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TaxPayers’ Alliance responds to Public Accounts Committee report on HMRC tax disputes with big companies

Dec 20th, 2011
by Matthew Sinclair.
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The Public Accounts Committee has released a new report today looking at how the HMRC works to raise tax from large companies. They have found a number of weaknesses and say that they “have serious concerns that large companies are treated more favourably by the Department than other taxpayers.” Looking at specific cases has led the Committee to conclude that there “needs to be proper separation between the negotiation of tax settlements and the authorization of such settlements. And the Department must address issues of accountability so that Parliament and the public can be satisfied that best value is secured.”

The TaxPayers’ Alliance has produced research on unpaid tax and the complexity of the tax system (along with a video showing the world’s fastest speaker trying to read the tax code) which makes its administration more challenging. Today Matthew Sinclair, Director of the TaxPayers’ Alliance, responded:

“This report again calls into question whether HMRC is fit for purpose. Ordinary taxpayers often feel that they are treated harshly when they make genuine mistakes because of our complicated tax system; the PAC findings will increase suspicions that big businesses are treated differently. The taxman will always struggle to effectively enforce a tax code that is one of the longest and most complicated in the world and the only way to ensure that more individuals and big businesses pay their fair share is to simplify the system and reduce the number of loopholes. There may be times when confidentiality is needed, but it would be unacceptable if HMRC was using this as an excuse to avoid being completely transparent about its decisions.”

Recent coverage of Let them eat carbon

Dec 17th, 2011
by Matthew Sinclair.
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Over the last week we have seen the end of the Durban summit and a new report from the Committee on Climate Change, trying to play down the extent climate policies are set to push up energy prices.  At the TaxPayers’ Alliance, we’ve been arguing online and in the media that the Government shouldn’t ignore the pressure being placed on families and needs to put in place reforms to give families a better deal, building on the case set out in Let them eat carbon.   Here is a round-up:

  • In the immediate aftermath I wrote for the ConservativeHome and Spectator websites about how little progress the Durban summit had made, and the implications for policy here.
  • I debated climate policy in the aftermath of the Committee on Climate Change report and the Durban summit with environmentalist and Guardian columnist George Monbiot on Radio 4′s flagship Today programme.  The debate is available online.
  • I looked at the Committee on Climate Change report and found that many of the assumptions hadn’t been made clear, but what we could see suggested there were some problems.  I set out the issues with the quango producing such an opaque report in an article for the Spectator website.
  • Finally, yesterday I wrote for this website that, as the dust settled after the Durban summit, it was clear that the EU strategy hadn’t worked.  We are left pressing ahead unilaterally to no end.

It is clearer than ever that climate policy needs to change.  We will keep making the case.

What does the Durban summit last weekend mean for taxpayers?

Dec 16th, 2011
by Matthew Sinclair.
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Early last Sunday morning Connie Hedegaard, the European Commissioner for Climate Action, wrote on Twitter that: “We made it.  EU’s strategy worked.”  It was the end of another climate summit in Durban where the parties had been starkly divided into two camps: the European Union and lots of smaller countries pushing for rapid decarbonisation; and major emitters like the United States, China and India who were unable and unwilling to commit to binding limitations on their own emissions.  The same divisions meant that Copenhagen collapsed in acrimony and the negotiators at Cancun limited themselves to addressing details.  Was it really the “breakthrough” that Hedegaard claimed?  Did the EU’s strategy really “work” and secure the global deal to ration greenhouse gas emissions they want?

Taken for a ride...

No.  The EU’s negotiators were willing to accept new commitments under the Kyoto Protocol, which doesn’t include the major emitters.  But in return they initially wanted all the parties to commit to agreeing a legally binding deal covering everyone by 2015.  The major emitters wouldn’t do that and so it looked like the talks were going to break down.  Instead they got creative with the language and now the major emitters are only committed to an “outcome with legal force”.

Enthusiasts in Europe can claim that is basically the same thing, but the reality is that just about anything can be described as “an outcome with legal force”.  If the major emitters don’t want a legally binding deal to limit their emissions in 2015, nothing will stop them rejecting it.  That is why they would sign a deal with the vaguer language but not when it was more specific.

So the EU has committed itself to emissions cuts in return for a Durban Platform that pledges a deal by 2015, but that Platform isn’t made of much stronger stuff than the Bali Roadmap back in 2007 which pledged a deal by 2009.  That certainly isn’t a triumph.  It would be better described as a disastrous performance if it wasn’t for the fact that the EU was planning on going ahead unilaterally anyway with the existing 2020 targets.  The result in Durban was another breakdown, not a breakthrough.

Canada added to the environmentalist gloom by dropping out of the Kyoto Protocol on Monday.  Their Environment Minister Peter Kent said that complying would mean the equivalent of taking every motor vehicle in Canada off the roads, or shutting down their entire agricultural sector and cutting the heat off in residential, industrial and commercial buildings.  The leader of the Canadian Green Party was apparently almost in tears at a press conference responding to the announcement but there is no sign ordinary Canadians care much either way.

The European Union is now the only major economic area still committed to rationing fossil fuel energy.  It has been going ahead without the largest emitters taking equivalent action since the Kyoto Protocol came into effect in 2005.  Even if a new deal is built on the Durban Platform it won’t start until 2020.  Our leaders have already pressed ahead for six years in the vain hope a global deal was just around the corner.  There is nothing to show for it.  The global increase in emissions in 2010 was, according to the US Department of Energy, the largest ever.  Can politicians here really sustain that for almost another decade?

While negotiators in Durban were committing their countries to expensive action to reduce greenhouse gas emissions, others in Brussels were trying to save the euro.  If they are going to have any chance, they will need to credibly commit to fiscal austerity.  And that will be much harder if low and middle income families are struggling to pay higher energy bills, at the same time as benefits are cut or taxes are hiked.  If Europe could ever afford a vain attempt to lead the world into cutting greenhouse gas emissions, it can’t now.

That is why many countries are making cuts in some particularly inefficient climate policies.  Britain recently cut subsidies for small solar installations under the feed-in tariff scheme roughly in half, from 43p per kWh to a still extravagant 21p per kWh.  Environmentalists and lobbyists are up in arms but the Government insist it is needed to keep feed-in tariffs affordable.

Lots of other countries from Spain to the Czech Republic have taken similar steps, but they need to go further and consider a more realistic approach to climate policy overall.  Right now too many European politicians are still trying to work out what their allotted share of the burden would be if some disinterested world Government set climate policy.  Instead they should be asking what their country can usefully do in the real world, where even when treaties can be arranged they are invariably limited and messy products of self-interested negotiation.

Britain is a good example.  Given that less than two per cent of world emissions are produced here we can make a limited contribution by cutting the amount we emit.  But we do still have significant financial and technical resources at our disposal.  Instead of investing £200 billion in our energy sector alone, as Citigroup argue we would need to in order to meet environmental targets, squandering a large part of it on exorbitantly expensive offshore wind turbines, why not put a far smaller amount of money into directly supporting research that can make low carbon energy more affordable?

Durban definitely wasn’t an example of the EU’s approach to climate policy working, quite the opposite.  The only question now is whether or not the politicians are honest enough to admit it, and flexible enough to consider other options.

What does the Durban summit last weekend mean for taxpayers?

Dec 16th, 2011
by Matthew Sinclair.
Comments are off for this post

Early last Sunday morning Connie Hedegaard, the European Commissioner for Climate Action, wrote on Twitter that: “We made it.  EU’s strategy worked.”  It was the end of another climate summit in Durban where the parties had been starkly divided into two camps: the European Union and lots of smaller countries pushing for rapid decarbonisation; and major emitters like the United States, China and India who were unable and unwilling to commit to binding limitations on their own emissions.  The same divisions meant that Copenhagen collapsed in acrimony and the negotiators at Cancun limited themselves to addressing details.  Was it really the “breakthrough” that Hedegaard claimed?  Did the EU’s strategy really “work” and secure the global deal to ration greenhouse gas emissions they want?

Taken for a ride...

No.  The EU’s negotiators were willing to accept new commitments under the Kyoto Protocol, which doesn’t include the major emitters.  But in return they initially wanted all the parties to commit to agreeing a legally binding deal covering everyone by 2015.  The major emitters wouldn’t do that and so it looked like the talks were going to break down.  Instead they got creative with the language and now the major emitters are only committed to an “outcome with legal force”.

Enthusiasts in Europe can claim that is basically the same thing, but the reality is that just about anything can be described as “an outcome with legal force”.  If the major emitters don’t want a legally binding deal to limit their emissions in 2015, nothing will stop them rejecting it.  That is why they would sign a deal with the vaguer language but not when it was more specific.

So the EU has committed itself to emissions cuts in return for a Durban Platform that pledges a deal by 2015, but that Platform isn’t made of much stronger stuff than the Bali Roadmap back in 2007 which pledged a deal by 2009.  That certainly isn’t a triumph.  It would be better described as a disastrous performance if it wasn’t for the fact that the EU was planning on going ahead unilaterally anyway with the existing 2020 targets.  The result in Durban was another breakdown, not a breakthrough.

Canada added to the environmentalist gloom by dropping out of the Kyoto Protocol on Monday.  Their Environment Minister Peter Kent said that complying would mean the equivalent of taking every motor vehicle in Canada off the roads, or shutting down their entire agricultural sector and cutting the heat off in residential, industrial and commercial buildings.  The leader of the Canadian Green Party was apparently almost in tears at a press conference responding to the announcement but there is no sign ordinary Canadians care much either way.

The European Union is now the only major economic area still committed to rationing fossil fuel energy.  It has been going ahead without the largest emitters taking equivalent action since the Kyoto Protocol came into effect in 2005.  Even if a new deal is built on the Durban Platform it won’t start until 2020.  Our leaders have already pressed ahead for six years in the vain hope a global deal was just around the corner.  There is nothing to show for it.  The global increase in emissions in 2010 was, according to the US Department of Energy, the largest ever.  Can politicians here really sustain that for almost another decade?

While negotiators in Durban were committing their countries to expensive action to reduce greenhouse gas emissions, others in Brussels were trying to save the euro.  If they are going to have any chance, they will need to credibly commit to fiscal austerity.  And that will be much harder if low and middle income families are struggling to pay higher energy bills, at the same time as benefits are cut or taxes are hiked.  If Europe could ever afford a vain attempt to lead the world into cutting greenhouse gas emissions, it can’t now.

That is why many countries are making cuts in some particularly inefficient climate policies.  Britain recently cut subsidies for small solar installations under the feed-in tariff scheme roughly in half, from 43p per kWh to a still extravagant 21p per kWh.  Environmentalists and lobbyists are up in arms but the Government insist it is needed to keep feed-in tariffs affordable.

Lots of other countries from Spain to the Czech Republic have taken similar steps, but they need to go further and consider a more realistic approach to climate policy overall.  Right now too many European politicians are still trying to work out what their allotted share of the burden would be if some disinterested world Government set climate policy.  Instead they should be asking what their country can usefully do in the real world, where even when treaties can be arranged they are invariably limited and messy products of self-interested negotiation.

Britain is a good example.  Given that less than two per cent of world emissions are produced here we can make a limited contribution by cutting the amount we emit.  But we do still have significant financial and technical resources at our disposal.  Instead of investing £200 billion in our energy sector alone, as Citigroup argue we would need to in order to meet environmental targets, squandering a large part of it on exorbitantly expensive offshore wind turbines, why not put a far smaller amount of money into directly supporting research that can make low carbon energy more affordable?

Durban definitely wasn’t an example of the EU’s approach to climate policy working, quite the opposite.  The only question now is whether or not the politicians are honest enough to admit it, and flexible enough to consider other options.

Union myths unravelling

Dec 1st, 2011
by Matthew Sinclair.
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Following up on our release yesterday confronting union myths, and TPA Research Director John O’Connell’s blog for this site, I wrote for the Spectator Coffee House about the TUC using a poll which showed the public had a good idea of the value of normal public sector pensions to try and sell their misleading average pension statistic.

Since then the Institute of Fiscal Studies have estimated that public sector workers are 7.5 per cent better paid, even after “allowing for the higher age and qualifications of public sector workers”.  Their work confirms the figure from the Office for National Statistics which we have been quoting.  The unions just can’t defend the strike except with misleading claims that fall apart when challenged, like they did when I debated the issue with the ATL President on Sky News:

 

If facility time cuts strikes, what is happening in the public sector?

Nov 25th, 2011
by Matthew Sinclair.
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Unison General Secretary Dave Prentis has responded to our report showing the unions getting a £113 million backdoor subsidy.  He claims that the facility time reduces industrial strife, and leads to fewer strikes. If that was the case, then surely the public sector – where staff take three times as much in facility time – would see fewer strikes? After all, public sector workers are also better paid and get better pensions. It doesn’t work out that way:

The data on the relative number of strike days lost per worker are from our research last year. You can see the same thing with the ridiculous claim that having hundreds of staff working for the union, instead of the public service, improves public service productivity:

The data on productivity compares the market sector and the major public services. It is taken from the Economic and Labour Market review produced by the Office for National Statistics.

Either something else is going catastrophically wrong in the public sector, and things would be even worse without huge amounts spent on facility time, or union staff paid for at taxpayers’ expense aren’t associated with an efficient workplace.  We shouldn’t fear ‘pay up, or we’ll strike’ threats from the union bosses.  And our past experience with Dave Prentis shows that he isn’t above misleading the media and the public:

Other European countries do enjoy a better relationship with the EU

Nov 24th, 2011
by Matthew Sinclair.
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Jeremy Warner writes for the Telegraph this morning, arguing that Britain is unlikely to get impressive results out of any renegotiation associated with the EU treaty.  He is right that a lot of the minor changes we’ve heard rumours about would be welcome but, in the grand scheme of things, “don’t add up to more than a hill of beans”, but if the Government is more aggressive there is a real opportunity here.  As our Chief Executive Matthew Elliott wrote for his blog at the Daily Mail recently, there is a “a golden opportunity to claw back powers from Europe” if the Prime Minister is willing to seize it.

Matthew gave a list of demands that we should be making, not an exhaustive platform but a very good start:

  • Rejecting the European credo of ‘ever closer union’
  • Providing for UK law to take precedence over EU law
  • UK withdrawal from the atrocious and costly Common Agriculture Policy and Common Fisheries Policy
  • A cut to the UK contribution to the EU budget – which has increased by some billions of pounds since the last Government threw away the rebate negotiated by Margaret Thatcher
  • A UK opt-out from the Social Chapter which suffocates business with red tape and restricts the prospects for job creation
  • Ending British contributions to the EU’s International Development aid budget – so much of which is unaccounted for
  • Pursuing multinational defence ventures through NATO and only multilaterally via Brussels on an ad hoc basis
  • Allowing the UK to taking full control over Justice, Home Affairs, Asylum and Immigration policy once again
  • Restoring full UK control over taxation, particularly VAT

Jeremy writes that such proposals would be “red-line issues” for both Germany and France, and as a result our “position in the internal market would become marginalised. We’d end up like Norway, forced to adopt most of the foibles of the eurozone to keep trading with it, but with no say in its constitution.”

It is actually a a myth that Norway, and the other countries in a similar position like Iceland or Switzerland, are really in that unfortunate position.  Lee Rotherham wrote about this for the publication Controversies: From Brussels and Closer to Home:

The content of the [European Economic Area] Agreement is updated very regularly, but – and it is a huge ‘but’ – it can be blocked if either side does not want to include any single element of the acquis.  Each individual EFTA state has a veto on the entire agreement, since it is shared between the EEA and the EU acting as two parties.  This also means that national parliaments have a veto too.

He went on to cite a number of cases which show that the resulting regulatory burden is far greater than that felt by EU member states:

Firstly, according to a report by the EFTA Secretariat in Brussels for the Icelandic Foreign Ministry that was published in May 2005, only some 6.5% of EU regulations, directives and decisions had fallen under the EEA Agreement over the first eleven years of its existence, a total of 2,527 pieces of legislation.  Of those only 101 required a change to Icelandic laws already in place.

[...]

There was a similar question raised in the Norwegian parliament in 2004 about how much EU legislation had been implemented under EEA terms.  The then-government replied that over the period 199702993 there had been 11,511 pieces of legislation adopted by the EU.  Of those 2,129 fell under the EEA agreement, or about 18.5 per cent.

[...]

From its cost-benefit analysis, Berne assessed that the cost [to Switzerland] of continuing bilaterally with the EU would run at 557 milion Swiss Francs; gaining EEA terms would cost 737 million CHF; and joining the EU would come with a net annual billion of 3.4 billion CHF, and a gross bill of 4.94 billion Francs.

Britain’s position is far stronger than Jeremy suggests.  We don’t have to fear Norway or Switzerland’s fate.  It wouldn’t be so bad.  So the Prime Minister should be able to go and demand the repatriation of powers, that should never have gone to Brussels in the first place, with confidence.

Double taxing holidaymakers

Nov 19th, 2011
by Matthew Sinclair.
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Earlier this week, I appeared on Sky News to debate aviation taxes with John Stewart, Chairman of Airport Watch. We were asked whether we supported scrapping Air Passenger Duty – a tax that, according to the Government’s own research, is excessive compared to the emissions aviation creates.

In addition to this, the Government plans to extend the EU Emissions Trading Scheme – which I have written about previously – to aviation, effectively taxing holidaymakers twice. This is not only unfair, but hits tourists, and the tourism industry, at a time they can afford it least.

You can watch the debate below:

Taxpayers lose a fortune on the Northern Rock bailout

Nov 17th, 2011
by Matthew Sinclair.
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It is a long time since Northern Rock was last regularly hitting the headlines, as its funding dried up at the start of the credit crunch.  Then politicians were busy playing down the cost of the bailout.  But we weren’t convinced.  TPA Research Fellow Mike Denham argued that we would be left with a hefty bill for the poor quality assets we had taken on.

And I looked at the extent to which politicians were “committing taxpayers money to the risky venture of trying to revive Northern Rock instead of taking the more cautious approach of trying to get value from the assets as they stand”.  Now part of the bank is returning to the private sector and the losses on the bailout are starting to be crystallized: the BBC reports that we are down £400 to £650 million.  But that’s just the start.

The big money is in the bad bank.  Again the BBC reports that the losses there could be as much as £21 billion.  That’s over £800 for every family in Britain.

And even more of our money is at stake in the other nationalised banks; particularly RBS and the Lloyd’s Banking Group.  It wasn’t so long ago that they were worth more than they are today, but wise commentators were telling us that we needed to hold onto those shares so we could enjoy the gains as their prices inevitably rose.

Now, with their talent for identifying every possible opportunity to lose huge amounts of money, and the unfolding eurozone crisis, it is possible that RBS could even need another bailout.  At that stage, surely we would need to finally put the bank out of its misery and look at bail-ins of the kind envisaged in the the Vickers Report instead of putting yet more of our money on the line.

The deal today will at least create more competition for high street banking and get some money back.   Ed Balls suggesting after three years that we should keep holding on in the hope of a turnaround is ridiculous.

The critical mistake that politicians have made at every stage in this crisis is to think they know best, that they can see a safe opportunity for profits where people playing with their own money can’t.  Taxpayers weren’t queuing up to put their money into Northern Rock, quite the opposite, but politicians did so on our behalf.  The best guess as to the long term value of the taxpayers’ shares in the nationalised banks is their market price.  Now we are starting to pick up the bill for the politicians’ hubris.

Merging Income Tax and National Insurance would just be more honest

Nov 15th, 2011
by Matthew Sinclair.
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Over the weekend Kamal Ahmed, Business Editor at the Sunday Telegraph,  reported that the Government is slowly moving towards simplifying the tax system by at least merging the administration of Income Tax and National Insurance. Our research on the growing complexity of Britain’s tax code shows that an ambitious attempt to simplify the system is needed. And in another recent paper we showed how a full merger was possible.

A full merger, and bringing the two taxes together instead of just having them work the same way behind the scenes, isn’t just simpler.  It would also be more honest. Here is a simple new video, produced with visualisation experts See What You Mean, that sets out how the tax system understates how much we’re really paying, in Income Tax and Employees’ National Insurance – even before we get onto Employers’ National Insurance which also depresses your wages:

Click here to tweet the video to your family and friends

Transport Select Committee report shows the HS2 project needs to be reviewed

Nov 8th, 2011
by Matthew Sinclair.
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The Transport Select Committee report on proposals for a new high speed rail line this morning is supportive of the case for the new line on balance but, as Benedict Brogan wrote this morning “its backing is so lukewarm it is almost as bad as a condemnation.”  There are a whole series of issues that the Committee argues need to be dealt with before a decision is made, and a whole lot of problems they haven’t dealt with properly that also need to be addressed.  The final picture is clear: a project of this scale can’t go ahead without a proper review that answers these questions, and offers a complete idea of the costs and benefits so taxpayers can decide if the scheme offers proper value.

There would be a number of areas a review would need to address.  The Committee call for better analysis of “the policy context, the assessment of alternatives, the financial and economic case, the environmental impacts, connections to Heathrow and the justification for the particular route being proposed.”

The new line needs to be properly assessed against realistic alternatives like the plan set out by Chris Stokes for the local authority group 51M.  The Committee accept that would meet forecast demand.  They call for the economic case is updated on the basis of reduced crowding and a lower value for time savings.  That update also needs to apply to alternative proposals.

What they don’t address seriously is all the ways that this project might lead to fresh demands for taxpayers’ money.  They note that the London Underground won’t be able to cope with so many more passengers being routed into London Euston, but don’t properly reflect on the huge amounts that could add to the cost.  They argue that new services on the current network could compensate for the reduction in services that places like Coventry and Stoke will face under the existing plans.  But don’t ask what the bill will be to subsidise those trains (it will take a substantial subsidy to maintain a regular service when most passengers to Birmingham and beyond travel on the new high speed line) and how that can be reconciled with the existing budget including billions in cuts to existing services.

We looked at the potential additional costs in a research note.  It is only possible to get a rough estimate without the resources available to the Government investigating this sort of decision.  But we produced a research note with reasonable estimates.  Meeting Ministers’ promises that towns and cities currently set to lose out won’t, and stopping rises in fares expected under current plans will increase the cost to taxpayers.  So will burying parts of the line to address environmental concerns, and building new capacity to cope with the huge number of additional journeys being routed into Euston.  Rail expert Chris Stokes estimates that would increase the cost to taxpayers alone from £17.1 billion to £45.5 billion.

And that’s leaving aside the potential problems with the demand forecast.  The Committee cite how “some major transport schemes have proved to have had greater economic impacts than their pre-implementation appraisals predicted” but not how passenger forecasts are overestimated for nine out of ten rail projects.  In most cases these lines don’t live up to their billing.

If Parliament doesn’t insist that Ministers either come clean about the true cost of HS2, or the many people who may get a worse service, MPs will have completely let down taxpayers.  We can’t let this huge project go ahead without proper scrutiny.  Politicians should be extremely careful about taxing the poor to pay for a rich man’s train.

Robin Hood stole from the rich and gave to the poor, Bill Nighy would steal from savers and give to the politicians

Nov 3rd, 2011
by Matthew Sinclair.
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This evening, Channel 4 News at 7pm will be screening a debate between me and the actor Bill Nighy on proposals for a Financial Transactions, or Robin Hood, Tax.  UPDATE: You can watch the video after the break.

Bill Nighy wrote for the Guardian recently arguing that the Financial Transactions Tax was an all-round wonderful idea only scuppered by bankers not wanting to pay their way.  The reality couldn’t be further from the truth.  The reality is that the people who would pay this tax would be savers struggling to afford a comfortable retirement.  Already struggling with high inflation, they would be hit again as the share prices that underlie the performance of most pension funds would be depressed.  In the longer term, particularly if the tax isn’t applied globally, workers would suffer too with fewer opportunities and lower wages as investment went elsewhere.

Bill Nighy in a video promoting the "Robin Hood" Tax

He hides that problem with the misleading statement that according “to the IMF it would be paid predominantly by the richest”, which he then translates for the rest of his article into this money coming out of the pockets of the likes of Goldman Sachs executives.  The reality is that the IMF paper he is referring to says that burden would “fall on owners of traded securities, at the time the tax was introduced, as the value of stocks, bonds and derivatives subject to” the new tax.  In other words, savers.

Of course people with savings are generally significantly better off than those without them.  For example, people on benefits aren’t saving and their retirement income will depend on the level of state pension entitlements rather than investment returns.  The other group this won’t affect as much – though they are actually relatively well off – are public sector workers, whose unfunded, defined benefit pensions also aren’t dependent on investment returns.

Savers will pay and, while they are on average significantly better off than people who aren’t saving, they aren’t all plutocrats.  We are talking about plenty of normal people struggling to save and invest, to build up a pension fund and provide for themselves and their family.  This certainly isn’t a tax on the banks.

British politicians are constantly urging people to save, that’s why things like tax free ISAs are available.  Hitting them with a new tax would achieve precisely the opposite and further put people off putting money aside for their old age.  That means taxpayers will have to pick up the bill instead and poses a mortal threat to the long term stability of our public finances with an ageing population.

In the longer term, by making it more expensive for companies to raise finance this measure would depress investment.  Particularly in an open economy like ours, and if the tax wasn’t truly global, capital would “flow out until its after-tax return was restored to the world market level.”  Less investment means fewer jobs and lower wages.  As the IMF say: “In the long run, capital owners would therefore not bear the burden of the STT; it would fall on workers, who as a result of the smaller capital stock would be less productive and receive lower wages.”

Other countries have seen that these taxes don’t work.  Australia abolished a stamp duty on shares in 2001, for example.  The IMF reported that these taxes have been in steady decline internationally in recent years.  We do have a stamp duty on shares in Britain but it is a disastrously inefficient tax, despite some differences in the conditions making it less onerous than a pure transactions tax.

In 1999, researchers at the London School of Economics found that while other transaction costs for UK equities had more than halved while Stamp Duty had remained constant.  As the Forsyth Commission reported (pgs. 103-104), those higher transaction costs depress share prices by up to 10 per cent.  One study suggests that if it were abolished the increase in the market capitalisation of the FTSE All Share could be in the region of £150 billion.  That suggests the around £4 billion a year the tax raises is pretty poor value.  If the Robin Hood Tax is supposed to raise much more money than that, then it will do even more to destroy share prices.

And stamp duty on shares also makes it more expensive for companies to raise the finance they need to grow and compete with rivals abroad.  Oxera found that abolishing the tax would reduce the cost of equity by 7 to 8.5 per cent on average, but technology companies for example might pay up to 12 per cent less.  That means abolishing the tax would increase investment, and bring more jobs and higher wages for British workers.  Bill Nighy wants us to go in the opposite direction.

This tax would be bad for the City, but that doesn’t make it good for the rest of us.  It would be an immediate disaster for savers and a longer term disaster for workers.  It would also increase volatility in financial markets, as I have written before, thereby increasing risk.

And that’s before we get onto how the money will be spent.  Bill Nighy’s idea is that it will go on aid for poor countries.  But even if you think the rapidly rising development budget – while taxes are rising and spending is being cut here in Britain – isn’t enough, European politicians appear to have other plans.  They want to use it to finance their wasteful spending and grand plans in Brussels.  Is that where you want your savings spent?

This is a bad plan and the Government should reject it regardless of whether international agreement can be secured.

Fun with the Regional Growth Fund

Oct 31st, 2011
by Matthew Sinclair.
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Today the Department for Business, Innovation and Skills announced the results of the second round of the Regional Growth Fund – which we last looked at when we uncovered that one of the directors is from an organisation that doesn’t support growth.  Nick Clegg told the BBC that the £950 million would help create or safeguard “hundreds of thousands of jobs”.  The opposition’s only criticism was that the money was too late, or not enough.  That it wouldn’t match the scale of the wasteful and ineffective Regional Development Agencies.  That means it is up to the media and groups like the TaxPayers’ Alliance to scrutinise how the money is being spent, and whether it will deliver on the hype.  After all, we’ve seen enough dodgy claims that policies will create jobs before.  So what did we find when we looked at the projects approved?

Nothing.  There is a list of recipients and an estimate of the number of jobs that will be created in each region but no suggestion of how much each recipient is getting or what projects are being funded.  All we have are questions:  Why are British taxpayers funding Santander UK plc, a subsidiary of the major Spanish banking group Santander?  How will funding for miscellaneous national projects that they expect to create 200 jobs directly create 16,500 indirectly? What are any of the 119 firms getting our cash doing with the money?

As Jim Pickard has pointed out in a blog for the Financial Times, even the names of ten of the winning companies haven’t been disclosed.  At some point apparently we will be able to see where the money is going.  But until then grand claims about the numbers of jobs that will be created are a complete joke.  As far as we know, the money is all being spent on procuring the latest generation of the Turbo Encabulator:

Maybe the money is all going to projects that will be incredibly economically valuable but, for some reason, can’t generate a return for private investors and therefore need support at taxpayers’ expense.  Or maybe this is just ugly corporatism.  Taxing all businesses then giving the money to a few who have won the favour of politicians or bureaucrats.  No one knows and until we do I would assume the worst, that this announcement was calculated to get the jobs figure out there and reported before anyone could judge for themselves looking at the actual plan.

The only mitigating factor is that many of the projects are being required to raise private capital as well.  That means it is less likely the taxpayer is being sold a complete lemon.  But it could equally mean that these projects would have gone ahead anyway, so public funding hasn’t achieved anything.

As Fraser Nelson has written for the Spectator this morning there is a critical contradiction between this funding and the Government’s wider narrative on how economic growth is best encouraged:

No wonder that so much confusion surrounds the government’s growth strategy. The government is sending out conflicting messages all the time. Osborne talks about tax cuts, while delivering tax increases. It says “there is no money left” while doubling the international aid budget. Clegg talks about the problem of the Man in Whitehall trying to direct regional economies, before going on to direct regional economies. In Vince Cable we have a Business Secretary who seems to regard his job as complaining about businesses. He is perhaps the only business secretary who disparages capitalism as a system which “takes no prisoners”.

If people really want to fight crony capitalism, the answer isn’t moralising about misleading figures on pay for FTSE100 directors.  It is properly scrutinising schemes like this that make a company’s success more about their ability to convince politicians they’re worthwhile and less about their ability to efficiently produce goods and services we need or want.

Fiscal union won’t save the eurozone

Oct 27th, 2011
by Matthew Sinclair.
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After extensive negotiations, European leaders have now announced another desperate attempt to save the euro and tackle the sovereign debt crisis. Allister Heath in City AM describes the packages as “barely a draft blueprint” and “not a plan that will save the Eurozone”. George Osborne has joined eurozone politicians in their belief that the answer to their problems is a common fiscal policy.

It is a convenient answer for politicians deeply committed to political integration in Europe but it raises some pretty difficult questions. If one of the problems is that the Greeks evade their taxes, will German tax collectors be dispatched? If the challenge for Italy is a combination of high debt and low expected growth will the Estonians take on that massive debt or be let loose to impose supply-side reforms?

Economist John Kay wrote a pretty comprehensive demolition of the idea a common fiscal policy was the way forward for the Financial Times yesterday:

“Conventional wisdom holds that the eurozone problem is the adoption of a common monetary policy without a common fiscal policy. But a common fiscal policy is not necessary for a successful monetary union. No such agreement existed under the gold standard. Nor does one exist now between the US and the several countries – including China – which have pegged their exchange rate to the dollar.

Nor is a common fiscal policy sufficient for a successful monetary union. Neither the European Commission nor the German government can put tanks on the streets of Athens. The only mechanism the European Union has, or can have, for imposing fiscal discipline in any country or region is to refuse further payments to that country or region. This is precisely the mechanism that has been deployed, with limited success.

[...]

The eurozone’s difficulties result not from the absence of strong central institutions but the absence of strong local institutions. A miscellany of domestic problems – rampant property speculation in Ireland and Spain, hopeless governance in Italy, lack of economic development in Portugal, Greece’s bloated public sector – have become problems for the EU as a whole. The solutions to these problems in every case can only be found locally.”

It is worth reading the whole article. Instead of supporting their vain attempt to fight reality, George Osborne should be telling eurozone leaders they need to face up to the currency’s failure. He certainly shouldn’t let even more of our money be staked on fresh bailouts through the IMF.

The Government’s rhetoric has changed on energy, but not its policy

Oct 17th, 2011
by Matthew Sinclair.
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David Cameron and Chris Huhne have written for the website MoneySavingExpert.com this morning and argued that “everything that can be done will be done to help people bring their energy bills down”. It is a fine sentiment but not matched by their actions. They are continuing to impose regulations that will drive up bills, and are no friends of consumers. Attacks on energy companies are thinly veiled attempts to distract from politicians’ complicity in rising in energy prices by attacking a sector which will enjoy higher profits as a result of the regulation they have put in place.

Prices have risen for a number of reasons including instability in the Middle East; rapid rises in demand with strong growth in major developing economies; and climate regulation. But with instability in the Middle East subsiding for now and oceans of shale gas being discovered there should be every reason to be a bit more optimistic about the pressure on households easing a little. Unfortunately, they are going to have to pay for hundreds of billions of pounds in investment under draconian climate regulations, in order to meet Brussels targets. Citigroup estimates suggest Britain has to invest around £200 billion. That is far more than our European competitors, let alone the rest of the world:

Paying for that investment will require the energy companies to make more profit. That will drive up prices by over 50 per cent in real terms according to Citigroup. Even with greater efficiency, they think we will have to pay over a third more in dual fuel energy bills in real terms, and that is before paying for the extra insulation.

There is no way of making £200 billion cheap. Fiddling around the edges trying to bring down energy company margins might help some people in the short term but won’t address the fundamentals.  Any politician who was serious about helping to bring energy bills down would reconsider some of those regulations and targets. There are a few ways they could do that: stop picking losers and giving extravagant subsidy to the least efficient sources of power; scrap the renewable energy target and just focus on the emissions target; scrap the new carbon price floor that Credit Suisse think will mean £7 billion more in profit for energy companies while just shifting emissions from Britain to other European economies according to the IPPR.

If they want to be more ambitious, and really do all they can to ease the burden on consumers, they could rethink the fundamentals of our energy policy. Instead of trying to deploy expensive sources of energy now we should focus on research. Even if we were happy to pay higher prices for our energy, major emitters aren’t going to do the same so developing new alternatives is the only way we make a practical contribution. After all, our paltry under two per cent of global emissions won’t make much difference to the climate. There is a lot more detail on how to do that in Let them eat carbon.

Britain’s relative problem with youth unemployment has been growing for a while

Oct 13th, 2011
by Matthew Sinclair.
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It is a real tragedy that so many young people aren’t able to find work. According to the Office for National Statistics, 721,000 16 to 24 year olds were unemployed in the three months to August this year, excluding full-time students. Lots of young school leavers and graduates are facing pretty grim prospects with a slow recovery from the economic crisis across the developed world.

But it is important that we are clear about the source of our particular relative problem. The graph below uses OECD data to show how the percentage of young people not in education, employment or training (NEETs) rose in Britain between 1997 and 2007 – before the recession – while falling in the rest of of the developed world:

So why did that happen?

Young people with less experience tend to be less valuable to their employers. That’s why we tend to earn more as we get older. If the Government takes action that makes it more expensive to employ people the first to be priced out of employment, as it costs more to employ them than it is worth an employer paying, are often young (or female, or from an ethnic minority).

Politicians have done a series of things that have made it more expensive to employ people, particularly on low incomes:

  • Increased employers’ national insurance.
  • Implemented domestic regulations like the National Minimum Wage.
  • Implemented European Union regulations like the Agency Worker Directive.

By contrast, back in 2002 then German Chancellor Gerhard Schröder confronted the country’s economic malaise by cutting non-wage labour costs. He took on opposition from the haves who liked the expensive entitlements that those policies provided. Along with an education system preparing people for the world of work, which hopefully reforms like free schools can start to build here, the action he took then has been critical to Germany’s strong economic performance now.

Other taxes like Corporation Tax are also important. If they deter investment and enterprise then that means fewer employers looking to hire people in the first place. And we need to reform a benefit system that seriously undermines the incentive for some people to work.

But the critical thing now is that we stop driving a wedge between what employers’ are able to pay and what employees receive that leaves many sitting at home on benefits who should be in work. Cutting non-wage labour costs is vital to help the most vulnerable people in the labour market.

Article about the Solyndra scandal and “green growth” in City AM

Oct 12th, 2011
by Matthew Sinclair.
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I’ve written an article for City AM about the Solyndra scandal, mentioned before on this website, and the implications for draconian climate regulations. It looks at the price we’re paying for these policies; the financial challenges they are facing; and the fact they don’t deliver jobs.

I conclude the article arguing that:

“The particularly sad and venal story of that loan guarantee is just one example of how attempts to secure green growth so often end in disaster. The pattern is clear. Huge amounts of consumers’ and taxpayers’ money wasted; the promised boon to employment not living up to its billing; and a nasty aftertaste of cronyism.”

In other news, reports from Australia suggest we might see yet another vindication of the Second Law of Climate Change Politics soon, which I coined in Let them eat carbon: Climate change regulation will tend to proceed by the least democratic route.  This video explains what has happened pretty simply:

Clean Development Mechanism just gets worse

Sep 28th, 2011
by Matthew Sinclair.
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In Let them eat carbon I looked at some of the problems we already knew about with the Clean Development Mechanism (CDM).  The idea is that sometimes it will be cheaper for richer countries like us to pay poorer countries to cut emissions on our behalf.  It doesn’t matter to the climate where emissions are produced so why not do that to meet our targets?  So how does that end in the New York Times reporting families in Uganda being driven off land at gunpoint and an 8-year-old child being burned to death?

Unfortunately the simple idea has in practice been a corrupt attempt to buy the notional involvement of poor countries in the Kyoto Protocol, in particular.  Huge subsidies are available for a project that can be approved by the United Nations body charged with overseeing the scheme as having cut emissions.

Most of the Certified Emissions Reductions (CERs) issued so far have gone to schemes to destroy particularly potent greenhouse gases like HFC-23 produced as byproducts in industrial processes (in that case, the production of HCFC-22). Academic study suggests that the scheme have been so generous that they have encouraged companies to produce more of these byproducts in the first place, making the whole scheme monstrously inefficient.

There are massive conflicts of interest in the critical validation process deciding whether or not projects will actually cut emissions, and whether they would have gone ahead anyway without subsidy.  Two of the biggest validators have received temporary suspensions and reviews suggest many projects don’t provide evidence that CDM funding makes a difference.

But now the New York Times reports a particularly disturbing case where the prospect of carbon credits seems to have driven an ugly land grab in Uganda:

“I heard people being beaten, so I ran outside,” said Emmanuel Cyicyima, 33. “The houses were being burnt down.”

Other villagers described gun-toting soldiers and an 8-year-old child burning to death when his home was set ablaze by security officers.

“They said if we hesitated they would shoot us,” said William Bakeshisha, adding that he hid in his coffee plantation, watching his house burn down. “Smoke and fire.”

According to a report released by the aid group Oxfam on Wednesday, more than 20,000 people say they were evicted from their homes here in recent years to make way for a tree plantation run by a British forestry company, emblematic of a global scramble for arable land.

The firm in question, the New Forests Company, has high profile investors like the World Bank and HSBC.  Of course, this isn’t the first violent land grab in a developing country, and the Ugandan government is probably right that it is a failure of the rule of law as much as anything, but this is yet another example of how climate policies that sound fine in comfortable offices in London can have awful effects in practice.

Setting up a generous subsidy for emissions reductions in the developing world with limited accountability was always a recipe for a waste of money at best, corruption at worst.  British families and businesses pay for all of it in their energy bills.

Clean Development Mechanism just gets worse

Sep 28th, 2011
by Matthew Sinclair.
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In Let them eat carbon I looked at some of the problems we already knew about with the Clean Development Mechanism (CDM).  The idea is that sometimes it will be cheaper for richer countries like us to pay poorer countries to cut emissions on our behalf.  It doesn’t matter to the climate where emissions are produced so why not do that to meet our targets?  So how does that end in the New York Times reporting families in Uganda being driven off land at gunpoint and an 8-year-old child being burned to death?

Unfortunately the simple idea has in practice been a corrupt attempt to buy the notional involvement of poor countries in the Kyoto Protocol, in particular.  Huge subsidies are available for a project that can be approved by the United Nations body charged with overseeing the scheme as having cut emissions.

Most of the Certified Emissions Reductions (CERs) issued so far have gone to schemes to destroy particularly potent greenhouse gases like HFC-23 produced as byproducts in industrial processes (in that case, the production of HCFC-22). Academic study suggests that the scheme have been so generous that they have encouraged companies to produce more of these byproducts in the first place, making the whole scheme monstrously inefficient.

There are massive conflicts of interest in the critical validation process deciding whether or not projects will actually cut emissions, and whether they would have gone ahead anyway without subsidy.  Two of the biggest validators have received temporary suspensions and reviews suggest many projects don’t provide evidence that CDM funding makes a difference.

But now the New York Times reports a particularly disturbing case where the prospect of carbon credits seems to have driven an ugly land grab in Uganda:

“I heard people being beaten, so I ran outside,” said Emmanuel Cyicyima, 33. “The houses were being burnt down.”

Other villagers described gun-toting soldiers and an 8-year-old child burning to death when his home was set ablaze by security officers.

“They said if we hesitated they would shoot us,” said William Bakeshisha, adding that he hid in his coffee plantation, watching his house burn down. “Smoke and fire.”

According to a report released by the aid group Oxfam on Wednesday, more than 20,000 people say they were evicted from their homes here in recent years to make way for a tree plantation run by a British forestry company, emblematic of a global scramble for arable land.

The firm in question, the New Forests Company, has high profile investors like the World Bank and HSBC.  Of course, this isn’t the first violent land grab in a developing country, and the Ugandan government is probably right that it is a failure of the rule of law as much as anything, but this is yet another example of how climate policies that sound fine in comfortable offices in London can have awful effects in practice.

Setting up a generous subsidy for emissions reductions in the developing world with limited accountability was always a recipe for a waste of money at best, corruption at worst.  British families and businesses pay for all of it in their energy bills.

Why is British taxpayers’ money supporting Argentina’s finances?

Sep 28th, 2011
by Matthew Sinclair.
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Nile Gardiner at the Heritage Foundation has written for the Telegraph blog about the strong statement that the Government had to make at the United Nations in New York last week. In response to Argentina’s “increasingly belligerent stance”, as Nile puts it, the British delegation stated that we remain “fully committed to defending the rights of the people of the Falkland Islands to determine their own political, social and economic future.” That raises a critical question: why are we financially supporting a country that is threatening British territory and people?

Britain is a major shareholder in the World Bank’s International Bank for Reconstruction and Development, and rightly has considerable influence over the World Bank’s policies and priorities. Argentina owes the bank over $5 billion. New programmes are regularly being approved, like $30 million for a project aimed at improving public sector management, among other things, in the Province of La Rioja earlier this year.

It isn’t just the World Bank. An EU aid programme running from 2007 to 2013 is providing €65 million to Argentina. We pick up the tab through our contributions to the EU budget. We are responsible for over ten per cent of total gross contributions, which means we are paying nearly €8 million (nearly £7 million at the current exchange rate) to Argentina.

The Government should be fighting against this misuse of our money by Brussels.  But there is a more immediate opportunity at the World Bank.

The Obama administration in the United States is resisting further programmes in Argentina. At a hearing of the House Committee on Financial Services, Representative Robert Dold asked why the World Bank was supporting a country which was refusing to pay many of its debts and ignoring international arbitration judgements, despite sitting on over $50 billion in reserves. The Assistant Secretary for International Markets and Development – Marisa Largo – said that a country which “falls squarely within the ranks of middle-income countries” and failed to engage properly with creditors shouldn’t be getting funding and the United States would continue to “vote no”.

Please write to your MP – this website makes it easy – and ask them to tell the UK Government to fight EU programmes sending our money to Argentina, and support the US move to ensure we aren’t backing loans to them from the World Bank.

Solyndra and the green jobs debacle

Sep 19th, 2011
by Matthew Sinclair.
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At the time I wrote Let them eat carbon, Solyndra was already struggling.  Since then the American solar panel company cited by President Obama as “a testament to American ingenuity and dynamism” – and given a loan guarantee for half a billion dollars – has collapsed and is now being investigated by the FBI.  Jon Stewart talks through the entire gory story for the Daily Show.

This isn’t the only example of green jobs built up at huge expense failing to last.  The German solar sector has been in dire straits for some time.  Just look at the share price of major firm Q-Cells over the last five years.  In October 2010, wind firm Vestas announced major job losses in Denmark.

In the end, the people who get the green jobs will be the ones selling all the wind turbines and solar panels, not the mugs buying them.  Draconian climate regulations cost more jobs than they create.

To find out more about this issue, read the book.

BBC Daily Politics discussion of Let them eat carbon

Sep 16th, 2011
by Matthew Sinclair.
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This Wednesday, I appeared on the Daily Politics presenting a soapbox piece about rising energy prices, and how climate change policies are making the problem much worse.  That was followed up by a discussion in the studio with Grant Shapps MP and Tessa Jowell MP.  There is an expanded version of the argument I made in the soapbox as an article on their website which you can read here.

There have also been two prominent blogs about the report.  First an article by respected commentator Jim Manzi for the National Review Online. He wrote that:

Taxes, fees, restrictions and other economic costs imposed in the name of ameliorating climate change are vastly larger in the U.K. than in America.  There is a stifling consensus between left and right on the subject among the British political class. There are a few freethinkers, however, who just won’t get with the program. Among the most persuasive of them is Matthew Sinclair, director of the Taxpayers Alliance. 

Then I’ve written a piece for the Spectator website about the book, arguing that:

After a Spectator debate on climate change in March, Fraser Nelson wrote about whether or not we should try to engage in the debate ourselves or “trust the expert”. Simon Singh had argued in the debate that the most credible experts supported the view that the human contribution to potential global warming was real and serious. The response to my new book Let Them Eat Carbon shows how much that kind of debate is turned on its head when it comes to policy.

The book is available in paperback and Kindle editions.

 

The Campaign for HSR prop up the Government’s dishonest claims about HS2

Sep 16th, 2011
by Matthew Sinclair.
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Professor David Begg has attacked our report on the hidden costs of HS2 this morning.  The point of that report is simple: the Government’s plans for HS2 contain a series of unwelcome consequences like worse services for many towns and cities, higher fares and heavy congestion at Euston.  They promise that all of these problems will be addressed, but don’t acknowledge the costs that would entail.  They are trying to have their cake and eat it too.

If they want to stick to all the promises they’ve made that aren’t in the current plans, then they need to provide an estimate of how much that will cost taxpayers.  In lieu of an official study and to inform taxpayers, we asked experienced rail executive Chris Stokes to produce the best estimate he could.  He found it could be a massive £28.4 billion extra.  You can read the details here.

Professor David Begg attacked our report on two key grounds.

First he argued that we are wrong to say building HS2 will necessitate the construction of Crossrail 2, adding billions to the overall cost.  He says that is only based on the optimistic demand forecasts for high speed rail – which we have challenged – and a claim that the line is needed from Boris Johnson.  It isn’t.  As we stated in the report the critical thing is not just that Euston will need to accommodate growing passenger volumes, but that “the majority of InterCity passengers who currently use Kings Cross and St. Pancras would also travel through Euston.”

Kings Cross and St. Pancras are major stations accommodating lots of InterCity passengers from places like Yorkshire.  The Government’s HS2 plans would have huge numbers of those passengers going to the already overcrowded Euston instead.  That would almost certainly, particularly once Phase 2 of HS2 is completed, necessitate the creation of a new underground connection for Euston.  It would cost billions.  That is why Boris Johnson has said the new line is necessary if HS2 goes ahead.  Incremental improvements to the rail network would mean we could continue to make proper use of Kings Cross and St. Pancras and therefore don’t involve the same costs.

Second he argued that we were wrong to argue that existing services would be cut because capacity would be freed up on other lines.  The problem is that the Government has budgeted that they will save £5.4 billion by reducing existing services.  If they instead try to maintain the service on those existing lines – which will be less economical without traffic to the major destinations served by HS2 – then at the very least that saving won’t be possible.

Also, apparently we haven’t offered an alternative, but Chris Stokes has set out a set of incremental improvements that would double capacity against the same baseline as HS2 at a much lower cost.  You can read his alternative here.

Many of the estimates in our note are conservative rough estimates.  We aren’t going to pretend that it is an alternative for a proper, detailed costing of the pledges that politicians are making.  The report isn’t going to provide a definitive answer, we don’t have the data or the resources to do that.  But we have to produce the best estimate we can, on the basis of Chris Stokes’ considerable knowledge and experience, so that taxpayers are aware of the incredible bill that politicians might be setting up for them, if the Government won’t do their job and provide an honest estimate themselves.

Instead of throwing out simple-minded attacks, the Government and other proponents of HS2 need to do one of two things:

  1. Accept the consequences of the plans they have set out.  For example, that towns like Coventry, Stoke-on-Trent and York would get a worse service.
  2. Set out a detailed costing for a project that matches the promises they have made.

Till they do that, the best estimate available of the cost to taxpayers is the one in our research.

Talking to the One Show about energy prices

Sep 13th, 2011
by Matthew Sinclair.
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Yesterday evening I appeared as part of a panel for the One Show responding to consumers’ questions about high energy prices.  With electricity and gas bills putting so much pressure on their finances, it is important that people are aware of just how much government climate regulations are already costing them, and set to add to their bills this decade.  We need to get rid of failing climate change policies but that won’t happen if the public aren’t aware of the price they’re paying.  Here is the clip, and there is a lot more detail in the book.

One thing that came up in that clip, which it is worth saying a bit more about, is Chris Huhne’s suggestion that we won’t get higher bills because of the measures they are taking to improve the energy efficiency of our homes.  When you think about it, that argument is somewhat absurd.  He can’t conjure £200 billion of investment in the energy sector out of nowhere.  Who does he think will pay for that massive investment?

When Citigroup looked at this issue they found that even with major efficiency improvements prices will still rise by well over a third in real terms, and then we have got to pay for all the insulation and double glazing too.

He was also misleading when he said that this investment was needed to keep the lights on.  Replacement and renewal to maintain supply is only a small share of projected investment.  It is attempts to cut greenhouse gas emissions that are driving the huge costs expected here.  Particularly building, connecting and backing up massive amounts of offshore wind.

Let them eat carbon cited in the Lords

Sep 9th, 2011
by Matthew Sinclair.
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In chapter eight of Let them eat carbon I look at why major developing economies that emit far more greenhouse gases than Britain aren’t going to follow our lead.  And at politicians’ farcical attempts to buy their support with our money.  One example of that is the Clean Development Mechanism, and earlier this week Lord Reay discussed at that scheme in Parliament, citing the book and saying it “dissects brilliantly most of the ramifications of renewable energy policies.”

For more information about the Clean Development Mechanism, and other climate change policies, read the book (now also available on Kindle).

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