By following the voters over eco-protests, Starmer is distancing himself from the Left

19 Apr

Like death, taxes, and Thanos, the disruption caused by eco-zealots appears inevitable. Despite the Government’s best efforts, the Police, Crime, Sentencing and Courts Bill currently remains off the Statute Book. Since this many-headed Hydra of Sun-pleasing authoritarianism goes beyond tackling nuisance protests to “overhauling” the criminal justice system, sufficient opposition will prevent it becoming law for some time.

So it has been a refreshing sight these last two weeks that Labour have called for action against the goons of Extinction Rebellion and Just Stop Oil. “Drivers are being hammered by rising petrol prices and now millions of motorists can’t access fuel. The government must stop standing idly by and immediately impose injunctions,” Sir Keir Starmer tweeted in response to Just Stop Oil protesters’ blockading 11 fuel depots in southern England.

Similarly, Steve Reed, the Shadow Justice Secretary, has called for immediate and far-reaching bans on protestors. Reed demanded ministers “get on with their jobs” and block further action from the Just Stop Oil group after over 40 arrests were made last Monday. As Extinction Rebellion closed several London bridges, Reed copied his leader: “The Conservatives need to stop standing idly by and put an end to this disruption that is causing misery for motorists.”

This is all cask-strength stuff from Labour. Only last August, Starmer was telling his party that “time is short and history will not forgive a failure to act now” when it comes to tackling climate change. Consistently, Labour have taken the line of asking the Government to go further and faster on its Net Zero agenda. Its recent push for a windfall tax on oil and gas companies has provided an excellent opportunity to combine left-wing populism with green gesture politics.

For those of us who see the debate on global warming largely through the lens of what it will mean for England’s sparkling wine industry, all this earnestness is water off a duck’s back. But I can certainly get behind strong action to help motorists and shut up a few long-haired and over-educated oiks who can’t tell the difference between oil from out of the ground and cooking oil. And I imagine most voters would agree.

On the 1st of this month, many had the unfunniest April Fool’s in memory, as their energy bills went up by 54 percent. Fuel prices also hit an all-time high in March. So with most already feeling the pinch, having their travel disrupted further by pernicious protestors preventing them purchasing at the pumps leaves most feeling perplexed, peeved, and pissed off. Unsurprisingly, a poll last October found 72 percent of those asked disproved of XR’s antics.

Consequently, opposing the protestors is an obvious ploy for Starmer to use in his ongoing efforts to ape Tony Blair and condemn the Conservatives as weak on crime. But like his fellow North London lawyer, Starmer’s attempt to tack to the right have drawn the ire of Labour’s left, and various outriders.

Fresh from confusing themselves over whether NATO or Russia is the aggressor in the current crisis in Ukraine (here’s a hint guys – only one of those two are currently invading a sovereign state), opponents of the Labour leadership have criticised what Chris Saltmarsh, co-founder of Labour for a Green New Deal, called “petty authoritarianism”. Jamie Driscoll, the Metro Mayor of North Tyneside, compared the protestors to Nelson Mandela and the Suffragettes, and registered his displeasure at leader’s approach.

The most eye-catching condemnation of Starmer’s take, however, came on his recent visit to Scotland. I’ve already written about that trip because of what comments made there implied for Labour’s policy on trans. But Starmer’s Scottish soujourn also saw him confronted by 21-year-old Lauren McDonald, a climate change activist (and, one suspects, a student) who accused him of siding with the Government, wanting her in prison, and nabbed him as partially responsible for her climate-based stress-induced hair loss.

That last element reminds me of several of the fruitier loops of the Oxford Labour Club, whose meetings I used to sneak into because they had cheap prosecco and I fancied a couple of the officers. But the strength of Ms McDonald’s feeling shows a central problem for the Leader of Her Majesty’s Loyal Opposition. Climate change really matters for Labour’s activists, and especially so for the younger and moral vocal members.

After a few years of having hegemony in the party under Magic Grandpa, these left-leaning activists are as alarmed by their leader’s clear tack towards the right as they weren’t by the evidence for antisemitism within their own ranks.  As with trans, Brexit, economic policy and a half dozen other issues, Starmer’s pursuit of the voters is alienating him from those who backed him for the leadership assuming he would provide Corbynite radicalism within a friendly establishment shell.

Nevertheless, as the energy crisis bites and the public remain irritated by Extinction Rebellion’s ongoing antics, Starmer will do his party’s prospects no damage by moving into the same space the voters are. The Left may grumble, but the Government’s woes and his own ever-slicker presentation mean that Starmer is taking his party closer and closer to power.

Sally-Ann Hart: Nature-based solutions must be central to our efforts to adapt to climate change

1 Apr

Sally-Ann Hart is the MP for Hastings and Rye, and was a councillor in Rother.

The narrative around climate change has largely been focused on cutting carbon emissions and to some extent, sequestering carbon. However, the reality of climate change is that every country, including the UK, will need to adapt to the impacts of climate change.

Climate change has triggered more extreme weather conditions causing primarily heatwaves, droughts, high precipitation and flooding. Adapting to the impacts around the globe is a daunting prospect, but adaptation will undoubtedly keep the human population safer.

Throughout history, humans have adapted to the effects of climate change, including by migration – perhaps a reason why we have been around for so long.

Taking steps now to adapt to future change will make us more resilient and less vulnerable to its impacts. Adaptation can include traditional engineering projects such as seawalls or other coastal defences as sea levels rise; but the natural environment (wetlands, trees, vegetation and green roofs, for example) also has a significant role to play.

Adaptation covers everything from water storage to drought-resistant crops, from green urban areas to protecting and restoring natural indigenous ecosystems. Following the Covid-19 pandemic, adaptation has increasingly been framed in a wider context of strengthening resilience, which covers the ability to respond to a range of threats.

The Climate Change Committee (CCC) reports on progress in adapting to climate change in England, with many of its previous recommendations for improving adaptation planning and implementation in England being taken up by the Government and its arms’ length bodies, accepting CCC’s central message that it must take greater action to build resilience to the impacts of climate change.

However, in its latest risk assessment, the CCC stated that “adaptation remains the Cinderella of climate change, still sitting in rags by the stove: under-resourced, underfunded and often ignored.” It has advised the Government to urgently plan for adaptation to a 2°C world, and plan for 4°C.

The UK’s National Adaptation Plan sets out potential actions to address climate change risks. Investment in flood defence and improving resilience to flooding is substantial, with the Government spending nearly £900m on flood and coastal erosion risk management in England in 2019/20.

A long-term approach to flooding is essential; spending on prevention is better than the reactive spending required to mop up the mess.

The recently released IPCC report, Climate Change 2022: Impacts, Adaptation and Vulnerability, acknowledged that climate change has already caused widespread adverse impacts and related losses and damages to nature and people – and to a greater extent than estimated in previous assessments.

Climate change is and will increasingly cause extensive and sometimes irreversible damage to ecosystems, and this degradation of ecosystems increases the vulnerability of people. The rise in weather and climate extremes has led to some irreversible impacts as natural and human systems are pushed beyond their ability to adapt.

Nature-based solutions offer cost-effective adaptation to climate change whilst also providing benefits to people and wildlife. Safeguarding biodiversity is fundamental for climate-resilient societal development. Conservation, protection and restoration of land, freshwater, coastal and ocean ecosystems, together with targeted management to adapt to unavoidable impacts of climate change, reduces the vulnerability of biodiversity to climate change.

Sustainable food production using agroecological principles and practices, ecosystem-based management in fisheries and aquaculture, and other approaches that work with natural processes support food security, nutrition, health and well-being, livelihoods and biodiversity. These practices also help to sequester and capture carbon.

I was interested to read Nature-Based Solutions in UK Climate Adaptation Policy, written by Oxford University’s Nature-based Solutions (NbS) Initiative and commissioned by the RSPB and the WWF-UK.

The report highlights the opportunities and policy support needed to implement NbS across the UK in ways that deliver for nature, climate and people. It also outlines how NbS offers opportunities to mitigate the eight key risks identified by the CCC in the UK, while supporting the provision of public and private goods.

NbS contribute to reducing our vulnerability to the impacts of climate change. Using green roofs to reduce stormwater runoff in urban areas, for example, reduces the exposure of people and assets to climate hazards.

By diversifying livelihoods and enhancing the resilience of timber and food production to pests, pathogens and less water availability, we can reduce our sensitivity to climate shocks and through governance reform, empowerment, and improving access to natural resources we can enhance the adaptive capacity of individuals and communities.

NbS have huge potential and should be integrated in the forthcoming National Adaptation Plans. NbS are no longer peripheral, and Defra has already started to develop policies that should be rolled out across all sectors. NbS can be measured and monitored for their effectiveness by using defined metrics, indicators and targets and standards can be set for high-quality NbS, benefiting nature, our environment and people.

Increased funding is required. But it does not have to be the sole responsibility of government; three per cent of private financing mobilised under the 2018 Paris Agreement went into adaptation, with more than 95 per cent going towards mitigation. Adaptation will increase resilience, benefiting businesses and financial institutions, as well as nature and people.

Emma Howard-Boyd, Chair of the Environment Agency, has recently highlighted the need to ensure that the race to net zero runs hand in hand with the race to resilience with ‘resilience [being] the missing link in investment in net-zero and nature’.

We have a window of opportunity to take action to adapt to climate change and avoid the worst impacts and political commitment and follow-through across all levels of government to accelerate the implementation of adaptation actions is vital. I believe that will is there.

Tory wars over climate change. The Conservative Environmental Network v the Net Zero Scrutiny Group.

31 Mar

The Conservative Party does not find it easy being green. Though a few romantic Tory hearts may long for a Disraelian idyll of an unspoiled, eternal countryside, more recent times have seen the party blow both hot and cold over whether the planet is getting hot or staying cold, and what to do about it.

Consider four recent leaders. Margaret Thatcher was ahead of her time on climate change. David Cameron hugged huskies when visiting the Arctic. Theresa May introduced the Net Zero target which has formed a centrepiece of Boris Johnson’s premiership, most prominently at  COP 26 last year.

But those same four also had their premierships propped up by North Sea Oil, scrapped subsidies for onshore wind farms, abolished the Department for Energy and Climate Change on entering Number 10, and subsidised their political career by revving Lamborghinis as fast as they could go. The Party has therefore not been so much afflicted by climate change denialism as climate change schizophrenia.

Nevertheless, it would be foolish to argue that the party’s environmentalist wing of isn’t currently in the ascendant. The Conservative Environment Network announced this week that it has 133 backbenchers signed up, more than a third of the Commons party and half of backbenchers.

Prominent recent recruits include recent Cabinet ministers Matt Hancock and Robert Jenrick, as well as Jeremy Hunt, the former Foreign Secretary, and Anna Frith, the new MP for Southend-on-Sea.  Meanwhile, Chris Skidmore’s more specific Net Zero Support Group claims up to 30 members. It may have been 16 years since we were asked to “vote blue, go green”, but it seems Tory MPs are finally getting the message.

Or are they? Alongside the growing number of MPs willing to be seen as committed supporters of Net Zero and environmentalism, there also are a growing number who publicly suggest that pursuing decarbonisation by 2050 is the height of folly during an energy crisis.

Craig Mackinlay’s Net Zero Scrutiny Group has claimed around 58 members, though private conversations suggest “at least 100” MPs are sympathetic. Broadly, the group aims to have the government pause or reverse a policy it believes is economically and politically disastrous. Unsurprisingly, coverage of these splits has largely played up the potential for green issues to replace Brexit as a new dividing line separating hard-line sceptics from progressive modernisers.

Is that true? According to Skidmore, suggesting that the party is divided by this is a fantasy.  Not only, as he told me, are there far more MPs supporting either the CEN or his group than Mackinlay’s, but the current energy crisis has made it more essential that the government delivers on its Net Zero agenda, not less.

Western attempts to sanction Putin have been hobbled by Europe’s dependence on Russian gas, so our national security relies on the energy security that going entirely renewable would provide. Moreover, with around two years until the next election, the Conservatives still require for a positive message for the electorate. Skidmore pointed me towards research by Onward suggesting that the Net Zero agenda can put meat on the bones of ‘levelling-up’, producing green jobs in the Red Wall that will keep those seats blue.

To say members of Net Zero Scrutiny Group were unimpressed by these arguments would be an understatement. They believe all this talk of a ‘Green Industrial Revolution’ and ‘Net Zero Growth’ is ludicrous when considering looming stagflation and tripling energy bills. Whilst they do not deny that reducing our reliance on fossil fuels or cutting emissions are good ideas, they believe the current agenda is, in one’s phrasing, “pie in the sky”.

Do ministers and members of the Support Group realise the environmental impact of extracting the Zinc required for solar panels, or how small the UK’s battery capacity currently is ? Do they realise, as one told me, that we will need to carpet 75,000 acres of the country in solar farms to reach our current energy needs? They suspect not.

Instead, the Scrutiny Group want to focus on practical measures to reduce energy bills in the here and now. Primarily, that means backing fracking. They argue it would lower prices and provide just as much of an economic boost as any ‘Green Industrial Revolution’ – just look what the shale gas industry has done for the United States.

But the last manifesto announced a moratorium on the policy, not so much for environmental reasons, but because it was so unpopular in swathes of the North and Midlands. Since a few Net Zero Scrutiny Group supporters have constituencies in the South and East, their fondness for fracking raises an obvious question. Isn’t what they are doing the same as a Northern MP calling for HS2, or for more house-building near London? A few Scrutiny Group members sheepishly acknowledged this hypocrisy.

Nevertheless, the Net Zero Scrutiny Group do raise a valuable point: why, at a time when energy bills are tripling, are Conservatives so willing to sign up to an agenda that many suspect will only hike them further? According to Skidmore, there is no surprise: green policies only account for 8% of energy bills, and these policies will encourage the growth and innovation that will make costs cheaper in the long-term. And lower taxes, smaller government, motherhood, and apple pie will also soon follow in their wake.

But there is another reason why MPs are so keen to go green. One MP compared the hold of the CEN over the parliamentary party to the Sparrows from Game of Thrones – religious zealots whose commitment to their mission outweighs any practical considerations, and who keep the average MP in a state of servile terror. Or so I’m told, since I’m likely the only person working in politics not to have seen the popular breasts and dragons-based drama.

It has been noted that CEN and their supporters are very well-connected in Downing Street. Moreover, of the 2019 intake who have written for ConservativeHome about Net Zero over the last two years, one has then been made a PPS – Virgina Crosbie, the MP for Ynys Môn. Then again, another has defected to the Labour Party, so it’s not too useful a metric.

Notwithstanding that, Net Zero is clearly in fashion in Downing Street. Although the crisis in Ukraine may have provided an opportunity to look again at fracking and the North Sea, and to carve out an energy strategy that gives more of a role to nuclear than it would have done six months ago, there is a reason why the Net Zero Scrutiny Group’s membership includes serial rebels such as Steve Baker and Rob Halfon. Their counterparts in the Support Group may not be the stooges of the Whips that the Scrutin-eers claim (and which Skidmore vehemently denies), but they are not serials rebels, or likely to offend bien pensant opinion. In other words, no energy crisis can dampen the reflexive Tory instinct to climb the greasy pole. Disraeli would be proud.

Gerard Lyons: Sunak’s task tomorrow. The best way of reducing the deficit is to go for growth.

22 Mar

Dr Gerard Lyons is a senior fellow at Policy Exchange. He was Chief Economic Adviser to Boris Johnson during his second term as Mayor of London.

Rishi Sunak needs to provide context, actions and vision when he delivers his Spring Statement to the House of Commons this week.

Context, so that people can understand the present difficult economic environment and what lies ahead. Actions will be needed to cushion the imminent cost-of-living crisis. And the Chancellor needs to outline a vision, both from a domestic political perspective and to reassure financial markets and investors about the outlook for the economy.

The current context is a difficult one. The war in Ukraine and the associated high level of oil and commodity prices has added to uncertainty, both here in the UK and globally. This will be reflected in the economic forecasts from the Office for Budget Responsibility (OBR) that will accompany Sunak’s statement.

At the time of their previous forecast, last October, the OBR was forecasting growth of six per cent and inflation of four per cent this year. Now, depending upon their assumptions, the OBR’s growth forecast could be half and their inflation forecast almost twice as high as then. Hence the increased fear of stagflation – where inflation is higher, and growth lower.

For next year, the OBR will be expecting growth to slow further and inflation to ease. It is their cautious future growth outlook that limits the Chancellor’s room for fiscal manoeuvre. Sunak will also stress that higher inflation and interest rates increases the amount spent on servicing the national debt.

Despite this, the Chancellor should not feel constrained by the OBR’s forecasts into limiting the actions he can take. The margin of error for the budget deficit forecasts has been high in recent years – for obvious reasons, perhaps.

Importantly, the fiscal numbers, while poor, are clearly on an improving trend. During the first ten months of this fiscal year, public sector net debt was £138.5 billion, around half the level of a year earlier. So Sunak may have around £25 billion more to use in this statement than previously expected, and still be able to stick within his fiscal rules. He thus has the opportunity as well as the need to provide some help this week.

What then of the actions that can be taken? There are two areas he should focus on.

One is actions linked to the war, such as more immediate defence spending or help for refugees. The other is finding money to cushion the cost-of-living crisis.

While he may mention issues linked to levelling up and incentives to boost investment and improve skills, the bulk of tax changes and spending announcements linked to these will have to wait until the Budget in the autumn.

The imminent cost-of-living crisis is explained by higher inflation, rising fuel and energy bills, and increased taxes. The approach that the Chancellor is likely to take to address these is best captured by the three “t’s” – timely, temporary and targeted measures.

Even though people across all incomes, including the squeezed middle, are being impacted, help will be targeted to those on low incomes and most in need.

The rise in inflation is out of his control. But we shouldn’t pretend that no-one is to blame. Costs have risen across the board – initially because of supply disruptions triggered by the pandemic and now because of the war. At some stage these pressures will ease, but not yet.

But inflation has also risen because the Bank of England has been asleep at the wheel. Last year, when inflation was already rising, it printed an excessive amount of money as quantitative easing reached £895 billion. That made the inflation outlook worse, feeding inflation expectations.

The Chancellor can act on fuel duties. During the next fiscal year, fuel duties are expected to raise £28 billion. By comparison, income taxes will raise £229 billion and national insurance £182 billion. A bold step would be to suspend fuel duties completely for a period. But then the pain would be felt when reintroduced.

Indications are that fuel duty will be cut, perhaps for a temporary period. A similar approach has been seen recently in France and Ireland.

For example, take a litre of petrol at £1.65. This price includes fuel duty of 57.95 pence and VAT of 27.5 pence. So total tax is 85.45 pence

If fuel duty is reduced by five pence per litre, then, after taking into account VAT, this would reduce the price per litre by six pence, in this case from £1.65 to £1.59. A small but significant saving for many people.

A radical – but very unlikely – step would be to move environmental levies from fuel bills onto general taxation. From this April these levies on household energy bills will raise £9.2 billion over the fiscal year, around £325 per household per year. The importance of addressing climate change is critical, it is peoples’ ability to pay that is the issue. This leads onto the big issue that Sunak needs to address: taxes.

Two tax increases will bite this spring. There is fiscal drag: as pay creeps up it drags people into higher income tax brackets. Normally, this is addressed by allowing tax allowances to rise in line with inflation. Allowances have been frozen for a couple of years, so it is unlikely anything will change here.

The other tax is the increase in national insurance, which will rise for both workers and employers, and which comes into effect in a couple of weeks. For workers this rises from 12 per cent to 13.2 per cent, so someone earning £30,000 per year will pay £214 more and a £50,000 earner will pay £339 more.

In April 2023, this is replaced by a new health and social care level (which in all likelihood will rise in future years) and the national insurance rate falls back to 12 per cent.

There was no need for this tax to have been increased in the first place. It was already clear last autumn that the public finances were improving. Furthermore, it is a tax on jobs that it is coming into effect now when incomes are being squeezed.

Sunak appears keen not to reverse or delay this tax. Instead, he could raise the threshold at which national insurance is paid by workers. From April, national insurance is paid after you earn £190 per week. By contrast, the threshold for paying income tax is based on annual income but is equivalent to £242 per week.

The Chancellor also recently announced measures totalling around £9 billion to help people most in need. He could find other targeted help. For instance, benefits and allowances could be raised in line with latest inflation figures.

One lesson from following fiscal statements over the years is that, when it comes to chancellors, don’t just listen to what they say, watch what they do. During the pandemic, Sunak responded well. Further action is needed now.

Finally, despite uncertainty, it will be important for the Chancellor to outline a vision. The UK’s trend rate of growth is too low. The UK needs to become a more competitive economy. Sunak wants to reduce the budget deficit. That is understandable. His choices are: borrow, raise taxes, austerity via cutting spending, focus on boosting growth – or a combination of these.

Austerity is rightly ruled out, although public sector reform is needed. The trouble is that taxes are already high, even for people on modest incomes. The best way to reduce the deficit is to boost economic growth, allowing the ratio of debt to GDP to come down gradually, over time.

Anthony Browne: Now is not the time to go slow on Net Zero

21 Mar

Anthony Browne is MP for South Cambridgeshire, and chair of the All Party Parliamentary Group on the Environment.

Does the invasion of Ukraine – and the commodities price crisis that it has exacerbated – mean we should “press pause” on Net Zero? Gas and petrol prices have rocketed up in the past few weeks, increasing the cost of heating and driving, and causing real financial pain to households, particularly those on lower incomes. The Government has unleashed a £9 billion package to bring bills down, but there is a limit to how much it can buck global markets. The call has come for further action – in particular, to start fracking in the UK again.

I fundamentally disagree that Net Zero needs to be paused. Many of the arguments put forward are not just self-serving, but patently irrational. If they were acted upon, we would be repeating rather than learning from the mistakes of the 1973 oil price shock.

I have always seen three major reasons for aiming for net zero – one is to curb climate change, and the other two are to enhance national security and to improve economic resilience.

Weaning ourselves off fossil fuels – which is completely achievable – is not only critically important for the environment, but would mean that we would no longer be funding and dependent on some of world’s worst authoritarian regimes, and the change would make our economy more resilient against volatility in global energy prices.

In 1973, a six day war in the Middle East produced an oil price shock that unleashed explosive inflation and a deeply scarring recession, sending our economy into turmoil for nearly 20 years. That is a critical weakness on an otherwise powerful, diverse economy.

Our economy is less dependent on oil prices now than it was – the energy intensity of GDP has fallen – but we are still vulnerable, as we are experiencing.

After 1973, other countries had deliberate strategies to wean themselves off oil – France went for nuclear power, Denmark for wind power, and Japan for solar. By contrast, we went for North Sea 0il. But since our output is part of global markets, that did nothing to insulate us from global price shocks.

We have more recently boosted renewable energy. Few people realise that more of the UK’s national electricity supply is now produced from wind power than it is from gas. No foreign dictator can stop the wind from blowing on these shores. The fact that over half our electricity comes from zero carbon sources (wind, solar and nuclear) means that its price has been less volatile than if it was produced solely from oil and gas, whose prices are decided by highly volatile international markets.

France, where nuclear power generates three quarters of electricity, and Norway, which is 100 per cent hydroelectric, have suffered from electricity price spikes, but only because they have been exporting power other countries which are vulnerable.

North Norway, which is isolated from the main European power networks, has seen more stable electricity prices from its hydroelectric plants. Two thirds of Norway’s homes are warmed by electric heat pumps, and so are not directly affected by global gas prices.

The UK could produce more fossil fuels, but the UK cannot much influence international oil and gas prices, whether it fracks or not. For as long as our heat and light and transport depend on fossil fuels, we will still be at the whim of international markets. 

But imagine if all our (and Europe’s) electricity production were from zero carbon sources – renewables and nuclear – and if we drove electric vehicles, and had electric heating for homes, then homeowners and drivers would be more insulated from international energy price movements and no longer funding foreign dictators.

The answer to the current crisis is more people driving electric cars, and less electricity produced from fossil fuels – not pressing pause on Net Zero, producing more fossil fuels and doing less to get people to drive electric cars and heat their homes with electricity.

That would simply exacerbate the problem, not solve it. You won’t make the UK less hostage to global fossil fuel prices by making the UK more dependent on fossil fuels. We need to learn from 1973, not repeat the mistakes.

As we get to Net Zero by 2050, there will still be a continued demand for oil and gas as transition fuels, and there will be some residual demand afterwards for industries such as chemicals.

Where that fuel comes from is less an environmental issue than a security one. Since Russia only supplies four per cent of our gas, it is not really an issue for the UK: giving the go-ahead to the wind farms and solar farms already in the pipeline will more than make up for the shortfall from Russia.

The energy gap is more an issue for the EU, which is heavily dependent on Russian oil and gas. If Europe stops buying fossilsfuels from Russia, it will have to buy them from elsewhere, but that does not in any way mean it needs to stop aiming for Net Zero.

The Russian invasion in Ukraine is not a reason to give up on Net Zero. Rather, it is a reason to redouble efforts to get there as quickly as possible.  That will benefit the environment, economic resilience and national security.

 

John Redwood: My critique of the Chancellor’s Mais Lecture, and what the Government should do next

7 Mar

Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales.

Amidst all the harrowing reports from Ukraine and the deaths and destruction wrought there by Russia, the Chancellor has sought to chart a course for the economy for the next couple of years.

In his Mais lecture he echoed his predecessor, Philip Hammond, in seeking a productivity breakthrough. He also reaffirmed the Maastricht rules approach to economic management, wanting tax rises to get the deficit down first. The Treasury should note that its role model the EU has abandoned these rules for the time being, and is pursuing monetary and fiscal expansion.

The lecture was wrong to deny that lower tax rates can bring in more revenues. The Republic of Ireland has been a shining example of this, boosting its per capita GDP far higher than ours or the lower level of the  EU by attracting huge investments through a 12.5 per cent Corporation Tax rate.

Their business taxes offer a higher percentage of total tax take than our higher rates. The Chancellor ignores the findings of Margaret Thatcher and Nigel Lawson who he praises. They produced a surge in revenues from higher paid people by major cuts in income tax rates.

The Government should take the cost of living crisis more seriously. In accordance with the Mais lecture, it needs to create the conditions for private sector investment in creating more better-paid jobs and in producing more of the goods and services we need at home.

Levelling up needs to be private sector led, and offer people the chance to set up and run their own businesses, be trained for better paid employment, and find ladders of opportunity in the areas attracting the projects and businesses.

The Government should not take the fast growth rate of 2021 for granted. It was a one-off based on removing Covid restrictions and on an unprecedented injection of money by the Treasury and the Bank of England. In the end, they overdid it in scale and duration, triggering a nasty inflation. The new investment has to take place against a less supportive public sector background.

The rise of prices well above wages will cut growth, as people spend more of their money on such basics as food and energy. That will leave them with less to spend on leisure and pleasure – on items that are nice to have. The huge rise in energy bills alongside tax rises including National Insurance will sap spending power further. The economy will slow. The lecture did not tell us how the extra private sector investment will be attracted in these conditions, particularly with the planned rises in Corporation Tax to come.

These troubles will be compounded by the Government’s import promotion policies, which are most pronounced in the Business and Agriculture departments. Business is busy allowing the rundown of big energy using manufacture like steel, ceramics, aluminium, and glass in the name of Net Zero.

The trouble is that we then import the products from abroad, meaning that more C02 is created in their production and transport to us. The Business Department is busy reducing our oil and gas output so that we need to import more energy. Again, this adds to our CO2 production worldwide.The Environment Department is developing big subsidy incentives to remove land from food production and to encourage older farmers to give up. That will make us more dependent on imported food.

So why does the Government not like products made or grown at home? Why doesn’t it want more home output to boost jobs, incomes and lifestyles? Any sensible programme of levelling up should be cutting taxes and making it easier for local businesses and farms to set up and grow.

This year, revenues have come in much higher than the Budget forecast, thanks to higher growth – and way higher than the £12 billion that the Government says it needs for a tax rise. The Treasury did not put up rates of tax, so revenue grew. During the next financial year, higher tax rates and frozen starting levels will hit taxpayers hard. Revenue is likely to underperform as growth stutters.

An energy shortage is a big part of the problem. The government should ease the shortages of gas, oil and electricity. They should invite in the oil and gas producers in the U.K. and help them increase production straight away from current fields. They should offer licences for new production from all those new and extended fields that have already been discovered. That’s more jobs, better paid jobs, and plenty of extra tax revenue. It is also less CO2 generated globally, as our own gas produces under half the CO2 of imported LNG gas. We will have much more productive industry if we have cheap or competitive energy.

The Government should work with the electricity industry to keep the lights on. We  will need more capacity than is planned to cover the electric revolution. We need more power for when the wind does not blow and the sun does not shine. We should abandon the current policy of putting in more and more interconnectors to allow us to import more from an energy short continent.  They should produce schemes to promote more home-grown food.

Defence, energy, food. Ten ways in which this war should change Government policy and the way we live.

7 Mar

None of the below will happen in the straightforward event of an imminent coup in Russia.  Nor perhaps in the more subtle one of a ceasefire soon, followed by eased sanctions and a negotiated peace.

But most of it will take place in the event of a longer war, and much of it should have happened anyway.  Here are ten ways in which politics is set to change.

First, defence policy.  It’s a statement of the obvious that defence spending will rise – at the expense of budgets elsewhere, further complicating Rishi Sunak’s calculations.   But as important as the percentage by which it will rise is how it will rise.

Russia was named as “the most acute direct threat to the UK” in last year’s Integrated Review of Security, Defence, Development and Foreign Policy.  Now the Government will have to react on the basis of that judgement, and review the review itself.

That should mean a larger army, a focus on our European hinterland, and no more naval adventures in the South China sea.  “Putin’s Russia is closer to home – remember the Salisbury attack – and Islamist extremism is already here,” as I wrote at the time of the AUKUS deal.

This site has been singing the same song since the review was published, and before (see here, here, here and here – “The Conservatives risk obsession with China to the exclusion of other threats, including Russia and Islamist extremism”).

The last may fade away in public consciousness, which would bring its own dangers with it. The second knock-on effect of the war will be on energy policy.  To pick up on another theme familiar to ConservativeHome readers, Government policy will need a much greater stress on security of supply.

Which means extracting more of our own oil and gas as a bridge to more nuclear and renewables.  That might not affect the second leg of the energy policy stool, lower electricity prices.  But it will have have an impact on the third, carbon emissions.

As this war gathers pace, it is looking harder for us to hit Net Zero by 2050, though I’m sceptical about that timetable in any event. Next, food.  Agriculture policy will always seek to strike a balance between consumers and producers, and in the wake of Brexit we now have more scope to adjust.

To date, the tilt has been towards consumers, with less farmer subsidy (“mine are doing their nut”, one Minister told me yesterday) and more countryside rewilding.  That is going to have to change, which will have an effect on trade policy.

Deals with Commonwealth friends and allies  – Anne-Marie Trevelyan has just agreed one with New Zealand – have implications for domestic production, no less than those with other countries.  And a lesson of Covid should be that one cannot rely on supply chains to deliver as planned.

Which will mean a switch from just-in-time to just-in-case.  Then there is the exposure of universities to Russian and Chinese influence.  The sanctions in placed are already poised to snarl up science partnerships with counterparts in the Putin-led state.

There will be protests, for good reason and bad.  It will be argued that many Russian academics are opposed to the war, and that collective punishment is a bad thing.  That argument will have wider resonance as the effects of sanctions kick in.

But read Tom Tugendhat on this site, writing about the universities’ dependence on Chinese overseas students, or elsewhere on the need for a register of China’s interests in the UK.  A Counter-States Threats Bill was promised in the Queen’s Speech.  Ministers will need to speed up getting it before Parliament.

Next, immigration and asylum.  Taking more refugees from Ukraine, as they flee West from the war, will have an effect elsewhere – since public opinion will always back, as it must, control on overall migration numbers.  Watch out for the tangling-up of Ukrainian refugees and small boats.

Voters won’t long tolerate the opening-up of legal routes if illegal ones run out of control (as the traffic across the channel already has).  How many who seek help from the gangmasters will be from Ukraine?  Or from Afghanistan – in the wake of last summer’s disaster?

How many who arrive will claim to be, whether they actually are or not?  Pondering the European landscape takes one to our relations with the EU.  Liz Truss was invited to and attended a meeting of the Foreign Affairs Council last week.  That’s a sign of easing tensions, as Europe and America close ranks.

It may even be possible in this improving atmosphere to recast or minimise the Northern Ireland Protocol, although I’m doubtful – since the theology of the EU requires stringent checks at the sea border to guard against the non-existent threat to the internal market.

But either way, don’t expect Article 16 to be moved any time soon (will will bring its own risks, as indeed would moving it, during the run-up to this spring’s election to the Northern Ireland Assembly).  There are conceivable effects on the debate about devolution and independence.

Scottish independence ought to be a less attractive option in a more dangerous world – and Ministers can be expected to make that argument as they continue to develop the UK’s internal market.  Meanwhile, expect the UK to work more vigorously through European institutions.

Writing on this site recently, David Lidington named “the Northern Group that brings together the NATO members and partner countries that border the Baltic and the North Sea”, the E3 (France, Germany and the UK) and “the party too European Intervention Initiative that brings together EU and non-EU countries”.

Boris Johnson issued a statement last week in the wake of a meeting of the Joint Expeditionary Group, whose members are the UK, Latvia, Lithuania, Estonia, Finland, Denmark, Sweden, Norway, the Netherlands and Iceland.  The Group has previously carried out its own military exercises.

Then there is the economy.  I’ve already referred to a higher defence budget necessitating a spending squeeze elsewhere.  There are those who believe it isn’t necessary: that the Government should cut taxes, go for growth and let borrowing take the strain.

Up to a point: Jacob Rees-Mogg hinted in our last Moggcast that government ought to be able to find the £12 billion of annual savings for the next three years that would render the coming National Insurance rise unnecessary.  But Sunak’s take on history and the economy in his Mais Lecture was sound.

Namely, that the economic recovery of the 1980s came off the back of lower interest rates, secured in the 1981 budget by tax rises, not cuts.  The lesson of the era is that tax cuts and spending control march in step – one that we may have to learn all over again at a time of stagflation, as growth slows and shortages send prices rocketing.

There will be pressure for the City to be less open to dirty money, which the institutional Treasury will try to resist as best it can, and a squeeze on the levelling-up project.  That takes us finally to culture – and, no, I don’t just mean the “sporting and cultural Siberia of its own making” which Nadine Dorries referred to last week.

The last fortnight has seen the contention that Putin’s aggression has been encouraged by Western decadence discussed vigorously.  That’s a bigger theme than the conclusion of an article can tackle.

Though the progress of Putin’s war, or perhaps the lack of it, ought to give pause for thought.  At any rate, apologists for dictatorship are getting a hard time.  That’s a change for the better.

Rachael Finch: Net Zero and energy security. If we go too fast for the first, we won’t get the second. Indeed, we may get neither.

4 Mar

Rachael Finch is a former British Army Officer and works in the defence sector. She is currently a Deputy Chairman of the Conservative Women’s Organisation West Midlands.

When Russia is negotiating with Western countries over the crisis in Ukraine, it is doing so knowing it is in control of 41 per cent of the EU’s gas supply. Having also built up its foreign currency reserves to defend itself from Western sanctions, and with no Western political appetite to commit troops to the crisis, Moscow is in a strong position.

In the long-term, Henry Smith, writing for this website, is likely right: Net Zero, by reducing dependence on natural gas, will weaken Russia’s position.

However, in the short-to-medium-term, the transition to Net Zero will transform geopolitics before a world powered by green energy can take shape. When we consider that almost 60 per cent of Russia’s exports comprise petroleum or coal products, it’s hardly surprising that Vladimir Putin is not the world’s most vocal environmental campaigner.

Consequently, the UK Government needs to look beyond the long-term environmental challenges of global warming, and address the nearer-term geopolitical risks that are present. Geopolitical risks create uncertainty in energy markets as reliability is questioned, pushing up prices for consumers and creating resistance to Net Zero goals.

The move away from oil and gas as sources of power will not happen overnight, and during this period, petrostates will continue to profit from their exports of fossil fuels. However, the combination of pressure on investors to divest from carbon-based fuels and the uncertainty about the future of fossil fuels may result in declining investment in oil and gas.

If oil supplies fall faster than oil demand as a consequence, fuel shortages and higher and more volatile oil prices will be here to stay for a while. Notably, the current increase in UK gas prices is due to a drop in gas supply at the same time as an increase in demand.

Higher oil prices result in higher revenues for petrostates such as Russia, or Saudi Arabia. In addition, as the transition to so-called clean energy develops, the overall reduction in the demand for oil combined with the need to keep costs as low as possible may result in higher-cost producers, such as Canada, being priced out of the market. This leaves room for states that produce cheaper oil, such as Saudi Arabia, to fill the gap increasing their geopolitical clout.

The same logic applies to gas markets. And for Europe, this means an increasing dependence on Russian gas: Russia’s importance to Europe will increase in the short-to-medium term if the Nord Stream 2 pipeline eventually comes online. If Putin wants to push back against the expansion of NATO in Eastern Europe, now is a good time for him to do it.

However, it’s not only fossil fuel exports that could increase Moscow’s geopolitical clout. According to the International Energy Authority, global nuclear energy generation will need to double between now and 2050 if the world is to achieve net zero emissions by the same date.

Many of the nuclear reactors planned or under construction outside Russia are being built by Russian companies. China is also a relatively large investor in nuclear power, meaning that both Moscow and Beijing will increasingly be able to influence industry norms and impose global standards in their favour.

China also controls many inputs required for clean energy technology, dominating both mining and the processing and refining of critical minerals, such as copper, cobalt, lithium, nickel and rare earth metals. An increase in the demand for clean technology will further increase China’s geopolitical influence. China has previously shown its ability to (mis)use this influence when it blocked the export of critical minerals to Japan in 2010 over the disagreement about the East China Sea. It could do so again.

It may seem as though localising supply chains is a way to fix these tensions. Despite the Green Party’s utopic advocacy for reducing emissions in the UK’s imports to zero, the reality is a net-zero global economy will need large supply chains for components, products and global trade in low-carbon fuels and minerals.

Global competition is needed to encourage innovation and to develop new markets, reducing prices for consumers. But, increasing electrification, be it for vehicles or heating, will likely result in more local production due to the difficulties with transporting electricity over long distances. Although local supply chains can be beneficial for security and employment reasons, too much localisation reduces diversification, creates vulnerabilities and raises prices for UK consumers.

Moreover, China’s recent increased use of ‘home-grown’ coal as an energy source is driven in part by the shortage of gas on global markets and the need for more energy security. Germany has also found itself in a similar position after its ban on nuclear power. Localising power supply chains doesn’t necessarily result in a reduction of carbon emissions.

Decarbonisation also poses problems for developing countries. The COP26 highlighted this with lower-income countries calling for developed nations to pay for historical damage allegedly caused by greenhouse gas emissions.

Whether you agree with this statement or not, developed and developing nations have diverging future goals which will increase tensions. The latter need growth to raise their populations out of poverty in the most economically efficient way. The former, by trying to stop the use of fossil fuels to deal with global warming, are preventing this happening. When the reality of life is a diesel-generator backed power grid that keeps blacking out, an electric car is not a sought after item.

For many developing countries, the way out of poverty may involve extracting hydrocarbon resources. However, developed nations are putting pressure on financial institutions not to support extractive projects, but by not assisting with an alternative, the tensions will grow.

China, on the other hand, is providing finance to countries like Cote d’Ivoire, helping to develop their extractive industries and by doing so is feeding internal Chinese demand for raw materials. As far as many developing countries are concerned, rolling back globalisation could do far more damage in relieving poverty and living standards than continued global warming.

The transition to a world powered by clean energy is radical and it will be messy. If, on the way to achieving Net Zero, national energy security conflicts with responses to global warming, there is a real risk of friction on the road to a green planet.

International climate leadership needs to mitigate the national security implications of a transition to green energy, in addition to making promises and signing agreements. Nuclear power and continuing investment in oil and gas reserves are essential tools in dealing with energy market volatility and the inevitable periods of disconnect between supply and demand of fuels; it’s good to see the government beginning to recognise this.

Supply chains need to be diversified to reduce reliance on one main provider – competitive markets are essential in this regard, as well as keeping prices lower for the UK consumer. And there will be a need to support communities dependent on fossil fuels, both domestically and internationally.

New green technologies will solve technical problems, but they will also encourage states to maximise their own interests and policymakers would be naive not to recognise this. However, perhaps the greatest risk of Net Zero is that if the conflict between global warming and national security is ignored, that the transition to a greener planet won’t take place at all.

Craig Mackinlay: Politicians must be honest with the public about the costs of Net Zero

2 Mar

Craig Mackinlay MP is the MP for South Thanet.

The Public Accounts Committee, on which I sit, has today published a new report on Achieving Net Zero. This was a chance to take a serious look at the potential costs of Net Zero, both to the Exchequer and to individuals.

While it acknowledged that “many of the technologies the strategy relies on are currently very expensive”, it failed to establish what reasonable limits on the cost of Net Zero would be or suggest any mechanism for keeping costs under control.

To be fair to the Committee, it relies upon evidence from departmental luminaries; the Government’s various papers are long on words but light on detail. Rubbish in usually generates rubbish out.

The report is, in my view, an opportunity lost and amounts to yet another call to go further and faster without giving consideration to the enormous damage that Net Zero could do, or its geopolitical implications.

We can’t go on like this. The shocking events in Ukraine have surely demonstrated unequivocally the importance of energy security, and the broader global context in which our energy policy sits. The fact that the West has paid for, and continues to fund, Putin’s war machine should be a source of shame.

Now must be the time to review our Net Zero policies in light of the incontrovertible need for secure and affordable energy supplies. We’d hardly be alone in this reconsideration, with Green Party ministers in the German government proposing exactly that.

There is a worrying temptation for politicians, quite evident in this document, to demand an illusory certainty that Net Zero targets will be met. This flows from the legally binding nature of our Net Zero objectives, which invites the demand to know in detail how every tonne of carbon dioxide will be removed.

This mindset is deeply misguided. Committees and Politicians don’t know which technologies will be most competitive in bringing our emissions down, and by inviting the forced adoption of expensive and immature alternatives we are risking storing up huge and unnecessary costs for consumers and, perversely, slowing the pace of emission reductions.

My primary complaint was that the witnesses we questioned were reluctant to be drawn on what the future costs of achieving Net Zero would be. It’s true that this is a very challenging calculation; transforming an economy from being almost entirely powered by fossil fuels to being powered by zero carbon alternatives within a generation is a complex task.

But can we realistically tell the public that this must be achieved at whatever cost? What we can do is look rigorously at policy proposals that are on the table, and at the prices we are currently paying for energy.

Chief amongst these policies are the planned phase-outs of gas boilers, along with petrol and diesel vehicles. Text-book examples, in my view, of the kind of polices that risk completely undermining the Net Zero agenda. Ultimately, by restricting consumer choice, these bans are certain to leave consumers worse off, and the only real question is by how much? Looking at the current prices of electric vehicles and heat pumps, the working assumption has to be: a great deal.

If Net Zero has to be met by the arbitrary deadline of 2050, which is the current legal position applying to the UK’s one per cent of global emissions, we are being forced to accept any cost in its pursuit. This is inherently irrational, and it’s my view that there must be limits on what we’re prepared to pay for decarbonisation.

The idea of the ‘social cost of carbon’ is instructive here. The costs associated with our emissions must be recognised, but if policy costs exceed this amount, then they should be questioned, and adaptation rather than mitigation might be the more cost-effective strategy for a better outcome.

We also mustn’t be distracted from the bigger picture of energy policy either. Decarbonisation is one element, but by focussing on it to the detriment of other considerations we have created a perfect storm of high energy prices and an unhealthy reliance on energy imports. Efforts to boost our own domestic production of oil and gas could give us greater geopolitical leverage, as well as keep jobs and tax revenue here in the UK.

Steve Baker: Wanted – a politically and economically viable path to low emissions

23 Feb

Steve Baker is MP for Wycombe, and served as a Minister in the former Department for Exiting the European Union.

No serious person doubts that CO2 is a greenhouse gas or that human emissions of it have contributed to our changing climate. Our legal target of Net Zero carbon emissions by 2050 is water under the bridge, nodded through without a division in parliament despite the scale of the implied changes to all our lives.

I admit I will miss petrol engines, especially in motorcycles, but I have no in-principle objection to Net Zero – other than that there has never been a democratic choice about a policy which means, as our Chief Scientist, Patrick Vallance, wrote in the Guardian, “transformation is required at every level of society”.

My objections are practical questions about how we get there – questions usually evaded by turning back to what we ought to do and why, or by doubling down on misinformation. That can’t go on because socially, economically and politically-unviable policies will not survive contact with the public.

Our current energy crisis is substantially a result of the emissions reduction policies of previous governments, particularly Tony Blair’s. Blair changed course away from the gas and nuclear path established by Conservative governments, which had reduced prices while cleaning up electricity generation and domestic heating. Blair’s renewables drive, which was maintained by all subsequent administrations, has left the UK critically exposed to the regional price of gas, because it is natural gas alone which ultimately guarantees security of supply for the UK electricity network.

It’s rational to have a climate policy, but our climate policies aren’t rational. Our acute crisis is a result of chronic, long-term strategic extremism in energy and climate policy. Policy which has been naïve about geopolitical realities, too inflexible, too dogmatic, too hasty and far too expensive.

Just as with our Covid response, the root of our problems is a failure to conduct robust cost–benefit analysis while focussing too narrowly on a particular problem.

Economists can value the harm done to human welfare by emitting a tonne of carbon dioxide – the Social Cost of Carbon. Estimates vary, but most think it is somewhere between £10 and £40. So if reducing emissions by a tonne costs over £40, we are probably doing more harm to human welfare than the climate change we are trying to prevent.

That is, above £40 per tonne the cure is worse than the disease. Worryingly, nearly all our climate policies are significantly more expensive than the social cost of carbon. Onshore wind costs over £100 per tonne and offshore over £200. Rooftop solar can cost over £1000 per tonne.

In 2009, the then government stopped using Social Cost of Carbon, and switched to what is a called a “Target Consistent” value, which is the price that will have to be paid to meet the target. That is, government stopped considering the overall welfare of the population, focussing instead on meeting the targets.

That change is even more important now we have a Net Zero target. By neglecting the already strained budgets of British households and by loading the public with more and more ambitious targets – for renewables, and heat pumps, for EVs, you name it – ministers have put climate policies on a collision course with socio-political reality.

We are seeing the first signs of public resistance now, and the situation will not improve on our present course. A rational policy for reducing emissions must deal with runaway cost problems, growing concerns about security of electricity supply and pressure on business competitiveness.

The cost to consumers of the renewables drive now stands at around £14 billion a year, around £500 per household. Most of that is subsidies, but the cost of dealing with the intermittency of wind and solar is also rising alarmingly. Despite that vast expenditure, once one sets aside incorrect claims which could amount to misinformation, hopes that renewables would become significantly cheaper have been disappointed. The industry claims their capital and operating costs are falling, but their financial accounts tell a different story. And there is a large queue of renewables operators with rights to extraordinary, index-linked levels of subsidy.

On our current path, there is no scenario in which energy prices return to normal in the next decade. It’s anyone’s guess when this unsustainable position will end but end it must. In the short term, we must cut the multi-billion pound cost of green levies, and admit they have not succeeded and bring these programmes to an end.

We will also need a different medium and longer term approach, reducing emissions but being realistic about what can be engineered at reasonable cost to the British people. We need to think a little less about the targets, and much more about what people can afford.

That leads us to a strategic gas-to-nuclear policy, not all that different from the sound Conservative energy policies inherited by Tony Blair and trashed. Government must allow people to go on using their gas boilers for longer, perhaps mixing in hydrogen, and not force the adoption of heat pumps. The drive to EVs should be relaxed: Government is demanding too much too quickly.

Ministers should restore confidence in North Sea oil and gas exploration to increase domestic supply of these fuels. And it is time to get on with using shale gas. Thanks to outrageous misinformation, the public are concerned about fracking, but the evidence shows it is a technique which can be safely used.

Natural gas is an excellent and a clean fuel. It can give us time to start a major rebuild of nuclear electricity generation. There are real signs that advanced modular reactors are the answer to the production of high-grade industrial heat, one of the hardest areas to decarbonise without pricing our manufacturers out of the international markets.

In the future, there may even be nuclear fusion, but banking on it would be a huge gamble. We will need to maintain a sophisticated and capable society if we are to overcome that technology’s known difficulties, and that means keeping energy costs low today.

The quickest win for the public and the government would be to encourage the construction of a new generation of gas-fired power stations. These would have much higher efficiencies than the existing fleet, which is mostly rather old, and could reduce wholesale electricity prices by as much as a third.

This gas-to-nuclear policy is a sound, balanced approach to emissions reductions. It doesn’t rule out anything – there can still be voluntary adoption of heat pumps and EVs – but it allows the public much more freedom to decide what works for them and how fast they can afford to decarbonise.

That is rational. That is Conservative. And it would work.