Why are our politicians so ignorant of the real world?

As much as I want to get rid of the Bullingdon Club bullies in Downing Street, I have major doubts about Ed Miliband. He keeps quiet when he should be shouting from the rooftops and announces the most stupid policies which are ill thought out. Is he really surrounded by idiots and unable to judge their ideas on merit?

Take the latest example to dictate energy prices, ostensibly to make sure the benefits of a fall in oil prices are passed on. Doh! It is not the function of government to set the prices that a business charges its customers. Where are we going here, should business apply to the government to change their prices?

I didn’t appreciate it at the time but I was one of the first business students in the UK to study marketing in the 1970’s. How we laughed at business models where price was based on cost plus a gross profit margin. Price is what the customer is willing to pay. A business then judges whether it can meet that price and make a profit.

So how do you control excessive profits resulting from a failure of the competitive marketplace to function in the public interest. Governments have a number of mechanisms, they can introduce a one off windfall corporation tax (the threat should do), they can improve competition using the model that was intended when the energy companies were privatised and which the government at the time failed to fully implement. 

They can force separation of energy supplier from energy producer, as intended on privatisation. This should be done by forcing energy companies to float off parts of their business. This is what governments do, they set the market conditions under which businesses operate.  They do not stand apart at a distance from the business dictating prices. Stupid stupid boy.

I’ve been reading Al Gore lately and I am stunned by his eloquence. He almost writes in prose.  He puts it far better than I can, and incidentally makes British politicians look rather badly educated.

“The idea of making truly meaningful collective decisions in democracy that are aimed at steering the global machinery we have set in motion is naive, even silly, according to those who have long since placed their faith in the future not in human hands, but in the invisible hand of the marketplace. As more power to make decisions about the future flows from political systems to markets, and as more powerful technologies magnify the strength of the invisible hand, the muscles of self governance have atrophied.”

Wow – beautiful writing. He goes on,

“In the United States, many have cheered the withering of self governance and have celebrated the notion that we should no longer even try to control our own destiny through democratic decision making. Some have recommended, only in half jest, that government should be diminished to the point where it can be drowned in the bathtub. They have enlisted politicians in the efforts to paralyze the ability of government to serve any interests other than those of the global machine, recruited a fifth column in the fourth estate, and hired legions of lobbyists to block any collective decisions about the future that serve the public interest. The even seem to sincerely believe, as many have often written, that there is no such thing as the public interest”

Well Ed Miliband, you need to start exercising those muscles of self governance. 

Footnote - David Cameron urges firms to use windfalls from cheaper oil to fund pay rises. Argh! Keep politics out of business decisions but ensure that markets function for the public good. In this case Britain has gone too far in restricting trade unions. Redress that balance of power and let workers negotiate pay rises. David Cameron is even more stupid than Ed Miliband.

Apathy is Acquiescence.

Yesterday I received an email from Berkeley Earth, the independent climate science review body.  

Berkeley Earth has constructed an estimate of the global average temperature during 2014, including land and sea.  The key findings are:

1. The global surface temperature average (land and sea) for 2014 was nominally the warmest since the global instrumental record began in 1850; however, within the margin of error, it is tied with 2005 and 2010 and so we can’t be certain it set a new record.

2. For the land, 2014 was nominally the 4’th warmest year since 1753 (when the land surface temperature record began).

3. For the sea, 2014 was the warmest year on record since 1850.

One thing we should note here is that a few years ago Berkeley were quite critical of the IPCC and thought their conclusions abused statistical analysis. So those climate change deniers who made vast fortunes out of oil, the Koch brothers thought the masters of statistical analysis at Berkeley could be used as “guns for hire” to spread further disinformation. Koch brothers funded Berkeley to re-analyse the climate scientists data. Berkeley were much criticised by climate scientists for taking the polluters money. 

But scientific honesty prevailed and Berkeley duly announced after extensive statistical analysis, that global warming was real and this increase was entirely due to human caused greenhouse gas emissions. Berkeley were critical of the IPCC and expressed concern about heat islands (cities) affecting temperature readings, but broadly agreed with their findings. The Koch brothers withdrew their support but Berkeley found other funding and continue their work having set up Berkeley Earth.  Their mission “to monitor the scientific community and provide objectivity without concern for policies of government, industry or philanthropic ventures “.

However all reviewing bodies are by their nature behind the latest research. For example it takes 5 to 6 years to write papers up and get them reviewed, edited and reviewed again before they are accepted and published in scientific journals. The IPCC for example will only accept peer reviewed papers and so are several years behind the latest data.

Quite a lot of recent research shows that catastrophic abrupt climate change is with us now!

Why is this important, well one to one and a half billion people live close to sea level.  As the oceans warm, thermal expansion is causing sea levels to rise. Add to that loss of land ice in the Arctic and Antarctic which will have an even more significant impact and you start to see a worrying picture.

The IPCC are funded by the UN to review available science and advise governments. Contrary to the lies the denialists spread the IPCC do not do the research themselves.  In advising governments the IPCC stay on safe ground, they would rather underestimate the trends than open themselves to accusations of speculative claims. 

Guy McPherson for one, warns of catastrophic impact of climate change caused by the release of methane gases from the Arctic ocean. This research on Arctic methane release is not included in the IPCC models.

Paul Beckwith’s research concludes that  we are already committed to temperature increases of 5 – 11 degrees in the next 2 decades and a catastrophic sea level rise. Basically these guy’s are talking about human extinction within our lifetime.

So do you think immigration is a problem? What do we do when one billion people are flooded out and need to look for a new home. Man the borders, what a joke!

When the last IPCC report was produced on BBC’s Question Time, there were three climate change deniers on the panel and not one scientist to tell the truth. Shame on the BBC. When Nigel Lawson repeated old lies, no one challenged him. Shame on the BBC. 

We, that’s you and I, need to make sure that climate change is the biggest issue in the next general election.  

https://www.youtube.com/watch?v=UXn22d7tyKM

http://arctic-news.blogspot.co.uk/2014/02/abrupt-climate-change-by-paul-beckwith.html

http://www.theguardian.com/environment/2015/jan/15/sea-levels-rising-faster-than-previously-thought-says-new-study

http://www.theguardian.com/environment/2014/dec/05/warmer-seas-could-cause-faster-melting-polar-ice-rising-sea-levels

http://www.skepticalscience.com/antarctic-ice-sheet-sleeping-giant-beginning-to-stir.html

Were Labour really that profligate in power?

When the Labour party won the 1997 general election, they inherited a Britain where schools and hospitals had suffered from decades of neglect and under investment. Not all of this was Thatcher’s fault. However the trashing of the economy, creating firstly the deepest recession and secondly the longest recession of the 20^th century alongside a public expenditure cuts policy certainly did not help. Apart from selling off state assets and spending the money on current expenditure rather than infrastructure investments, we may have emerged from Thatcher’s experiment with some benefits. We got rid of some old inefficient industries, freed the financial world from many constraints and moved on with a new confidence.

In the last years of John Major’s government a new idea was born, the Private Finance Initiative. The Conservatives were cautious but the new Labour government seized on PFI with enthusiasm. In accounting parlance, PFI is usually off balance sheet, according to GAAP (Generally accepted accounting principles). A huge advantage, as you do not have to admit to what you are spending, even to yourself.

A couple of years ago I had reason to spend a few days in my local hospital. The experience was so much better than I expected. The hospital, all shiny and new, showed what was possible under a well funded health service. At the time I thought it the best hospital in the world. The hospital was completely rebuilt on PFI funding, with a 30 year contract. The hospital valued at £312 million would be paid back at £50 million a year rising to £100 million by 2041. That’s a total repayment of £2,500 million. Maybe it was the best hospital in the world. It’s certainly one of the most expensive.

When the coalition took over in 2010 they immediately cancelled all PFI developments that had not been contractually committed, and froze other contracts in progress to await review. 

So, why did two governments take such a radically different view?

Consider the need to cut the deficit in 2010. In 2010 alone the taxpayer was committed to paying:

Year 12 of New District Hospital, Newark

Year 11 of New District Hospital, Swindon

Year 10 of Cumberland Infirmary, Carlisle

Year 9 of Russell Hall Acute Hospital, Dudley

Year 8 of Calderdale Royal Hospital

 Year 7 of New District Hospital, Coventry

Year 6 of Newbury & Thatcham Hospital

Year 5 of Central Manchester University Hospital

Year 4 of Derby City Hospital

Year 3 of St James University Hospital, Leeds

Year 2 of Wakefield & Pontefract Hospital

Year 1 of Penbury and Maidstone Hospital

Now you start to see the picture. Just when the banks had pillaged the economy and we needed to cut our expenditure, we were contractually committed to massive PFI payments. Only it’s much worse than my example of 12 projects as there are over 170 NHS PFI projects and over 700 PFI projects across all government departments. The biggest of these is PRIME and it is worth £9.5 billion. PRIME outsources all D of E offices, job centres and such. These PFI contracts are not just for new buildings but for maintenance of the whole property portfolio on a 20 year contract.

The amount being paid to private capital suppliers is rising each year, and will peak in 2029/30.

Between 2001 and 2008 536 PFI deals were signed off in the UK. These were valued at £61 billion. In Europe over the same period there were 215 PFI contracts valued at £37 billion. So the UK had almost twice the contracts in place than all the other EEC countries put together.

The Dutch government use PFI but with strict controls. Only 50% of a project can be funded this way and the maximum term is 4 years.

If we look at Labours 13 years in government, the deficit in 2007/8 before the crash was lower than in the last year of John Major’s government. At one point Labour even ran a budget surplus. Superficially it looks like only the banks imploding caused the deficit to spiral out of control. But given the impact on the economy in 2008, PFI is the inflexible yoke around our necks.

Still we have some nice new hospitals, some new schools etc. What a shame we cannot afford doctors, nurses, teachers........

Footnote: When the coalition dropped all new PFI contracts and where they could froze those already underway, they inadvertently killed the recovery that began under Labour and caused a further recession until 2012 when they relaxed austerity (while denying in public that they had moved away from plan A). Sometimes it really is that complicated. George Osborne is currently championing PF2. You can’t make this stuff up.

It’s difficult to find out about PFI projects in the UK. They are regarded as commercial in confidence and excluded from freedom of information. The Hong Kong government are less secretive.

http://www.eu.gov.hk/english/psi/psi_case/files/ppp_case_estate.pdf

http://www.eu.gov.hk/attachments/english/ppp_duty_visit_reports/United%20Kingdom%20Duty%20Visit%20Report.pdf

History of NHS

http://www.nhshistory.net/parlymoney.pdf

Open Democracy Report (a must read if you value our democracy)

https://www.opendemocracy.net/files/PFIreport.pdf

Like Kermit I have a problem being green?

I’m getting closer to the green party, except that I believe in nuclear power. I’m definitely sympathetic to the green agenda, except I don’t like windmills. But I’m definitely a green, although I find many of them a bit.... well green.

I don’t like simple answers, magic bullets. I believe in the markets ability to drive change. Capitalism is a great mechanism to drive innovation. There are a number of reasons why this is not happening now. The main one is a total failure of the market to price what Galbraith called “neighbourhood costs”. To be more precise, a failure to fully price carbon. In effect that’s free market economics speak for you suffering from my pollution. I'm not charged for generating the pollution, your charged through environmental damage and the health issues that arise.

Politicians are not the right people to decide what solutions to back. Subsidies for wind power will only work if wind power is the right answer and all the other answers are wrong. Politicians are not the right people to decide which technology to support. Politicians do have a role to play. They have to kick start a new industrial revolution and ensure that the natural ability of our capitalist system to exploit new ideas is allowed to compete against the powerful interests of the fossil fuel lobby.

“Government policy can create viable new markets, boost private investment and innovation, and stimulate the economy without requiring large public expenditure” (Dimitri Zenghelis, 2011).

Retired climate scientist James Hansen has argued for a rather elegant solution:

It requires an honesty from our politicians that I’m not convinced they are capable of. Basically get rid of all energy subsidies and taxes. Then tax pollution and undesirable “neighbourhood costs” heavily, very heavily. Wind power has to compete once the playing field has been levelled. The price of fossil fuels will rise significantly and the world will be encouraged to wean itself off this previously underpriced energy source.

But here is the true beauty of this pollution tax. Every 3 months the government divides the tax take from the carbon tax by the full population and sends each of us a cheque. So the government does not get the benefit of the extra taxes but we are encouraged to be fuel efficient.

Two examples. A fuel inefficient person pays heavily, and gets a little back. A fuel efficient person pays less because they use less dirty energy and gets the same share of tax back as the first person.  And here is the surprise – it works, British Columbia have such a system running now and its so popular that opposition to it is political suicide. Latest news is the Boston asked private consultants to recommend an effective way of cutting carbon pollutants blamed for accelerating climate change. They proposed a multi million dollar carbon tax.

Read more about this in James Hansen’s book “Storms of my grandchildren”. In the UK I would include children in the cashback, but held in a trust which could be used to pay university fees. There may also be an issue with fuel duty making an existing contribution to the exchequar. However a lot of the fuel tax we currently pay is returned to the fossil fuel industry in the form of subsidies.

This elegant solution won’t work if the politicians keep the tax. In needs to be returned to us as a quarterly dividend.

A significant issue is the right wing free market hatred of any interference in markets. These right wingers think that everyone has a right to pollute and the government has no right to interfere. This is not a free market, it is rigged in favour of fossil fuel. Consider the tax breaks that Osborne is giving to the fracking industry. This is a UK taxpayer subsidy to oil. But according to the right wing pundits, the government has not got a right to try to control a dysfunctional market. In the future the failure to accurately price carbon pollution will be regarded as the greatest market folly of our time.