Oct 2007 26

Leggett’s article for Comment is Free is so idiotic it is positively painful. I’ll fisk it and then quickly conclude with a little examination of his dubious byline:

"When Britain and Germany raced to scale up their aircraft industries for war in the 1930s, the British competed rather well. Recovering from a late start, we rapidly produced machines capable of winning the Battle of Britain.

Today, the two nations are on the same side in a different battle, but Germany alone is mobilising as fast as it did 70 years ago."

If we’re on the same side why would we want to race the Germans? Who cares if they win. Their gain is not our loss. Quite the opposite. If they develop the renewable technologies we can use them. Welcome to post-mercantilist economics.

"Our common enemy is global warming, and it is already at our gates. But while our German allies are turning out the renewable energy equivalents of Messerschmitts by the factory-load, Britain is again slow to spring into action."

Okay, they can bring the renewable power technology; we’ll bring the City, Canary Wharf and associated financial innovation. We can’t produce everything so why should we distort our investment market in an effort to race the Germans for the renewable energy market? Specialisation can make us all better off.

"Worse, as we learned yesterday, officials responsible for UK mobilisation have told the prime minister it is impossible for us to build modern-day Spitfires in any number. We should instead oppose European targets set recently for such mobilisation and join other laggards in order to persuade the Germans to scale back their own efforts."

Perhaps they’ve realised that big subsidies for renewables may not be a particularly efficient way of reducing emissions.

"On Tuesday one of the main architects of Germany’s renewable energy policy, Hans-Josef Fell, was in London to give a press conference on peak oil. In this issue lies another, related imperative for nations like Germany and Britain to be mobilising for renewable energy as if for war. A group of German scientists, the Energy Watch Group, has completed the latest in a crop of studies showing that oil is depleting far faster than previously estimated, and that a global energy crisis is imminent. Renewable energy and energy efficiency are the only technologies that offer any hope of staving this off in time."

Anyone who pretends to have a good idea of the amount of oil left in the ground is trying to fool us or themselves. Besides, shortages of hydrocarbons aren’t an externality so the market will create the proper incentives to switch to other sources of power. There is no market failure here for government to address.

If all you’re worried about is dwindling reserves then you’re worried about them increasing the cost of hydrocarbon-based power. The idea that the best response is raising the cost of hydrocarbon power is pretty bizarre.

"Fell spelt out Germany’s success with renewables. In 2000, when he and other parliamentarians pushed through a law to fast-track renewables markets, such sources contributed 6% to the national electricity mix; the target was 12% by 2010. Three years ahead of the target, they are approaching 14% – and have created 200,000 jobs in the process."

Have they created more jobs than would have been created if the free-market had invested the capital instead of it being forced by the state into the hands of renewables companies? Opportunity costs!

"International investment patterns tell the story. Some $1 trillion, globally, will go into energy this year, and more than $100bn of that will be invested in renewables. Renewables make up just 2% of the global mix, excluding large hydropower schemes, and yet about a tenth of global energy investment now flows into them. Renewables companies are lining up to be quoted on stock exchanges, and those already listed have strong share prices. But as things stand, only a tiny proportion of this investment bonanza is heading into Britain."

Almost all of that development is utterly dependent on subsidies. It isn’t a competitive industry at all. What that means is that each country pays for the investment either from its exchequer or through a levy on energy production.

"The German renewables market is being fed by funds raised from a levy on energy bills to guarantee premium prices for renewable electricity. Britain’s Department of Business, Enterprise and Regulatory Reform says the UK’s renewables obligation, a certificate-based scheme for growing renewables markets, works better. Ofgem and the Carbon Trust are among the many who disagree. It is easy to see why. In 2006 the cost to the average German household of the tariff was £12 a year. The average UK household paid £7 a year under the renewables obligation, but that delivered significantly less renewable capacity. German windpower capacity is 10 times that of the UK today, and the energy it produces is 30% cheaper; German solar power capacity is 200 times that of the UK."

An energy production levy is particularly cruel as it means taking money from the very poorest. We demonstrated in the TaxPayers’ Alliance report on green taxes (PDF) how regressive any measure increasing the cost of electricity is. Poor families pay more, as a portion of their income, than the average and the rich pay the least. While £7-12 pounds isn’t a lot of money it is significant and could be spent in another way or deliver a tax cut that might make a small but meaningful difference to a number of poor families. That is quite a price to pay to distort the market in favour of renewables.

"Consider the stakes here. If we fail to contain global warming, we put the economy at risk. If we continue to ignore peak-oil warnings, we will plunge into the chaos of a third global energy crisis. If we continue to allow investment to flow uncontested into countries with a renewables vision, UK plc loses out on any prospect of a serious share in the next global business revolution."

1) Britain’s renewables subsidy won’t make a significant difference to global emissions. It makes no important difference to the amount of risk the economy is at from global warming.

2) I’ve dealt with ‘peak-oil’ already. "Oh no! An energy crisis is coming and we’ll all suffer as energy gets more expensive. Better make it expensive now to end the suspense!"

3) There are plenty of plausible "next global business revolution". I think the market is better at identifying them. Renewables, which are dependent on big subsidies, are a particularly poor candidate.

"· Jeremy Leggett is author of Half Gone: Oil, Gas, Hot Air and the Global Energy Crisis"

The Guardian’s byline tells us only that he has written a book about energy policy. This suggests that he is an ‘expert’ in the field and little more. How has such an expert produced such a poor article?

It appears the reason is that the article is more corporate PR flyer than intellectual search for truth. If you look at his profile on Comment is Free it turns out that instead of being an independent expert he is actually "chief executive of solarcentury the UK’s largest independent solar electric solutions company". If that isn’t enough "he is, in addition to his solarcentury role, a director of the world’s first private equity fund for renewable energy, Bank Sarasin’s New Energies Invest AG". This is a man with a massive personal stake in subsidies for renewable power that guarantee its future. For the Guardian to put him up as merely a concerned author writing on his subject instead of mentioning front and centre that he is a part of the renewables business he wishes to see subsidised is an abject failure of journalistic standards.

I’m all for business leaders speaking for their industry. I don’t mind newspapers printing what they have to say. However, that depends upon two key conditions being met:

  1. They must have something interesting and coherent to say. Instead, this article just ignored basic economics and spouted phony analogies about Spitfires.
  2. It must be clearly acknowledged – in a prominent position on the same page as the article – that they have an interest in the matter.

Neither condition was satisfied with this article. Deeply shoddy.

Oct 2007 26

Shameless_1

How to get shameless workshy dole recipients back to work and earning their own keep is one of the oldest problems in welfare. Indeed, it was the principal driver for the Poor Law reforms of the 1830s (see this blog and James Bartholomew’s outstanding Welfare State We’re In for details). Of course, those reforms were later reversed, and under the entitlement culture engendered by today’s Big Government, the problem is more acute than ever.

Today there are 4.2m people of working age living in workless households. The vast majority are supported by taxpayers, costing us an estimated £12.7bn pa, including £3.4bn pa on benefits for lone parents (source: NAO Report). That’s equivalent to nearly 4 pence on the standard rate of income tax.

Getting these people into work is generally called Welfare to Work, although New Labour naturally branded their programme with an upbeat Newspeak title- the somehow familiar sounding New Deal.

Now, as taxpayers, we ought to be applauding the New Deal: get those people back to work and we could save a huge amount of money. The trouble is, the New Deal doesn’t seem to be saving us money at all. In fact, according to the NAO’s report published in July, it costs us even more than just paying the benefits.

The following table summarises the costs and benefits for each of the ten (!) separate New Deal back to work programmes. "Net fiscal benefit per participant’ estimates the cost effectiveness to the Exchequer of the programme. It is based on the cost of the programme, minus the direct benefits to the Exchequer (such as increased tax receipts and reduced benefit payments when people move into work) and the costs of any additional in-work payments such as Tax Credits" (report para 5.3):

As we can see, only two of these ten programmes end up saving us money. With all the rest, the costs of running the programmes significantly exceed the savings we make. Hardly surprising when one of these programmes has cost £76,540 per job.

Looks like we’d have been much better off without the New Deal, saving ourselves the £6bn the programme has already cost (Report figure 1).

So what’s going on? On Wednesday, your correspondent attended the Public Accounts Committee meeting that tried to find out.

Appearing before the PAC were three mandarins led by the Department for Work and Pensions’ Permanent Secretary Sir Leigh Lewis. But despite being given one-and-a-half hours, they were entirely unable to demonstrate the New Deal delivers taxpayer value. In fact, it became painfully clear the whole programme is another all too familiar amalgam of wishful thinking and bureaucratic treacle.

Here are some key points:

PAC question: How can we be getting taxpayer value if the costs exceed the benefits?

DWP answer: We think there must be many additional benefits which have not been quantified. Lower NHS costs, lower costs from crime,and a load of other stuff

PAC question: How can you possibly know that?

DWP answer: We’ve had three studies conducted by academics. We paid them and they confirmed we’re right.

PAC question: How do you know your "clients" haven’t simply got jobs they’d have got anyway because of the strong economy?

DWP answer: Because we say so. Trust us.

PAC question: What about churn? Surely most of these people get pushed into a low grade job for a few months, then lose it, and then have to start all over again.

DWP answer: There’s absolutely no evidence to support that conclusion. Or more precisely, there’s absolutely no evidence. The simple reason being we don’t collect any.

PAC question: What about immigration- surely large-scale immigration must be making it much harder to place our own native workless into jobs.

DWP answer: You are falling for what our economists call the Lump of Labour fallacy. It’s well known that immigration boosts the economy and so must be good for jobs. QED. (for an exposition of how most economists outside Whitehall now agree that mass immigration really does take income and jobs from native workers see this blog).

PAC question: Why have you set up such a ludicrously complicated structure? The NAO report says that in Glasgow alone the local programme involves 125 organisations and 325 individual programmes, projects and services.

DWP answer: Yes, well, this is work in progress (even though in reality some of these programmes have now been running for over a decade)

The overall conclusion is clear. The New Deal delivers shocking value for taxpayers. It is costly and ineffective, and has spawned yet another gigantic bureaucracy.

In essence, it is yet another social service. But by masquerading as a measure to boost GDP and somehow make us all better off, it is managing to deliver the worst of both worlds.

Oct 2007 26

Still-rising levels of truancy, reported today by the Independent, are a result of the failure of an education system under political mangement.  There are a few key failures at work here.

1)  Children haven’t learn to read

Poor literacy standards mean that a child will often find the rest of their education nothing but a humiliation.  Under a more flexible system the schools would not want to press vainly on trying to teach a child Shakespeare when they can’t read the Sun.  A decentralised system where schools respond to the priorities of individual parents rather than the constant flow of central government diktats could be more flexible.

2)  Teaching to the test

We’ve noted before that it is becoming very apparent that schools teach what is needed to pass the many public examinations to the exclusion of a broader and more meaningful education.  That has to make things less interesting which will feed a desire, on the part of children, to avoid school.

3)  Focussing on those who can make the ‘C’ grade

Teachers face a big incentive to focus on making sure that the central "% Grade A*-C" number looks good for their school.  Students playing truant often won’t be anywhere near that standard.  While good schools will do their best for every student many will accept the reality that they have to meet the political standard and focus on boosting as many students as they can over the line to grade C.  That undermines efforts to make combatting truancy a priority.

Oct 2007 26

Around 40 TPA supporters and activists joined us last night at the Old Monk Pub for the first London area social.  We had a great turnout, allowing the TPA staff to meet our activists working so hard campaigning for lower taxes and better government.  It was also a good opportunity for TPA activists to network and talk about their plans.

Tpasocial_1

Two of our key activists, Austin Spiteri (left) and Saverio Bongo discussed joint campaigns in north London and Hertfordshire.  Austin’s son Richard (right) walked away with the raffle prize, the signed bumper book of government waste.

Tpa_social_october_001

We also got an excellent turnout from younger activists and those interested in joining the TaxPayers’ Alliance.  Everyone got a pack of Political Trumps, recruitment leaflets and some bumper stickers and you can guarantee that we’ll be organising more of these events in the future.

Tpasocial2

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Oct 2007 25
  • TPA says MPs "should be ashamed of themselves"
  • Increase per MP calculated by TPA
  • TPA calls on Commons authorities to follow Scottish Parliament in revealing itemised expenses

Responding to the publication of MPs’ expense claims for 2006-07 today, the TaxPayers’ Alliance described the rises as “extortionate”. TPA Chief Executive Matthew Elliott said:

“MPs should be ashamed of themselves. Families are struggling to pay higher tax bills whilst MPs are spending more and more of our money on themselves each year. What’s worse is that they won’t even give us a full itemised breakdown of their expenses as MSPs do in Scotland. No wonder voters have little respect for politicians when they see so many MPs with their snouts in the trough.”

The TPA has compared this year’s expense claims to last year and has produced a ranking of all the MPs by their overall increase.  This analysis reveals that the MPs who increased their claims the most are:

Expensesgrowthtable_2   

NB: Sinn Fein MPs are excluded from this list given the dispute over their expenses that occurred recently, which reduces the 2005-06 figures, thereby inflating the increases.

Contact the TaxPayers’ Alliance if you wish to see the full rankings.

The TaxPayers’ Alliance has been campaigning for the House of Commons authorities to publish MPs’ expense claims in full, to include a breakdown of all receipts and invoices, as occurs in the Scottish Parliament.

Heather Brooke, freedom of information campaigner and TPA supporter, said:

"The totals published today are merely the tip of the iceberg. If the Government is serious about open government then it needs to follow the Scottish example and publish a detailed breakdown of all claims. Instead we find the House of Commons spending thousands of pounds on expensive lawyers battling to keep secret the details of how MPs spend the public’s money. What have they got to hide?"

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