Does Boris Johnson’s National Flagship, the HBS Free(loading) Enterprise Address Market Failure?

“Flying Kites, HMS Surprise” by Geoff Hunt

Taking a step back, one has to ask what is the vessel designed to deliver in terms of tangible outcomes for British business?

The first step in a Treasury Green Book appraisal is to provide the rationale for intervention. Appraisal is a two-stage process, the first stage of which is the consideration of a long list of option choices and the selection of a rational and viable set of options for shortlist analysis. The second stage in appraisal is shortlist analysis using social cost benefit analysis or social cost effectiveness analysis.

As an aside, I gather there is some evidence that past voyages by HMY Britannia actually saw fall offs in trade with those countries at which the ship docked. On a par with the risks once associated with receiving an enterprise award from the hands of John Major when he was Prime Minister.

One should, though, be wary of lapsing into a post hoc ergo propter hoc fallacy.

“This new national flagship will be the first vessel of its kind in the world, reflecting the UK’s burgeoning status as a great, independent maritime trading nation,” says Boris Johnson.

No other sovereign nation has felt the need to have a ship dedicated to the purpose of promoting its trade and industry, including Japan, a trading nation made up of islands with a proud maritime tradition?

The Royal Navy trained the Japanese Imperial Navy that blew the Russian Imperial Fleets out of the water back in 1905.

Which begs the question. Why has a nation like Japan not had an unarmed, publicly funded vessel dedicated to promoting its trade around the world (and why have we not had one before now)?

The ship is as much for use by British business as the British Government, but British business has not felt the need to build and operate such a vessel?

May be they have found better ways to represent and promote the best of British around the world that provide greater returns for them in the medium to long term?

Perhaps Boris Johnson should ask British business what they want, a novel concept for him admittedly as his ongoing prosecution of Brexit displays, rather than expecting them to cheerfully use his latest pipe dream at some unspecified date in the future?

And, is not four years at a minimum a long time to wait for:

“a clear and powerful symbol of our commitment to be an active player on the world stage.”

A British aircraft carrier comes with lots of physical presence; armed matelots and Royal Marines; abundant conference space and meeting rooms; excellent communications facilities; a range of accommodation to suit all levels of status; plenty of empty aircraft hangers below the flight deck, well out of the elements and a great place to land the helicopters and aeroplanes necessary to fly world leaders to and from their capital cities. The overwhelming majority of capital cities around the world are not on a sea coast.

Although, few places around the world are more than a thousand miles from the sea.

Which is fine if you are the captain of a hunter killer submarine armed with cruise missiles rather than the skipper of a glorified floating gin palace.

I remain convinced that Boris Johnson dreams of being piped aboard the HMS Elizabeth in Singapore Harbour.

One is inclined to think there is no market failure to address in the concept as sketched out by Number Ten and, therefore, no grounds to commit public money to such a project.

“Market failure occurs where, a market is unable to function fairly according to the economic ideas of efficient markets, from a (Treasury) Green Book perspective which looks beyond simply economic efficiency this means the market is unable to provide satisfactory levels of welfare efficiency.”

“There is not always a hard and fast dividing line to identify the degree of welfare inefficiency in markets.”

Let us for sake of argument, though, discover that many British businesses would like a floating conference and exhibition facility with good quality accommodation; a free licensed bar; Cordon Bleu cuisine with of a necessity plenty of foreign ingredients; and, of course, silver service and butlering to Jeevesian standards. But practical problems around funding, co-ordination etc have made it an impossible project to even commence.

Grounds perhaps for Government co-ordination and partial funding with a significant input into the design of the vessel by potential users. There is no point in designing and building something that those folk will find impracticable to use.

Of course, the greater involvement by British business, the more workmanlike, and mundane will be the final design. Not something likely to appeal to Boris Johnson as:

“A typical six month itinerary for the flagship might include docking at a port in a country where a British Prime Ministerial visit is taking place to accommodate parallel discussions between British and local businesses, hosting trade fairs to sell British products to an emerging market and providing the venue for an international ministerial summit or major trade negotiations between the UK and another government.”

I think we are asking more of the vessel than might be achievable within a single hull without considering the particular security issues around hosting UK and foreign politicians, diplomats and civil servants alongside the likes of the chair of Acme Whistles, who is, by all accounts, a very nice chap.

Ever more problems come to mind that would complicate the final procurement process. And the design would definitely need signing off before that was started. Would a single tender process, given the few shipbuilders likely to have the capacity to build such a ship be legal?

If we get private sector buy in, we should insist on the potential users committing to match the Government funding, at least pound for pound, giving us a minimum project budget of £400m (cost plus or fixed cost?) for the build and expect users to contribute to the running costs through a combination of pay as you go and annual subscription fees.

We now have a more credible capital budget and a contribution to the future running costs. And if not enough British businesses will commit to the upfront and long term funding then there is clearly no great demand for an ocean-going vessel to promote their businesses.

There would be no market failure to address.

And if that proved to be the case then we are just left with yet another Boris Johnson vanity project.

All fur coat and no knickers as we say here in Birmingham.

Acme Whistles (of Aston, Birmingham)?

The company designed and produced the whistles, used by officers and crew on the SS Titanic.

Would their products, still made right here in Birmingham, be wanted on the maiden voyage of the HBS Free(loading) Enterprise?

Five glaring issues about the announcement of the ‘new national flagship’ prestige procurement

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