Author: johnredwood

Yesterday’s figures showed another small fall in GDP in January and very little growth over 3 months. No surprises.

The industrial decline I and others have been predicting proceeds apace. Industry and oil and gas fell again. There are the high taxes on car sales with the attack on popular cars throttling the vehicle industry.There is the ban on new oil and gas exploration and development speeding the energy decline. There is the upcoming closure of our last blast furnaces hitting steel . There is the closure of Grangemouth and the persistent damage being done to high energy using industries by our high energy prices.

If the government wants growth and wants more to happen outside London and the south east it needs to reverse these  de industrialisation policies. The PM needs to reshuffle Miliband out of the Energy and Net Zero department and put in someone who does see the folly of switching to imports.

Meanwhile the Chancellor’s high tax policy is hitting small businesses, services and confidence. Still to come is the full imoact of the NI increase this April which will hit employment and lead to more closures of shops, pubs and restaurants.

The top three priorities for a successful industrial policy are cheap  energy, cheap energy and cheap energy.

The Uk with the dearest electricity of the advanced economies is performing the last rites for energy intensive industry. There has been a stream of closures of steel plants, petrochemical works, oil refineries, ceramics,glass, aluminium, foundries and much else.

The Bowland shales run across England, from Lancashire through Lincolnshire to South Yorkshire. They are thought to contain enough gas to meet our domestic needs for several decades.

Cuadrilla spent £200 million on drilling five exploration wells which found gas in Lancashire. Today they are instructed to pour plenty of concrete down two wells that could deliver us gas, to prevent them from ever being used. Mr Miliband doesn’t merely want to stop them producing any gas for us now, but wants to stop them however serious our need for gas might become. Tipping concrete down these wells is needless and expensive vandalism.

The Uk now imports half its gas. Much of it comes byLNG  tanker. It produces three times as much CO 2 as UK piped gas given all the energy used to cool, transport and convert back to gas. It is dearer. All the tax revenue and well paid  jobs benefit the exporting country, not  us. This is madness, self harm on a huge scale.

Developing North Sea oil and gas in the 1970 s helped the UK economy pull through despite the bankruptcy of the state  brought on by Labour’s over spending. Today the government’s growth strategy desperately needs more energy. So drill, baby ,drill. Up would go tax revenues, investment and well paid jobs. Down would go world CO 2 as we stop importing LNG.

 

 

Whoever dreamt up the name Operation Chainsaw to describe Ministers’ efforts to get back some lost public sector productivity was clearly no friend of the idea. As the head of the civil service union, FDA, said “The idea that you can simply get more for less is rhetoric”. His statement swept aside the idea that better management and new technology allows productivity gains. He ignored the fact that productivity has been falling. He has to defend the proposition that year after year we should expect to have to pay more for less.

Ministers are right to highlight the fall in productivity since 2019 and to ask senior staff to get back the losses from covid lockdowns as the private sector has already done. It does not take any new technology or investment to recreate 2019 productivity levels in the pre AI age. AI gains could come  on top.

The principles behind the drive, to expect more of senior managers and to link bonuses to productivity delivery are fine. Ministers should also demand to see any new external recruitment before advertising, as natural wastage is a friendly way to shrink an overstaffed organisation.

We have suffered from the dangerous doctrine of the independent body. Many MPS and the main parties have accepted the idea that politicians cannot be trusted to make good decisions. Crucial areas are given away to independent bodies. They appoint panels and Boards of experts. All too often their group think and abuse of patronage leads to disastrous decisions and big waste of money.

I have often criticised the biggest loss maker, the Bank of England. Apparently most MP s think it is just fine for them to be planning total losses of £240 bn (OBR forecast) all to be paid for by taxpayers. Much better they think  to mug the pensioners and slap on a jobs tax instead. This  was the same

The world establishment cries out for peace in Gaza. It is less keen on peace in Ukraine where more think Ukraine should fight on to try to wrestle some territory back from Russia.

President Trump wants  peace in both places. He is more determined by his own efforts to bring it about in Ukraine. In Gaza he is challenging the Arab states to draw up a plan that could work.

The outlines of the deal in Europe seems to be for Ukraine and Russia to accept much of the changed borders brought about by the Russian invasion. Ukraine would not be offered NATO membership now any US security guarantee. The European countries are split. France and the UK have offered peace keeping troops but need a US guarantee. President Putin has ruled out accepting such forces near his border.

If Presidents Trump and Putin do outline an Agreement based around current borders redrawn by war what should Ukraine do? European countries have no wish to join the war on Ukraine’s side. They might be able to step up financial and military aid a bit, but cannot this year replace the US military contribution.

Meanwhile what would a peace settlement look like in Gaza?

 

 

The government came to power saying it would put jn an industrial policy. So far it has been running an anti industry policy for the UK.

It is banning all new oil and gas drilling and development, running down this tax generating high pay industry faster.

It is toughening the complete phase out and closure of all factories making petrol and diesel cars.

It has failed to sure up some of the promised investments in electric vehicle manufacture, and not attracted new ones

It has promised lots of green jobs, whilst the wind turbines and solar panels are still imported

It decided to allow the closure of the UK’s last blast furnaces to make new steel

It allowed the closure of Grangemouth oil refinery

It launched a big tax attack on businesses with its National Insurance and iht increases

If it wants an industrial policy it needs to

Reverse its tax rises

Set a competitive Corporation tax rate like Ireland, which brings in more tax per head

Get energy prices down a lot by encouraging more gas power generation as baseload

Lifting the bans on oil, gas, ICE cars

Using its planned increase in defence spend to commission more orders from Uk based competitive production

 

 

The net zero enthusiasts tell us the costs of net zero will be low. They say a net cost of around 1% -2% of 2050 GDP. They decline to put an annual cash cost on the combination of investment and subsidies, wishing to net a lot of alleged gains from these true costs  and express it as percentage of an enlarged GDP they forecast for 25 years time.

There are other estimates. The OBR said the investment cost will be around will be £1312 bn with a net cost of £321 bn. Mr Hammond when Chancellor thought the costs would be £50 bn a year or £1.5 tn over 30 years.

Clearly the gross costs will be huge. 30 m motor vehicles to replace with battery cars. 30 m homes to have electric heating. Thousands of industrial plants to be replaced with new electric factories. A massive expansion of electrical generation. The replacement of all gas fired power stations. A Switch to syn fuels for aviation. A switch  of food production away from animal products.

This investment takes three forms. A small amount will be investment in extra capacity for growth, which we would need to do anyway. A bigger amount could  be replacement of existing investment when they are worn out. Again that adds no extra cost if the replacement is as good value as the original or it adds marginal cost where the replacement is dearer or less effective. Then there is the big spend on conversion and premature replacement which is all additional cost.

There are large extra revenue costs. The state will pick up large bills for the mounting redundancies as blast furnaces and Grangemouth   are closed to be followed by others. There are large subsidies to get people to buy EVs and heat pumps. Renewable generators get   favourable prices and terms.

There are obvious targets to save public money on this wildly expensive command. Stop the £20 bn on carbon capture and storage. It is all extra cost. Cut the over generous subsidies to renewables, running at several billions a year. Wait for battery cars or syn fuel cars to become cheaper and better before buying them.

The £1300 bn “investment” is only part investment. Part of it is a wasteful premature replacement of  perfectly good machines, vehicles and heating  systems. Making them  will simply  add to costs and world CO 2

Some of you said you did sometimes want to talk about opposition parties here. I pointed out this  site deals  primarily and daily with government deeds and words. I agreed I would run the occasional piece on an  Opposition party.

Reform under Nigel Farage won five seats in Parliament and  improved its poll ratings significantly  in recent months. It changed its constitution following criticisms of its structure. This week it has catapulted itself onto front pages by removing the whip from its second most effective critic of the government, Rupert Lowe. Last November the Deputy Leader Ben Habib resigned from the party and set up a Political Action Committee to judge and criticise Reform and the Conservatives .

Here is your chance to comment on how you would like Reform, its MP s and the PAC to proceed from here.

 

The government is keen to put prices up. It has hiked rail fares by double inflation, and Council tax. They have allowed large double figure percentage rises in water bills. They have pushed up energy prices three times since taking office, now an increase of over 15%.

They have increased the costs of employing people considerably with National Insurance rises in April. Businesses that can will pass  those cost rises onto customers.

If the Bank of England does not accommodate these rises with a looser money policy then the public sector rises will leave  too little spending power for other items and demand will drop. Businesses will find they cannot pass on all the cost rises and will have to employ fewer people  and reduce other costs.