do in our
economy? The big thing they do is the Welfare State, huge
education and health. But there they are not selling anything.
They are not monopolists. I am trying to develop a new word which
I call monoparechists – single suppliers. The government supplies
schooling, they supply health, but they don’t sell it. And I think the
truth is they have no concept of how markets work where
consumers have a genuine choice. Now that is a pretty serious
drawback if you want a commercial project – and of course it
doesn’t apply to commercial companies.
SM
So where do we go with these public/private partnerships?
DM
Well that is just a trick, isn’t it, to keep the thing off the government
balance sheet? It’s nonsense. They haven’t transferred the risk,
there are huge debts. Even now, the Chancellor of the Exchequer
and the Prime Minister are pretending our debts are relatively low
compared with other countries. I mean, they are just telling lies
there. I am afraid they didn’t mean well on that one – absolutely
the opposite. And I can’t believe – they are hopeless – but I can’t
believe they are even deceiving themselves on that. It’s just a trick
to keep the thing off the balance sheet. Ridiculous.
And we have landed ourselves with commitments for thirty or forty
years ahead. These are projects, like the ones I was writing about,
where we don’t yet know what the total cost is going to be. But I
think the lesson – you seem nervous of accepting my essential
point, which is let the market work. If these things are worth doing
commercially then do them. If they are not, if the government wants
to say ‘oh, look we will go ahead with the Millennium Dome’ which
they might have done ‘even though we realise the cost is going to
be a thousand million pounds’, or whatever, well fair enough. That
is a political decision and they are entitled, I guess, to take it. But
to kid yourself that it is commercial when it isn’t, that is the disaster.
SM
David thank you very much.
Knowledge Interchange Podcast
Page 7
Cranfield School of Management
Produced by the Learning Services Team
Cranfield School of Management
© Cranfield University 2008