My Interventions on the Finance Bill

John Redwood (Wokingham) (Con):

I have declared my business interests in the Register of Members’ Financial Interests.

I rise to support the Government’s new clause 5. I think it is good that they are considering what more they can do to promote investment in the United Kingdom’s generating capacity. We import far too much power already, especially when the sun does not shine and the wind does not blow, and on the basis of the Government’s ambitious forecasts and targets for much more of our energy to be delivered by electricity, I think that the position will get a lot worse quite quickly. Anything that the Government can do to encourage that additional investment in generating plant will be very welcome.

We will, of course, need a similar positive approach to grid and cable, because the more we electrify, the more we will need to convey that power from the rather remote locations where much of it comes from to the parts of the country that will need it. So my only worry about new clause 5 is that I am not sure it goes far enough. I think it is helpful in this limited number of cases, but I trust that the Chancellor, when it comes to the Budget—quite soon, on 6 March—will consider that the new clause is just a stepping stone and that we need to review again the very large tax impositions on energy of all kinds in this country. We now have double corporation tax in many cases and a range of windfall taxes that are often not really windfall taxes because they do not come off when the prices go down, although they are put on when the prices are going up.

That whole area needs considerable review, because we need to take seriously the fact that we are short of energy overall. We are short of electricity generating capacity and short of the means to route power from generation to use, and it would be an important stimulus for the British economy if we produced more of our own energy and generated more of our own electricity, and if we were thinking about having a surplus to export again instead of all too often being cruelly reliant upon imports of liquid natural gas and electricity, particularly from the continent.

I would also like briefly to refer to new clauses 4 and 6. They are wide-ranging new clauses that invite the Government to make assessments or reviews of features of this legislation, but they also wish to broaden it out to get the Government to review the impact of their general fiscal strategy on equalities, on investment, on the state of the corporate sector and on inequalities in our society. I am quite sure that the Government will be reviewing all those things as a matter of course, as this is often a continuous process. Indeed, many of the items covered in this request for special review are already reported on and form part of the normal process of policy preparation, and rightly so. If the Minister were to tell me that he would be grateful if I did not vote for these new clauses, I would have no problem with that—I am not sure that it would help to embody them in the legislation anyway; I think it would be a bit of an abuse of the legislation—but the Government need to respond to the general thirst for knowledge that these new clauses represent, and to understand that there are some serious issues here that need to be returned to. I trust that the Chancellor will return to them at the Budget.

Looking at the fiscal impact that these new clauses cover, I trust that in the preparation of the Budget we will have analysis in the Treasury of these particular measures, which are still going through from the last time, but I also hope that the Government will review the extraordinary losses of the Bank of England—I think that they have already run up to £34 billion in the current financial year. These are losses that the Treasury, and therefore the taxpayer, have to pay as they are incurred, and that is completely unacceptable. It imposes strains on the public accounts and on the Treasury at a time when we really do not need them and when we need that money for other purposes.

There are two simple measures that the Bank could take to stem the magnitude of those losses. First, it should not be selling bonds at a big loss in the market. The European Central Bank is not doing this, although it has a similar problem with a portfolio of very expensively acquired bonds. There is also the issue of the running losses on these holdings where the Bank of England is paying the full, much enhanced, short-term interest rate following its increases in it. This now greatly exceeds the revenue on the bonds because the Bank paid far too much for the bonds and there is a very low rate of interest on them. Those running losses are a problem. I think the Bank should look at what the European Central Bank is doing, in paying different interest rates on reserves held under this system so that it does not have such a large running loss.

Richard Fuller:

Can my right hon. Friend tell me if I have got this right? In the commentary ahead of the Budget, we talk about wiggle room and the Office for Budget Responsibility forecast and about £5 billion or £10 billion here and there, but I think I heard him say that this matter was completely out of the control of the those on the Treasury Bench and this Parliament; that the Governor of the Bank of England could unilaterally decide to crystallise losses on whichever extent of bonds he wished to, and then put that loss into the calculations of the Chancellor of the day; and that the Chancellor would then have to work around that in order to work out what the fiscal expenditure, public expenditure and taxation would be. Is that actually the case? It sounds mightily undemocratic to me.

John Redwood:

That is an interesting point of debate, but my understanding of the constitutional position is that it is not as bad as my hon. Friend is suggesting because all the bonds were acquired with the express permission of the then Chancellor of the Exchequer. The Bank of England’s website says that the bond portfolio is held on behalf of the Treasury. Successive Chancellors of the Exchequer—beginning with the Labour Chancellor who first undertook quantitative easing and carried on by successive Conservative Chancellors—all signed an agreement with the Bank to say that they would indemnify against loss. So, given that the Government and this Parliament empowered the purchase of the bonds and now take responsibility for any losses on them, it seems perfectly reasonable for there to be a proper conversation about whether we want to take the losses.

I see nothing wrong with us here challenging the idea that, uniquely among the big quantitative easing programmes, it is the Bank of England that not only insists on selling the bonds at big losses but gets reimbursed. The ECB does not sell them in the market at big losses. The Federal Reserve Board sells them in the market at big losses but gets no money back; it simply puts on its balance sheet that it has lost a lot of money and takes the view that, as it is a central bank, it does not really matter if it loses a lot of money, because central banks create money and it is therefore not like a normal commercial business. So I hope that Ministers will look at this as part of the general assessment that is being invited by these new clauses.

I hope also that Ministers will look at the expenditure items in the overall accounts covered by new clause 4 on the public finances, because there has been a marked decline in public sector productivity in the years 2020 to 2023. It was quite without precedent in my experience of following public finances over the years, and this very sharp decline represents at least a £30 billion loss to our system, in that it now costs at least £30 billion a year more to run the group of public services covered by these figures than it did before the collapse in productivity. On top of that, there has also been the need for much bigger sums to cover inflation. This is not the inflation figure; this is the real loss figure from the productivity.

We are all sympathetic to the difficulties that lockdown and the transition out of lockdown caused, and there was bound to be disruption. Our public services were badly affected by that, as children could not go to school and hospitals were disrupted by covid, but that is now some time behind us and it seems perplexing that we cannot get those public services back to 2019 levels of productivity. I hear comment that maybe artificial intelligence will do it and that there needs to be a big investment in computers. Well, that should be on top. All that I am saying to the Government is that we can surely get back to 2019 productivity levels using techniques from 2019, which was very much pre-artificial intelligence and before the latest round of computerisation. Again, this is a big area that needs to be looked at as part of any review of the public finances.

The third area, which is also very large and very much in the news today, is that even more people in our country do not feel they can go back to work and that they need help at home because they are no longer able to work. The Government are working on some important programmes, through the Department for Work and Pensions, to show people that through a combination of part-time flexible working and working at home with proper support and training, and maybe with additional financial support to help them, they could go back to work for part of the time and make a contribution. We desperately need them, and I think their lives would be more rewarding. They would also be better off because we now have a benefits system that means it is always better to work. This should be a cross-party matter, because it is a problem that our nation as a whole faces. We can enrich those people’s lives, help to reduce the burden on the taxpayer and improve the net income of those concerned. Again, this involves many billions.

My point in making these three simple points apparent to the House is that there are very large sums of money indeed involved in bond losses and productivity, which we need to review because that would help in the formation of the next Budget. It would create more headroom, both for the tax cuts that we need if we are to promote growth, and for improved public service provision in the areas where the shoe is still pinching. I trust that will be part of any review that might emerge from these new clauses, or from the spirit of these new clauses. I hope that my right hon. Friend the Chancellor is thinking about this, as we will have a Budget hard on the heels of this Finance Bill, which came out of the autumn statement. In these conditions of recovery, and given the need for faster growth, I welcome having more than one Budget a year, and the fact that we may have three fiscal events quite close to each other, if all goes well. They must promote growth and reduce taxes, and this is a good start.

I welcome new clause 5, but can we please have more? Can we please look at the headroom that I think I have helped to identify?

90 Comments

  1. agricola
    February 7, 2024

    As you say in your lengthy submission, the business plan for UK energy contrives to give us the most expensive energy in the World, a barrier to UK competitiveness. All it does is impoverish our population and businesses. While it results in lots of loot for further HMG idiot schemes, fat profits for oil companies and overseas energy suppliers, not forgetting windmill owners. HMG confirms how bad its energy plan is by giving financial handouts to those worse affected.

    Bonds are a Ponzi scheme to produce extra spending money for HMG when they have maxed out on tax. The answer is to stop spending, a vain request because it is other peoples money.

    As for public sector productivity, for starters you need to write a new contract of employment, reduce numbers vastly and give the elected hire and fire power, not that many of them have the experience to run anything. Hence the shifting of responsibility to unelected quangos. Democracy is for the people, not for vested interesfs to gain the system.

    1. David Andrews
      February 7, 2024

      Well said. It is time HMG took its finger off the self destruct button.

      1. Hope
        February 7, 2024

        Another two Tory MPs standing down, 62 and counting. Guido reports CCHQ asking its MPs not to announce all at once. Also when obliterated they get substantial lay off money.

        I think it would be easier to get rid of Sunak and Hunt than the 62 named as going, plus the rest of the party.

    2. Ian B
      February 7, 2024

      @agricola +1
      Why is so much of our money on energy being given and being subject to the whims of Foreign Governments. Not private companies, but foreign state owned nationalized industries They then get to undercut the UK market place and its competitiveness with less costly energy. Is the UK taxpayer subsidizing the energy in other domains? Does that meant the UK taxpayer is forced to punish its industry for the sake of a pat on the back by those we didn’t and cant vote for.

      1. agricola
        February 7, 2024

        Ian B
        The story I got was that the current business plan was created under EU pressure when the UK found itself surounded by almost limitless quantities of oil and gas to add to our vast amount of coal. The EU did not want a low cost energy economy anchored off its northern shores. The Treasury and other elements contrived to ensure it did not happen, being eager to bend over to EU demands with enthusiasm. My source was at the time was sufficiently highly placed to be aware of what was going on. Our host was highly placed in government at the time so should be sufficiently well informed to explain why we have the most expensive energy in the World.

        1. Ian B
          February 7, 2024

          @agricola – it as if we are living in a horror movie. Much was made about the recent new licenses awarded for North Sea exploration a good chunk Foreign nationalized industries, they get to extract what they find, using their own equipment and labour all paying taxes in their own home nations. All extraction have to be sold on the International Spot market and if the UK wants to gets it hands on any of it own oil and gas they have to compete for it with everyone else.
          Self sufficiency and security is nowhere to be seen

        2. Mitchel
          February 8, 2024

          Forget the UK!The EU now has a vast low cost energy economic bloc on it’s eastern border.Russia has overtaken Germany on a PPP basis-and the growth there is coming from manufacturing and conversion industries.

      2. Mark
        February 7, 2024

        Yes, the UK consumer gets to subsidise electricity exports when we have surplus wind or solar generation. In 2023, a total of 275GWh was exported at negative or zero day ahead prices, and a total of 2TWh at prices below £60/MWh, which almost certainly entailed substantial subsidies; 2.9TWh below £70/MWh, 4.4TWh below £80/MWh, and 5.9TWh below £90/MWh. The time average day ahead price was £94.14/MWh, The demand weighted average was £99/MWh, and the average export value was £84.16/MWh for 10.1TWh.

        In addition there was 160GWh of contraflow on Eleclink/IFA1 with electricity going round in circles between Sellindge, Kent and Coquelles, near Calais which enriched the interconnectors at consumer expense.

    3. Lifelogic
      February 7, 2024

      First decided what the government produces that is of any real value to the public and actually wanted or needed and ditch the. the people not doing this – about half I would estimate.

    4. hefner
      February 7, 2024

      A very interesting map of productivity on
      ons.gov.uk/visualisations/dvc2847/fig2/index.html
      The country average Gross Value Added per job went from £46k in 2009 to £57k in 2021.
      But different areas have very different growth rate.

      One way to look at it might be that apart from London and the Thames Valley, with a few exceptions, the rest of the country is rather a sleeping beauty.

      1. Martin in Bristol
        February 8, 2024

        Possibly because outside the M25 productive manufacturing industry has been offshored to countries like China and India.

  2. Peter Wood
    February 7, 2024

    Good morning,
    ”The Federal Reserve Board sells them in the market at big losses but gets no money back; it simply puts on its balance sheet that it has lost a lot of money and takes the view that, as it is a central bank, it does not really matter if it loses a lot of money, because central banks create money and it is therefore not like a normal commercial business”. I think I told you that a few months ago. It’s about money supply to the economy if you’re the central bank.
    If there’s a full review of energy supply to the UK market, with a view to producing more of what we use for ourselves, does this not include a hard look at the cost of Net Zero policy? Removing the constraints of that half-baked philosophy would save the economy.

    1. Lifelogic
      February 7, 2024

      Even the relatively sensible pop con wing of the party want net zero. Doubtless Sunak will uniquivically assure us at the despatch box that the net zero agenda is vital and will save lives. The reverse is the truth, it is mad, bad for the economy, industry, defence, health, jobs, living standards… a totally evil agenda.

      The Chancellor, Rishi Sunak three years + ago refused to disclose whether he will profit from a surge in the share price of the Covid-19 vaccine manufacturer Moderna, one of the biggest investments held by the hedge fund he co-founded before entering parliament. Has he done so since? Needless to say the Covid Vaccine companies share prices have largely collapsed as people start to understand the stats and refuse the new tech. “vaccines”.

      1. Lifelogic
        February 7, 2024

        His “unequivocally Covid vaccine are safe” assurance reflects badly and not just on Sunak but all his medical, statistical and scientific advisors on this topic. So are they all totally deluded or lying to Sunak too.

    2. Bloke
      February 7, 2024

      Well done if you revealed something previously-unknown to SJR months ago. Evidence of having done so would be stronger than a recalled thought, as would its originality. SJR frequently raises Net Zero policy folly and many agree with you both, including this bloke.

      Reply I was aware before that contribution!

      1. Peter Wood
        February 7, 2024

        Bloke,
        Is Sir J’s acknowledgement sufficient. However, the concern expressed over BoE losses realised on Gilt sales, is contradicted by the lack of concern at the Fed., as indicated by this passage. So which is it?
        The BoE is removing money from the economy at a rapid pace, so this will most likely result in higher interest rates. Perhaps they’ve been told by the IMF that we’d better get our economic house in order, because we’ll not be offered another bale-out.

        1. Bloke
          February 7, 2024

          I find SJR maintains high quality standards and acts accordingly in support of the best interests of the UK, Peter. What the Federal Reserve Board does is a matter for the US.

    3. Ian B
      February 7, 2024

      @Peter Wood +1
      A hard look at NetZero must start with asking the question why is it 95% of the World, our market place competitors are not engaged in destroying their own industries and commerce? We must also ask by offshoring UK Industry to less green and pleasant lands what is the environmental cost of subsequently just importing from the World that hasn’t gone down this route, and where is the balance if we block our own industry why are imports that are not punished by the same criteria not subject to punitive tariff?

  3. Javelin
    February 7, 2024

    Follow the money … who specifically is making the bond profits.

    1. glen cullen
      February 7, 2024

      Correct – Always follow the money

  4. Lifelogic
    February 7, 2024

    So Harry flies in from California to meet the King for just 45 minutes. But doubtless given his CO2 religion he will surely have at least flow economy both ways to halve his CO2? Then the King hops on a helicopter to Sandringham (using about 30 times more fuel than a car per mile).

    1. dixie
      February 7, 2024

      Could an eminent scientist/mathematician/medic/polemist/educationalist yada yada as yourself explain exactly how flying economy rather than higher tariff modifies the CO2 emissions of the same flight …

      1. Mike Wilson
        February 7, 2024

        I believe the argument goes along the lines of: if there is no business and first class, you can pack more sardines into the tin so that the amount of CO2 per sardine is very, very, very slightly lower. And, if you get enough sardines into each tin, you might do a couple of less flights.

        1. Lifelogic
          February 8, 2024

          Not “slightly” lower at all, you need about three times as many planes to fly the same number of people first class so almost 1/3 of the fuel plus they have more crew taking up room too.

          1. dixie
            February 8, 2024

            Usual BS.
            and which is it – a half, a third, make your mind up.

        2. dixie
          February 8, 2024

          Note – “of the same flight …” – an aircraft’s seat types and distribution don’t get changed dynamically per flight.

      2. Lifelogic
        February 7, 2024

        Is this not blindingly obvious Dixie? A plane full of first class passengers will use about the same fuel as the same aircraft full of circa three times the number of economy passengers. So three times as many aircraft per thousand passengers if all go first class. Even worse should you take private jets or helicopters!

        1. dixie
          February 8, 2024

          You claim they change the distribution of economy, business and first class seats on a per flight basis? Tell me what you are drinking.

        2. dixie
          February 8, 2024

          Which airlines operate transatlantic flights with solely first class seats?

      3. Lifelogic
        February 7, 2024

        I have never claimed to be a medic (though my son is I just look at the overwhelming Covid Injury Stats.) nor an educationalist (whatever that is).

        Maths, physics, electronics and other engineering, businessman with a fair knowledge of the absurd & dire UK tax system.

        1. dixie
          February 9, 2024

          And yet you profess expertise in so much. A degree in those subjects does not give you the same or vocational expertise in all the subjects you flood this blog with pronouncements on but are clearly not qualified in. A professional and practicing engineer or scientist would know that.

    2. Hope
      February 7, 2024

      +many.

      Our eco nutty Royals lecture for small people but not themselves. Charles at event recently promulgating his climate nutty views!!

      I support the monarchy not Charles and his left wing views.

      1. Mike Wilson
        February 7, 2024

        I wonder why you ‘support the monarchy’? Do you support the landed gentry? Do you support owners of huge tracts of land? I’m sure they are very grateful for your forelock tugging.

    3. Mickey Taking
      February 7, 2024

      Did you want him to cadge a lift with the Household Cavalry?

      1. Lifelogic
        February 7, 2024

        Perhaps – I was not expecting him to cycle there!

        1. glen cullen
          February 8, 2024

          Why not ….he could use one of the new royal cycle-lanes

    4. glen cullen
      February 7, 2024

      Net-zero isn’t to restrict the elites …its only for the plebs

      1. Lifelogic
        February 8, 2024

        +1

  5. Mike Wilson
    February 7, 2024

    The Federal Reserve Board sells them in the market at big losses but gets no money back; it simply puts on its balance sheet that it has lost a lot of money and takes the view that, as it is a central bank, it does not really matter if it loses a lot of money, because central banks create money and it is therefore not like a normal commercial business

    I don’t pretend to understand this – the way central banks work etc. But this sounds like fantasy economics. Why doesn’t the Bank of England create money to buy all the bonds in existence so coupon interest does not have to be paid? It sounds nuts.

    1. Mickey Taking
      February 7, 2024

      yeah – monopoly money unless its your income they are playing with.

      1. Berkshire Alan
        February 7, 2024

        MT

        Sadly it is, the more money they Create (QE) the less ours is worth !

  6. Narrow Shoulders
    February 7, 2024

    A sub clause in one sentence saying that net zero was folly would have been welcome Sir John. By discussing mitigations you give credence to the zealotry.

    Does the government not consider why someone who evidently understands the finance bill is not at the treasury. Civil servants would have to work harder to run rings around you.

    What is this clause 4 which adds costs to equalities? Do we not already pay enough to be equal with everyone?

    Reply New Clause 4 was an Opposition clause which we voted down

    1. Narrow Shoulders
      February 7, 2024

      Thank you

  7. Bloke
    February 7, 2024

    Errors, shortages, muddles and waste should be foreseen and prevented at source. Inevitably some would be missed but should at least have been corrected well before they developed anywhere near to the tangled mess enduring today.
    This backward government acts as if there is a shortage of blunders instead and turns it into an increasing surfeit.

  8. Donna
    February 7, 2024

    Bond-sale debt …. caused by the Government’s QE programme and a commitment to underwrite BoE losses which were ramped up to ridiculous levels during the Covid scam (gee thanks Sunak!)

    Millions now not working / too anxious or unwell to work …… caused by the Government’s Covid Lockdowns and associated policies (in many cases, the jabs)

    Public services collapsed …… productivity has been hammered in the public sector by the switch to working from home; ongoing disruption caused by the lockdowns; Government-generated inflation leading to industrial action

    As Ronald Reagan correctly said – the scariest words in the English language are “I’m from the Government and I’m here to help.” But the Covid Inquiry has been rigged to ensure that the finding is we should have locked down sooner ….. so the WHO/Establishment has the power to do it all again.

    Still, we’re very lucky that Sunak is on the case …… with his flagship policies of a rolling ban for the age you can buy cigarettes and enforced Maths tuition for all. That’s going to make a huge difference.

  9. Sakara Gold
    February 7, 2024

    The new nuclear power station at Hinkley Point C, being built by EDF, is going to come in years late and substantially over budget. EDF was the construction manager for one in Finland that was 19 years late – and so over budget that it ended up in the International Court of Arbitration. Many in the construction industry think that Hinkley Point C will only be producing electricity in 2028 at the earliest

    EDF are now proposing to again extend the life of the British built nuclear power units that they operate here.

    As I have repeatedly posted here, the government should approve and rapidly build some of Rolls Royce Small Modular Reactors and get this superb British design producing much needed electricity.

    1. Original Richard
      February 7, 2024

      SG :

      The EDF EPR Hinkley Point C (HPC) building cost should not be taken as the norm for large scale nuclear power. The Finnish EDF EPR, Olkiluoto 3, plant you mention was indeed also very late but it is now producing reliable electricity at a price nearly 60% less than the CfD for HPC.

      The building cost per GW for the Finnish plant was less than half the current expected final cost for HPC and the Korean built UAE plant was built at a price/GW that is a quarter that of HPC.

      There will be a number of reasons for the enormous expense of HPC which include Chinese funding at 9% instead of 2% and the ONR, according to EDF, requesting 7000 design changes to adapt to UK regulations requiring 35% more steel and 25% more concrete. A claim which the ONR has denied…

      However, even the profligate cost of HPC, because it will provide power for 60 or more years, still works out far cheaper to build per unit of power per year than fixed offshore wind.

      But I wholeheartedly agree with your last sentence that the Government should proceed immediately with RR SMRs. It is ridiculous that the ONR (R for Reduction?) has delayed approval until 2029 to allow foreign competition to bid and I suspect to further protect the fixed offshore wind industry from nuclear competition…

      1. Original Richard
        February 7, 2024

        PS : I have a copy of a letter written to my MP from a BEIS Minister of State dated March 22022, sent as a reply to one of my enquiries, which states that HPC would have been £30bn cheaper with RAB rather than CfD funding.

        1. Mark
          February 7, 2024

          I can’t help thinking that pension funds would have been delighted to have been offered a bond paying say 6% to finance Hinkley Point. But perhaps they would have insisted on a better choice of proven technology, which would have been a big win for consumers and pensioners. With the lower costs it would have been obvious that more nuclear investment was preferable to paying silly prices for (floating) offshore wind.

          Meanwhile I read that Drax estimate that BECCS will cost £150/MWh in 2012 money – over £200/MWh indexed to today, and 50% more than their CFD for burning woodchips. That probably excludes downstream costs of CO2 disposal, too. It would of course consume at least 30% more woodchips per MWh.

          1. Lifelogic
            February 8, 2024

            30% more fuel and with zero benefit from the CO2 capture. This as a bit more CO2 is on balance a net good!

      2. M.A.N.
        February 7, 2024

        Ahh that’s what happened to SMR’s. Thank you.

    2. agricola
      February 7, 2024

      SG.
      Yes to your last paragraph. However it is the Civil Service who are scheming to kick RR SMRs into the long grass by starting some spurious bidding war against the strategic interests of the UK. We need the minister to explain what in hell is going on, but he won’t, no doubt citing commercial confidentiality.

  10. hefner
    February 7, 2024

    O/T: One can only have a very sad laugh at that: ft.com, 07/02/2024 ‘UK to wave through animal products from EU if ports are overwhelmed’.
    Take back control of our borders … really?

    1. formula57
      February 7, 2024

      @ hefner – twe know this government cannot control the borders but the freedom to operate a waiver (without subsequent sanction) is only possible post-Brexit.

    2. Narrow Shoulders
      February 7, 2024

      The laugh (cry) is that the level of regulatory divergence is so small that it doesn’t matter and that the EU does not reciprocate

    3. Donna
      February 7, 2024

      I guess the horse-meat producers will be celebrating.

    4. Martin in Bristol
      February 8, 2024

      Are you claiming EU animal products are poor quality hefner?
      Surely not.
      Do you not trust their regulatory controls?

  11. Ian B
    February 7, 2024

    Sir John
    Congratulations. But, that is a big ask in suggesting the HoC and this Conservative Government should start to take account of their responsibility and accountability of what happens to ‘our’ money.

  12. Kenneth
    February 7, 2024

    On the matter of public sector productivity, since so much more money has been spent and services have not kept up, where has all our money gone?

    Somebody must have it.

    Can we get it back?

    1. Ian B
      February 7, 2024

      @Kenneth – more than that, the ones doing the spending, those in charge of the spending, those in charge to ensure a return must know what they are doing? I am of course referring to this spend, spend Conservative Government

  13. Bert+Young
    February 7, 2024

    All good stuff Sir John ; I hope Hunt and his advisers listen carefully and act to correct the many errors they have made .

    1. Ian B
      February 7, 2024

      @Bert+Young – that’s like trying to have a nice dream in a nightmare

  14. forthurst
    February 7, 2024

    The mysterious loss of public sector ‘productivity’ might possibly be connected to working from home. Some people can’t work from home because they provide essential services. When people attend a place of work, they are less subject to domestic distractions unless they have a wife who can’t do anything without soliciting prolonged instructions which disrupt everyone else within earshot as well. But It should be possible to identify how people spend their time with the use of modern marvels such as AI, e.g. how long do they spend emailing or whatsapping or listening to tedious phone conversations instead of working.

  15. Original Richard
    February 7, 2024

    “I think it is good that they [the Government] are considering what more they can do to promote investment in the United Kingdom’s generating capacity.”

    I think clause 5 only applies if “the new investment condition” is met that “on 21 November 2023 there is a significant likelihood of a project consisting of qualifying new generating plant not going ahead.”

    Clause 5 is not intended, for instance, to enable us to upgrade our aging CCGT fleet.

    https://www.gov.uk/government/publications/finance-bill-2023-2024-report-stage/new-clause-5-electricity-generator-levy-new-investment-exemption

    I suspect it is a wheeze to further subsidise those foreign fixed offshore wind industry companies who bid so low at the 2022 renewables Auction Round 4 (AR4) (£37.35/MWhr (2012 prices)) that they told the Government last year that they could not afford to proceed and were halting their projects. Since there were no bids at the 2023 AR5 for fixed offshore wind the Government has now priced the 2024 CfD Auction at twice the price of £73.00/MWhr (2012 price) which is now just over £100/MWhr at 2024 prices.

    The £100/MWhr fixed offshore wind price is between £30 to £50/MWhr more expensive that RR’s 2021 SMR price quoted to the HoC ES&NZ Select Committee 15/11/2023, never forgetting that nuclear power is not only reliable, whilst fixed offshore wind is chaotically intermittent requiring hydrocarbon fuelled backup, but also doesn’t require a £54bn + cost to bring the power onshore.

    To continue with renewables rather than nuclear, a technology whose prices really will fall over time, is not sensible to say the very least.

    1. Mark
      February 7, 2024

      I think you are correct. It seems to open the way for the capacity to be re-bid at future, higher priced auctions. So RWE’s purchase of Vattenfall assets such the the Norfolk Boreas project that was discontinued now looks astute. The Emperor’s New Clothes on AR4 CFDs at uneconomic prices are now a laughing stock. It’s about time DESNZ updated their formal generation cost assumptions which are still based on 2020 unicorns that assume the renewables are going to be less than half price. They are also still running with the same assumption for the cost of new plant in the Capacity Mechanism auction that they used back in 2015, despite all the intervening inflation. We will soon see whether those assumptions are valid, and get some idea of the cost of extending nuclear plant life too.

      I did note that the Environmental Audit select committee has made the bold suggestion that carbon budget proposals ought to be submitted and examined before they are approved by Parliament, rather than the gung-ho practice of setting net zero without a clue as to whether it is feasible or affordable. Shutting the sable door after the horse has bolted.

  16. formula57
    February 7, 2024

    The passages before and after and including Mr. Fuller’s intervention I have copied to my own MP who hitherto has told me the Bank’s antics in the bond market are beyond challenge by the people’s representatives. Perhaps minds will be changed!

  17. Ian B
    February 7, 2024

    Sir John
    This on Guido gives the appearance that someone else is answering you question – https://order-order.com/2024/02/07/bank-of-england-blamed-for-uk-recession/
    The National Institute of Economic and Social Research (NIESR) – has blamed the Bank of England for pushing the UK into recession at the end of last year. The Bank is putting itself in the firing line for more economic doldrums…

    Wasn’t that obvious to every one but their bosses the Sunak/Hunt duo, along with everyone in this collective responsibility Conservative Government. How long can they keep up this denial?

    1. formula57
      February 7, 2024

      @ Ian B – not exactly I think, rather NIESR’s economist Ben Caswell’s point is only that in refusing to provide “a little bit of forward guidance” on when interest rates might be cut meant the chance was denied to “the market to price in rate cuts much more efficiently”.

      I do not have accesss to Caswell’s full report but I do not think he echoes Sir John’s analysis that the Bank made a fundamental error in raising interest rates as much as it did after the error of too much quantitative easing for too long.

      Reply I did not criticise raising base rates

      1. formula57
        February 8, 2024

        @ Reply – apologies.

  18. Keith from Leeds
    February 7, 2024

    Excellent comment today. But why does the Government not see it the same way? Reliable, cheap energy is the foundation of a modern economy. It should be priority no 2 to be self-sufficient in energy, coming second only to defence. Slowly, the nonsense of Net Zero is being exposed thanks to the farmers in the EU and the nonsense in Sri Lanka, which decimated food production. Until we have a grown-up review of Net Zero and the Government stops being plain stupid about it we will go nowhere.
    In today’s uncertain world, the Government should be trying to make the UK self-sufficient in as many areas as possible, not just energy.

  19. Ian B
    February 7, 2024

    Also, from Guido
    “For once, the Advertising Standards Authority has made a sound decision. They ruled last night that Sadiq Khan and his TfL misled Londoners with some claims about the benefits of the ULEZ,”
    “Sadiq Khan and TfL have been caught out making misleading and unsubstantiated claims about the benefits of ULEZ to Londoners. This shouldn’t surprise anyone. Sadiq Khan’s own report said the ULEZ expansion would do little to tackle air pollution.”

    It’s a War on the Motorist always was – nothing else.

    1. Berkshire Alan
      February 7, 2024

      Ian B

      More to the point, Sadiq Khan has knowingly mislead the population, so when is he going to be dragged before a Select Committee, interrogated and then forced to resign.
      Seems like one rule or some, another for others who seem to be able to do as they like.

    2. Mickey Taking
      February 8, 2024

      a war that pays handsomely for his social spending (and New Year’s Eve fireworks) to buy him votes.

  20. Christine
    February 7, 2024

    “because the more we electrify, the more we will need to convey that power from the rather remote locations where much of it comes from to the parts of the country that will need it.”

    And has anyone considered the disruption this will cause and the destruction of our last remaining rural areas?

    Where I live BP is planning one of these monstrosities. It will involve a 20 mile scar wider than a motorway across beautiful prime farmland to a new substation which will be the size of 13 football pitches.

    How is this good for the environment? We are being ruled by idiots.

    1. formula57
      February 7, 2024

      @ Christine – but we elect idiots, repeatedly!

  21. Lynn Atkinson
    February 7, 2024

    I leave the economics in your safe hands.
    Please watch the 2 hour long Tucker Carlson interview with President Putin. It is so powerful that the EU proposes ‘sanctioning Carlson’. The USA MSM is also in a froth. All their careful manipulation and lies about to explode.

    The people of the west are very restless. When they comprehend what their leaders have done in their name, risking WWIII – well – Sunak and Starmer need to resign and emigrate.

    1. Mitchel
      February 7, 2024

      Last December ,Will Schryver,one of the better American geopolitical analysts, wrote a piece titled “Open Defiance:-

      “In my view the single most meaningful consequence of the NATO/Ukraine proxy war against Russia is that most of the major geopolitical players outside the imperial realm are suddenly in open defiance of the capricious “rules-based international order and it’s rapacious monetary system.

      The catalyst for this rebellion was that Vladimir Putin’s Russia stood alone amongst the kings,princes,presidents and prime ministers of a trembling world,turned to the masters of the empire,and said “not an inch further.”

      1. Lynn Atkinson
        February 8, 2024

        Yes – Putin stood alone, just as Britain once did, and against the same force.
        Man of the Century, possibly the millennium.

    2. Lifelogic
      February 7, 2024

      Both Sunak and Starmer are dire!

  22. Donna
    February 7, 2024

    Off topic:
    “One of Britain’s largest offshore wind developers has been forced to cut hundreds of jobs and quit several global markets as it battles spiralling costs.

    Ørsted, which operates 12 wind farms in the UK, announced a raft of cost-cutting measures after posting around £2.2bn worth of losses for 2023.”
    https://www.telegraph.co.uk/business/2024/02/07/wind-farm-orsted-cuts-jobs-scales-back-offshore-projects/

    And that’s WITH massive subsidies from UK householders. Looks like those thousands of “green jobs” we were promised are Going With the Wind. When is the Government going to admit that Wind Energy is unreliable, expensive, unaffordable and Net Zero is undeliverable?

    1. Ian B
      February 7, 2024

      @Donna – please do not believe them. A Danish State owned Industry that knows how to play the system they have cried wolf before and our very obliging Conservative Government just opened ‘our cheque book’ and said how much do you want and gave it to them.

    2. M.A.N.
      February 7, 2024

      On a connected theme. It’s an absolute scandal that most ‘proper’ news is behind paywalls. It’s like a ‘ghetto’ effect, where only low grade news is left scattered around. Like this story linked, no doubt a good piece but hidden.

    3. Timaction
      February 7, 2024

      That’s why they died out originally centuries ago!!!

  23. glen cullen
    February 7, 2024

    How about passing a law to stop both central & local governments borrowing money ….you only live within the tax revenue

  24. oldwulf
    February 7, 2024

    Regarding quantitative easing – ” ……and carried on by successive Conservative Chancellors—all signed an agreement with the Bank to say that they would indemnify against loss.”

    Sir

    1. Did all the Chancellors sign an identical agreement with the B of E, with identical wording?

    2. Are those agreements available anywhere, for public scrutiny?

    1 Dont know
    2 No

    1. oldwulf
      February 8, 2024

      Thank you.

      It would be interesting for Parliament to question those who drafted the agreement(s), those who provided instructions for the drafting and those who advised the Chancellors to sign.

  25. Mark
    February 8, 2024

    Good journalism does cost. We used to pay for a newspaper. Specialist publications were always rather more expensive. Many still pay for the BBC, however its journalistic standards are now those of a propaganda rag. That tendency has crept into other formerly more reliable sources. Paul Reuter must be spinning in his grave.

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