Like the Covid pandemic, the war between Ukraine and Russia was not foreseeable. However, despite conventional thinking, the current cost-of-living crisis has causal strands other than the war and the pandemic. These strands lie chiefly in the political realm, notably the complete disregard of economic consequences of wishful-thinking masquerading as policy.
In the case of Covid, abuse of support packages bred rampant fraud, and we are now discovering how much pandemic help disappeared into offshore bank accounts – £5 billion lost through the bounce-back loan scheme alone. We are finally being told the unvarnished truth about the government’s blind belief in the Sage advisory committee’s statistical predictions of virus attrition rates, and the devastating consequences of falling for all that terrifying make-believe. The result was an experiment in authoritarian government unmatched in our history, even in wartime.
When will they learn – there are always consequences
And now it has happened in the energy realm. While developing new skills and storage capacity to allow for a transition to renewable sources – solar, wind, hydro, tidal, geothermal and biomass energy – we have abandoned carbon-based sources long before green alternatives are up-and-running reliably, and in a sufficient quantity. A desire to save the planet is instinctive – but the alleged urgency was a case of treating a thesis as proven fact. Nothing “sage” about it!
Only 0.03% of the atmosphere is carbon dioxide by volume, and only 3.2% of that is produced by man. The UK produces only 1.1% of the world’s CO2 emissions. The Wall Street Journal put all this into stark perspective:
“The underlying cause of Britain’s energy misery is its fixation with climate goals, especially the ambition to achieve net zero CO2 emissions by 2050……It has grown hostile to domestic energy exploration, banning shale gas fracking and slapping windfall-profits taxes on North Sea oil and gas producers that will deter investment.”
Pointing out the immense damage that its net-zero timetable is causing Britain does not of itself make you a “climate-change denier”. It merely suggests you are sane!
Consumers robbed of alternative suppliers
Attention is understandably focused on households, but businesses, to which the Ofgem price cap does not apply, face multi-fold wholesale gas price spikes; and many otherwise viable entities will have to close. The horrific trajectory of energy prices is now patently clear to everyone, but since all companies in the sector face the same supply constraints switching suppliers is no longer a feasible solution. Even the fixed rate/standard-variable alternatives are too risky for consumers to contemplate amid the present uncertainty. So what’s the answer?
As the visiting motorist was famously told when asking a resident for directions to Donegal, “ Well, I wouldn’t start from here…..”. Indeed, it’s already far too late and the damage has been done. Private sector solutions to the fiasco of state meddling are rarely forthcoming when the chances of a decent return are hobbled by regulatory constraint and threatened closure of the sector.
The CEO of Scottish Power, Keith Anderson, tells us what we already know: “We’ve got to the stage where this is a national crisis on the scale of the pandemic.” He proposes that the government should act as guarantor of new loans to the energy companies, enabling them to freeze bills to customers at their current level, while buying gas in the market. The loans, representing the difference between the existing price and the actual cost of energy over the next two years, would be repaid via customer bills over the next 20 years – in similar fashion to the settlement of our second world war debts to USA and Canada, which continued for 60 years beyond the end of the war.
As George Bernard Shaw wryly observed, a government that robs Peter to pay Paul can always count on the support of Paul. Having the government guarantee loans to your company is bound to be a popular idea, but as a statist solution to a state-generated problem it could worsen existing inequalities, spark a regulatory nightmare and renew cries for higher taxes on those capitalist demons: profits and dividends. Therefore I demur from Mr Anderson’s proposal of a wartime solution to a crisis of our benighted government’s own making.
No crisis continues unabated indefinitely, and there is more than enough available gas outside Russia to satisfy European demand – the problem is one of engineering the new sources of supply rather than the supply itself – a temporary problem.
Lack of storage remains a problem stemming from under-investment. When companies were told that we’ll be net zero by 2030, they naturally refrained from committing resources to repairing fossil-fuel storage. Although the UK has only a small fraction of the liquified natural gas (LNG) storage capability enjoyed by France and Germany, it has, in Pembrokeshire and Kent, two of Europe’s largest terminals for importing LNG via ships from the US, Qatar and elsewhere. Despite having neglected offshore production, Britain still produces close to a half of all the gas it uses and, by relying on wind, is virtually self-sufficient in electricity generation.
This time learning the lesson is a matter of survival
But whatever short-term positives there may be, there is no exit route from this mess that will avoid pain and suffering. At least there is a possibility that the causes of the last financial crisis, which plainly eluded leaders everywhere, might this time be better grasped. I hope so – for the simple reason that the consequences of a repeat failure are beyond contemplation.
This week’s new leader must recognise that most of the Conservative politicians holding Cabinet positions today are cast in the same mould as those who catastrophically cocked up economic policy both before and after the 2009-2012 financial crisis.
These people can’t see that their own floundering actually caused the debacle the country is in. Every wiser alternative was missed, misunderstood, ignored and botched by ministers whose only solutions were, and are, ‘more-of-the-same’: interest-rate suppression, limitless money-printing, bail-outs of zombie companies, boundless state-spending on projects you wouldn’t spend a penny of your own money on, indirect taxes to entrench the anti-obesity, anti-alcohol, anti-everything-you-enjoy nanny-culture, working-from-home, work/life-balance pampering, senseless financial aid for overseas despots, uncritical support for universities teaching their worthless diversity rubbish – and don’t forget that bottomless pit, the NHS. All of which demands even greater expansion of the civil service – heaven help us.
Britain cannot afford inflation-linked pensions for civil servants. We can’t simply “up” their pensions in line with unprecedented levels of price-inflation – private sector pensions schemes have had to abandon it. Jacob Rees-Mogg is at last cracking down on the pointless on-line courses fed to civil servants. He has so far ordered 250 “woke” tutorials to be banned. What do these people do when working from home? Council “workers” in South Cambridgeshire are soon to be put on a 4-day week – on full pay of course. Employees of the borough of King’s Lynn planted more than 100 trees to tackle climate change but they (the trees, unfortunately!) died after just a few months because they were planted at the wrong time of year and too shallowly to take root. The list is endless!
A clean-sweep purge – long overdue
So, after all that, what is the lesson? Yes, it’s obvious. The new PM must be ruthless. The useless dross that calls itself a Conservative cabinet must be cleared out and replaced with ministers who understand what’s actually needed, who “get it” – and will get on with it; and are prepared to ride out the pain of facing voters during the cleansing process.
Seen in this way a change of PM is a godsend – a priceless opportunity for a massive clear-out, and replacement with ministers who can see, really see, that most of the insane levels of spending – £400 billion in 2020 alone, equivalent to £6,000 per citizen, was “unproductive” – or, more accurately, a total waste of taxpayers’ money. People were paid for not working and support was given to businesses that had already been forced to close. Those on Universal Credit can now avoid weekly meetings with a job adviser by taking on just nine hours of work a week.
Attempts to re-instil a post-lockdown work-ethic have been scuppered by the handout-ethic. The result is that 5.3 million people are being kept on out-of-work benefits when plenty of work is available for anyone who wants it, and businesses are crying out for staff.
What’s needed is nothing more than the mental clarity to recognise that every gratuitous splurge of government spending, however it is justified, feeds its recipients with barrow-loads of bogus dosh that buys less and less, triggers higher wage-demands that are never enough, followed by futile strikes – in an ever-repeating circular treadmill.
Recognise it?
© Emile Woolf September 2022 (website)
