Government spraying big numbers up the wall

A range of vital skills and instincts are frequently found lacking in the populace at large, and often also in places where they are badly needed.  Numeracy is one: adequate skepticism concerning the Voice of Authority is another; and, the vital ability to conduct a two-second "do we believe this?" credibility check.

So: WTF can it possibly mean when we read:

Rachel Reeves is set to unveil an £86bn package for science and technology in next week’s spending review 

??   This is "expected to be worth more than £22.5 billion-a-year by 2029".  We know she's recently decided that government capital expenditure needs have no upper limit, but what on earth does anyone imagine this "package" means?  For calibration: the entire UK defence budget is about £60 bn this year, and the government's existing R&D spending somewhat less than £20bn right now.  Government S&T money for the higher education sector is in low single-digit billions. 

OK, higher education isn't the only place where government S&T money is spent, but unless Reeves has just "unveiled" the existing £20bn R&D budget slightly re-classified, how is the balance of "22bn p.a. by 2029" going to be doled out, and to whom?  Either (a) we can ignore it because it's empty; (b) it's gonna be pretty inflationary in some sector or other; or (c) it'll be embezzled on a large scale for purposes not really encompassed by "science & technology": I can see the queues forming already.

I suppose some people ignore these things anyway: but all too many supposedly fact-checked media outlets print them uncritically, and one kinda supposes they are half-believed, in a vague sort of way.  Maybe Reeves thinks that all those Trump-fleeing US academics will read it, and jump on the next plane for Blighty.

But who, exactly, rushes to vote Labour on the back of all this?  I think they'll find there's a great deal more focus on their failure to deliver, e.g., 1.5m new houses and cheaper electricity, come 2029.  Because fail is what they are gonna do. 

ND

The U-Turn as Art Form

Until now, the Starmer-Reeve style has been to face down - and double-down on - all demands for policy U-turns.  It's been more than a style, it's been their carefully-crafted, McSweeney-minted modus operandi: Mr Tough Guy who'll see everyone off by sheer force of political will.  Don't like it, O weak-kneed Cabinet colleague?  Well, tough titty because you'll be defending it on the Sunday TV politics shows, and here are your lines-to-take.  You, too, O snowflake Labour MP?  It's backbench obscurity for you, or maybe the loss of the Whip.  Everything becomes a virility test for everyone on the government benches. 

Looks like Winter Fuel Allowance might just have been a step too far, though - we can see why - and there are plenty of other unpopular policies in the same line of country.  It'll be interesting to see how the spin-doctory stuff is handled.

Bad Al: master of the Dark Arts

Of course, covering for U-turns and reverse-ferret operations is meat and drink for the practitioners of the Dark Arts.  As Kipling said to Asquith in WW1, you set the policy, I'll find the words.  You sense they actually relish the intellectual challenge involved, just as did Syme in 1984.  (McSweeney is a bit more of an O'Brien character, if not the full Bad Al Campbell.)

However.  Their cunning wheeze for the WFA reversal seems to be: we can, and indeed should do it now - because the economy is in better shape.  Thanks to us and our tough decisions!!!  See what we did there?  Oh, how clever these spinners are.

But this comes out on the day both inflation and government borrowing turn out to be "higher than forecast", and quite noticeably, too (just how stupid are these forecasters?).  Some *inconsistency* there?

Don't worry: the masters of Doublethink will be up to the challenge!  Of that we may be sure.  "2 + 2 = 5", eh?

OS

EDF and its nukes: "we're sh*t, and we know we are'

As so frequently stated hereabouts since forever (since 2007, to be precise), the whole point of French energy policy is to have someone else pay for France's humungous nuclear decommissioning liabilities. 

Now they'd like "negotiations" over Hinkley Point C and Sizewell C to be merged into one big financing deal.  Well, well.  

First of all, what "negotiations" are needed over HPC, pray?  We already have a definitive financing deal: a binding contract that clearly has EDF on the hook for the stonking cost overruns.  (Its alternative is to walk away: such is that inane deal, struck by the dickhead Osborne and signed by the fragrant May, that EDF is under no obligation to finish the thing at all.)  Do contracts signed by the French mean anything?  Silly question.

Second, why would we buy a second nuke - of the very same design - from the same imbeciles who clearly acknowledge they can't finish the first, under a different deal structure where we are on the hook for the inevitable overruns?

Is there any point in telling Starmer and Miliband to grow a pair - maybe just one pair between the two of them?  EDF are shit project managers; and successive governments have been shit negotiators.  Each deserves the other.

ND 

Self-sufficiency steel? Ore? Coal, oil ... gas storage ..?

The old debate we often return to, has surfaced again a propos of steel manufacturing.  To what extent is self-sufficiency in strategic commodities and capabilities to be maintained?  Procured?  Or even desired?  Some have strong inclinations to one extreme or the other, whatever the prevailing circumstances.  I tend to say that there's no immutable answer, no formulaic way of "optimising".  War and peace are critical input variables: but also the key given fixed externalities.  China has no oil, as I once diplomatically reminded a Chinese commissar who had just scorned Europe's enthusiasm for electricity interconnection and stated that a nation should not rely on imports of such a vital resource.

In the here and now, I and many others would put primary steel manufacturing on the strategic side of the line.  Clearly, Starmer has taken the same view at Scunthorpe (though curiously unmoved by Port Talbot, as the Welsh Nats bitterly remind him and indeed by Grangemouth / SNP), leading others to note that those vital "raw materials" we were all on the edge of our seats waiting for ten days ago, came from, errr, elsewhere (abroad).

Then comes Nils Pratley, extending the debate to gas storage and specifically, Centrica's huge offshore Rough storage facility.  Pratley is usually quite sound, and here he sets out a reasonably balanced range of pros and cons.

Steel was a security risk. What about UK gas storage? The government refused to allow steel furnaces to be turned off. Should it be happy with just six days of stored gas?

So here we go again.  

Nobody could disagree that now and for many years to come, gas ticks the 'strategic necessity' box.  Since we ceased to be self-sufficient in natural gas in terms of production from our own territorial waters (the early 00's), without any government intervention or subsidy the miracles of the free market secured a healthily diverse range of import sources and facilities through which to convey them.  How so?  We've told this story before.  

Because the decline of indigenous production could be, and was, seen coming a mile off, demand remained strong, and the companies involved were themselves strong, capable and confident. And that's where we are: able (as the energy crisis of 2021-3 showed) to withstand remarkable buffeting from the global market, and still keep homes warm.  For sure, the cost of doing so [i.e. paying world prices] was to some extent socialised, but the means of doing so were free-market means.  

And all this happened without Rough, which had been "permanently shut down" (© Centrica 2017 et seq) some years before as being uneconomic to its owners, the Tory government having more than once declined to bail them out.  But lo!  Miraculously, it transpired Rough had not been permanently shut down, but merely mothballed, and was rapidly pressed back into service by Centrica to avail itself of the profitable opportunities presented by Putin's gas crisis.

See, here's the problem in this very particular case: Centrica has form as a would-be subsidy-farmer.  That's the trouble with going down the "strategic" road.  Just like "green" or any other government-favoured enthusiasm, once the subsidies are spotted, every man-jack starts greenwashing / strategy-washing or whatever.  It becomes very hard to disentangle what could be a respectable strategic case from their self-interested special-pleadings.  

Even in 2025, with that recent crisis experience in hand, for all the ticks that natural gas puts in the 'strategic necessity' box, I'm not sure Centrica should be indulged.

ND 

Miliband's perfect positioning

By way of elaboration on my assertion last week that Miliband can't remotely be discounted should Starmer topple in the near future, look at this telling chart from the loyalist LabourList platform and its Survation polling:

Survation / LabourList:     click link above for full-size

Every Cabinet member has seen their ratings fall after Reeve's efforts of last week: but L'il Ed's fell the least by far; and with Rayner heading west with all the rest, he's now miles out in front with Labour supporters.

He'll be making very careful decisions in the event his damn-fool energy policy dreams come under even more pressure from Reeves and her Growth-At-Any-Cost strategies.  Would yet another serious slap in the face be the ideal time to quit?  Or exactly the moment not to rise to the bait, and to hang on grimly instead, making the usual offstage noises and pointed absences that ensure everyone knows his true feelings?  The almost-iron rule of UK leadership elections is that Leaders of the two main parties only ever come from the ranks of the Cabinet / Shadow Cab.  And whilst in government, when the Chosen One becomes PM immediately?  That really is an iron rule.**

ND

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** The Corbyn Exception relates, of course, to a period of opposition - and even that needs qualifying for special circumstances, because there was only a 'shadow-shadow' cabinet in being during the short inter regnum of Harriet Harman, following the resignation of, errrr, one Ed Miliband.

Labour leadership stakes: rats-in-sack update

It's two months ago since we last looked at the jockeying for position going on in the Cabinet.  At that time we cast our eyes over Reeves (nobody's idea of the next leader, then or now); Streeting (obviously positioning himself actively); Lammy (radiating ambition); and Rayner (also ambitious but actually a joke).  For completeness, we mentioned Khan (permanently on the lookout for the Main Chance); Miliband (radiating competence); and Mandelson (devious and unpredictable as ever).

How do things look now?  The Grauniad has a telling, tearful piece, avowedly briefed by the wimmin: and it's worth quoting a couple of chunks. 

... a female minister spoke directly to the prime minister to complain about the leaks and briefings she saw directed against other women ... including Bridget Phillipson, Liz Kendall, and Yvette Cooper .,. “Cabinet really no longer feels like a safe space for genuine debate,” one minister said ... after weeks of tension felt by some women in the cabinet... Almost a dozen female Labour MPs who spoke to the Guardian said they were unnerved at how female cabinet ministers appeared to be getting the brunt of the blame for issues in government – though there is less sympathy for the chancellor, Rachel Reeves, because of anger over the Treasury’s handling of spending cuts and welfare. Among some of the new intake of MPs, there is a strong feeling that any ultimate successor to Starmer should be a woman – and a resentment of what they see as a campaign to anoint Wes Streeting.

Hahah!  More popcorn supplies, please.  It goes on: 

At the moment [Streeting] has no obvious female rival as the heir apparent. Senior cabinet ministers who did not want to see Streeting win had previously coalesced around Reeves, but her unpopular decisions as chancellor have meant that is no longer the case. Other ministers would back Rayner, but she would face a brutal press onslaught. Among Labour members there is no doubt, however. Rayner is streets ahead of her rivals in terms of popularity with the grassroots ... There is only one cabinet minister ahead of her, who is probably the least likely of anyone around the table to have another shot at the top job – Ed Miliband.

This is not intelligent commentary.  First, selecting the next leader when there's no vacancy is well-known to be an absolute mug's game.  Genuine, nailed-on heirs-apparent are few and far between in British politics (in the past century or more, only Anthony Eden and Gordon Brown).  

Second, Miliband is not at all the least likely to have another shot.  In countries like France and Italy he would be the number one contender in everyone's books: competent (at politics, that is), confident, popular, experienced, sure-footed, intelligent, and comfortably dynamic enough.  And he has the green-left eating out of his hand - potentially deemed a vital constituency when the Green Party is snapping around Labour's heels in such politically volatile circumstances.  That's how he'd be marketed, anyhow. 

A couple more comments.  (a)  You just can't rule out Khan or Burnham.  These guys' ambition and political capital is so great.  Safe seats aren't so hard to find in a hurry: Boris always found one at the drop of a hat.

(b) Having mentioned the Prince of Darkness last time and just out of interest, I have it on good authority Mandelson has already f****d up royally in Washington.  Of course, he's made comebacks in the past from many an appalling situation of his own making, so who knows?  But right now, his political capital is deep in the red.

Oh, and Lammy?  Speaking of in-the-red, he's so far out of the money right now, I almost forgot him.

ND  

Even the Guardian notices 'Net Zero' is expensive

UPDATE:   Seems Kier 'Re-set' Starmer has resiled from "100% decarbonisation by 2030" already!   Now to be 95%, it seems (see prescient comments BTL)   Amusingly, his relaunch isn't on the Guardian front page yet.  Greg Wallace is, though ...  We'll have another post on this shortly

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Something I find depressing is the way so many perfectly well-meaning people have swallowed the deception that renewable energy is cheaper - all the way to "much cheaper" - than fossil fuels.  We needn't summarise the arguments or facts.  But here's a sad, earnest example from a 'community energy' project: 

A staggering 13% of households in England experience energy poverty ... Rising energy prices and inflation have started to affect people’s life quality, health and well-being ... Fortunately, there is a way to counter energy poverty, reduce energy bills, and keep them low going forward. Renewable energy is the cheapest and cleaner option to produce electricity ... The country is reducing its dependence on volatile fossil fuel markets and creating sustainable solutions for energy security. Renewable energy developments are crucial in ensuring more affordable energy for all.

*Sighs*.  Not much point in having this lady directed to Prof Dieter Helm**, I guess - the fine essay to which one of our anons directed us BTL on the previous post.

Is there hope?  Well, maybe: the Graun seems belatedly to be catching up with reality: 

• Will Labour’s 2030 green energy goal cost more than 2035? They should come clean ...costs to the consumer shouldn’t be ignored   
• Starmer has discovered a tricky truth about the electric vehicles transition: there’s no gain without pain ... the move to net zero won’t be cheap or simple 

The first, by the redoubtable Nils Pratley, is quite punchy as far as it goes (& we may suspect he knows well that he could have gone a lot further).  The second (Gaby Hinsliff) is, errr, not really in the Dieter Helm league.  otta start somewhere, I suppose.

ND

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** I have often disagreed with Helm on several issues (sometimes to his face in open debate) but his summary of the issues in the first part of this is masterful 

Cheery weekend update: Mandelson thwarted

Cheeringly, Mandelson came a resounding 4th in a final field of 5 for the Chancellorship of the university.  He had really pulled out all the stops on this, including blow-by-blow briefings to LabourList (who must have groaned, but still published it all through gritted teeth - I expect he indicated there'd be something in it for them.  Or issued some kind of threat, he is never slow with the menace**).

Couldn't have happened to a nicer bloke.  We read that what he's really going to be doing over the next few years is be Ambassador to the USA.  I can just see him now, wheedling with Bum-Steer Kier: "what you absolutely must have, is someone who can effectively negotiate with Trump in the only ways he understands ... What my many US contacts tell me, is that he only respects people who've been in the game for a long time, with a lot of personal money and a track record of dealing with global issues in a transactional, realpolitik way ..."  

Will it work?  I'm told not: but strange things are happening quite a lot these days.

ND

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** I have told this story before.  Many years ago I had an office in No.4 Millbank, a fine Edwardian building you will be familiar with from its roof terrace and staircase because, overlooking the Lords, it also houses the Beeb's Westminster offices and they conduct many a TV news clip or interview from there.  At the time, the Labour Party also had a suite there - it was just before New Labour's great 1997 GE victory - and Mandy was in his prime, calling all the shots.

One day I happened upon him in a corridor with a small gaggle of very young Labour staffers.  I have no idea what was the context; but in a soft, conversational manner, he berated them thus:  "... and if you ever screw up like that again, I will make sure you never work in London for the rest of your lives".  Such a nice chap.

The politics of (green) compulsion

If, as seems likely, the Tories held Uxbridge as a reaction to Sadiq Khan's ULEZ extension, well, we ain't seen nothing yet.

The UK has reduced its CO2 emissions by more than any other country** since 1990 - but this was achieved by (a) going for the low-hanging fruit (i.e. phasing out coal) and (b) de-industrialisation.  Although this hasn't been remotely cost-free, the costs have been loaded onto electricity bills and, frankly, haven't really been noticed.  But that phase of the game is rapidly coming to a close: very little low-hanging fruit remains down decarbonisation way.

The cost of such potential still to be exploited in the power generation sector is rising rapidly

Aside from incremental efficiencies that arise naturally from technical evolution, we've barely started on home heating, transportation, agriculture and much of heavy industry.  And decarboning those will be very costly indeed.

And then there's Behaviour.  Less travel.  Less meat.  Less creature comfort.  The greens, from Swampy and Greta to John Selwyn Bummer (© Jasper Carrot) have all been pressing government to start 'changing behaviours' - that's our behaviours - and while they'd rather that to be via 'leadership' and 'persuasion', there's little doubt that ultimately they mean compulsion.

I have a strong suspicion they won't be getting any change out of any UK politicians of any party (except just maybe a few Green Party hopefuls) this side of the next GE.  In this context, Khan is right out there on his own - and being rapidly disowned by Starmer, naturally enough.  Miliband has been well and truly sat on, so really it's only Ed "Drax" Davey we still need to hear from on the subject.

ND

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** France, of course, would claim to have had a lower-CO2 starting-point, thanks to its nukes

Smack of Firm Government?

Seven months ago I wrote that in his problems with public sector pay on many fronts, Sunak had been immeasurably helped by the sheer number of concurrent disputes, and the extreme claims being made in some of them.  There was 'obviously' no scope for him to concede them all, so he would find it easier to resist[1] them en bloc.

And thus, it seems, things have transpired.  How many PMs have even been able to stand at the lectern and say, no more talking, that's yer lot  -  and plausibly get away with it?  But, plus or minus the junior doctors, he might have done.

Even more remarkably, he even chucked in a culture-war twist: the award is to be partially funded 'by "significantly" increasing charges for migrants coming to the UK when they apply for visas and the levy they pay to access the NHS'.  To my amazement this has been very little commented upon (yet), and we may guess any belated squeals will not be originating officially from the Opposition front bench[2]. 

Is this the fabled Smack of Firm Government?  It has some of the trappings.  And in Starmer's current mode of saying 'no' (to the considerable dismay of the Left & the greenies) to everything that anyone suggests deserves a call on his largesse when putatively in power, presumably he's essentially going to take this development lying down - though it is always possible to script a hostile soundbite in response to anything.

So how does it all play?  Does it basically strengthen Sunak's standing with voters?   Or will it be a cause of sullen resentment?  A lot will depend on "whether it works", i.e. whatever inflation does next.  In any event, Starmer's stern stance makes resentment a lot harder to parlay into votes for Labour, so maybe it's the smaller parties that pick up the resenters.  Which, of course, may be a decent second-best for the Tories at the next GE.

ND

UPDATES:

(a) the predicted cries of anguish haven't been long in coming - from "charities, unions and politicians".  "Borderline racist", they cry.  But not Labour politicians, naturally (see above).

(b) see strikethrough below and dearieme's comment 

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[1] Of course, BTL here Kev has pointed out the remarkable inflation-busting 'award' already made (passively, under the triple-lock) to pensioners, possibly to be repeated next time too.  But, hey, priorities / politics / votes.

[2] I find it hard to believe we've heard the last of this.  Not least, because the Tories are likely to big it up in order to provoke a leftie response. 

 

Thames Water: catastrophic downside

Asset-stripping is hardly new: but the first really big company to be terminally hollowed out by modern financial engineering was Enron (1987-2001).  The reason why it happened there, was completely the opposite of what's taken place at Thames Water.  Enron was chronically under-capitalised for conducting the business it was (very successfully) engaged in: giga-scale market-making in the energy sector, with attendant innovation and creativity that has been much missed in the sector since 2002 (sic) but never truly replicated.   Nostalgic laments aside, what Enron absolutely needed for its business model to be workable was to maintain investment grade credit status, because long-term dealmaking was its forte, and nobody[1] will do long term deals with a shaky counterparty.  

Why was maintaining credit status a problem?  Because (a) as an inevitable structural problem, cashflow lagged profit (which can be the death of literally any business, however sound);  (b) it couldn't borrow any more, which deprived it of the traditional solution to that issue; and (c) - the real killer - it was committed to perpetual expansion, it being traded on Wall Street as a growth stock[2].

This conundrum became fully apparent (to Enron itself: the rest of the world just gawped and invested) as early as 1993, when the financial engineering started.  For a few years there was ample opportunity to do some clever but wholly prudent stuff, resulting in a balance sheet that was a marvel of precise and efficient design.  However, by the end of the '90s what could be achieved by such elegant means was pretty much exhausted, and they started resorting to some deeply imprudent expedients, designed by Enron people who really knew what they were doing - and abetted by banks who should have known better - and could therefore build it very big and very bad.  (It didn't help that one of the main architects of all this was actually on the take in the literally criminal sense.)

*  *  *  *  *

Enough of history: it suffices that some potentially very dangerous financial technology had been designed and employed, able to be abused in completely different circumstances.  Enter highly capitalised Thames Water, with physical assets and guaranteed revenue streams galore; the most fertile ground imaginable for financial engineering - and ideal circumstances for gouging out all the cash and remitting it as dividend.  And so, it seems, they have.

How dangerous is this?  One might say: who remembers Enron now?  Didn't the lights stay on, and the waters close over?  Hopefully, optimistically, that's right: HMG has quietly resolved several seemingly vast corporate problems in the past, British Energy 2003 being perhaps the best example ("Nuclear Generator In Financial Meltdown" - never a comfortable headline).  With TW there appears to have been a bit of advance warning: and maybe with the recent 'rescue' of Bulb, some sensible generic thinking has already been done in government.  Maybe.  And Thames Water is squarely based on real assets.

But on the pessimistic side:

• how likely is sensible generic thinking, in advance, within HMG?
• Bulb's business model was trivial compared with Thames Water
• with British Energy, when it went under its product hadn't been forward-sold to any degree, but could be (and was[3]), for an instant and constructive boost to its finances
• the economy was in a much better state in 2003 to be standing behind any loose ends
• some types of financial engineering are pretty toxic 

Which brings us to the elephant in the room: TW has suckered in a range of serious international financial players.  OK - so, caveat emptor and leave them holding the keys?  That may be possible in strictly legal / contractual terms: and HMG probably has reserve powers to direct the continued operation of the assets.  But here's the thing: like any financial player, those big Canadian pension funds and Far East investors really, really hate being left holding the keys.  In those circumstances, they have literally no idea what to do next: we know this, because it's happened many times around the world. 

So what happens now.  In coalface terms, there are asset-oriented specialists like Macquarie and Cargill who know all about restructuring and bailout.  They'd make fortunes from the gig: but they know what to do.  Is that how HMG will play it?  It won't look good.

More widely however, what does this do for the future attractiveness of UK plc for inward investment?  We've long been the envy of the world for how easily we've attracted cheap foreign dosh, and a large part of the economy is now based on it.  Kick away TW, and what do all these people do with their next chunk of money?  Equally great and easily-executed opportunities elsewhere don't grow on trees - but there are plenty enough, not least with government-backed Net Zero projects sweeping the globe.

In short, the worst-case scenario is, in sequence: (a) a serious investment strike by otherwise UK-directed money; (b) downgrading of UK plc's credit rating, with all its inflationary and currency implications; (c) drying-up of deal flow for the City.

This could be Very Ugly Indeed.  All the more reason why HMG will step in smartly.  But what if TW is just the tip of the iceberg?  Where's, *ahem* Gordon Brown when we need him to Save The World?

ND

[1] Nobody with any brains, that is - though amazingly, some companies still do.

[2] Everyone in Enron was substantially paid in company paper - so the idea of letting the share price slip was anathema.

[3] Sold to a rapacious Centrica, as recounted here before.  They then got carried away and foolishly bought 20% of the nuclear portfolio when EDF bought the rest.  Has been doing them quite nicely just recently though, of course.

Titan down: is caveat emptor the only regulation?

The ghastly fate of the Titan has already sparked one commentator into making a predictably incendiary semi-political comment, so with a bit of trepidation I shall essay another ...

Many years ago I rode my first flume.  It was a monster, a 10-metre drop with the entertaining feature that the tubing was fully opaque black plastic, so that after the first bend in the fully-enclosed tunnel, one was in pitch darkness for the remainder of the descent.  So here I am, falling out of control, unable to see anything, bashing up against the walls and surrounded by water, with all instincts screaming "that's it, you've killed yourself".  However, intellectually I clung to the reassuring thought that if it was actually fatal, it wouldn't be allowed. 

Neither of these conflicting emotions are carefully worked-through, pre-considered rational responses, they are just what different bits of the mind throw up in extreme circumstances.  The first of the two is rather basic visceral stuff.  The second is more interesting, albeit equally spontaneous - an experience-based reaction from someone brought up in the normally-regulated western world which licences and monitors such things.  Whether we recognize it or not, we tacitly bank on that kind of thing, e.g. every time we drive on a motorway or fly in a plane.  Passenger aviation in the developed world is a particularly good example because there is quite literally zero tolerance for any avoidable mishaps in that sphere, cost no object; and exceptionally successful it is, too.

(I say some of this rather obvious stuff for the benefit of any hyper-libertarians out there, with caveat emptor their only slogan, who affect to despise regulation in all its forms .  No you don't, chum - your life depends on it, and plenty of it, to a high, if unobtrusive standard.)

Personally, I'm a former soldier (bit of danger there, and nobody made me do it): and as an individual - and a father - I have joyfully indulged in, and encouraged, all manner of non-risk-free adventurous activities.  But in all of that I was competent to assess the risks, and to mitigate them intelligently.  But what do we say about unregulated ocean-floor tourism?  Despite the waivers they signed and the warnings they were given, were these recent hapless victims not just a little bit relying on that advanced-society, learned-instinct feeling that it must be OK because otherwise, they just wouldn't ... ... would they?

Which brings us to two semi-political thoughts, specifically for 2023.

1. What's to be said about the mad billionaires' rush into amateur space travel?  Can't help thinking there will be rather fewer takers now, BTW.
2. What's to be said when the regulating authorities aren't adequately resourced to do their jobs?

Semi-political?  Yup: politicians need to decide these things: and if #1 is mostly a spectator sport, #2 seriously affects us all.  Whatever romantic notions we entertain, we can't (all) sensibly live in a bracing Nietzschean free-for-all.

ND

Nigel Lawson. Not Easy to Categorise

You don't get many politicians like Nigel Lawson.  Perhaps the best thing about him was his intellectual self-sufficiency, which made him more immune than most from some of the typical politicians' permanent, minute-by-minute angst that they might not be perfectly-enough positioned (vis-à-vis their party's leadership, or their meejah image, or whatever else they worry about) for career advancement.  This leaves them always looking over shoulders - their own shoulders, and those of the people they are talking to - checking out the movements of the Important People in the room, metaphorically and actually.  This deeply unattractive paranoia, Lawson avoided better than most.

But it's all relative, and he did care.  When he first entered the Cabinet as Energy secretary, after the pathetic efforts in that job of David Howell (now there was a paranoid shoulder-checker par excellence), he was overjoyed, and held a sustained round of little parties in his splendid new office for all his friends, showing off like crazy.  He was also very circumspect in his dealings with Mrs T, with whom he disagreed on a lot of economic policy but whose favour he wished to court and to retain - even when he was at the height of his supposed invulnerability.  

A striking example was mortgage interest relief, which everybody knew was a pointless, indeed self-defeating economic distortion which merely served to increase house prices.  Geoffrey Howe, his predecessor as Chancellor, had cautiously mentioned the notion that it might be sensible to phase it out, only to be firmly beaten around the ears by Thatcher, for whom economic logic played a very lowly second fiddle to promoting (even if fallaciously) the idea of sustaining "her" voters in their aspirations.  Lawson, equally keen to scrap the subsidy, decided it wasn't on, while privately decrying it.  When, at length, he found the bottle to reform just one aspect of this nonsense, he screwed it up tactically by delaying its introduction after the announcement, causing exactly the baleful impact on house prices that theory indicated it would. 

I'd be interested to see an authoritative list of what enduring economic reforms his many admirers would claim for him.  My starter towards this little project: he played an important strategic role in defeating Scargill's epic strike of '84-85, both before and during.  That's not a small achievement: before Scargill was so soundly defeated the whole of the Left in the UK intuitively felt that Thatcher's regime was only there on sufferance: "Just wait till the miners go out ...". 

Other candidates for the list of achievements?  He certainly played a modest part in opening up the energy markets to competition, starting from the dreadful monopoly arrangements then in place.  But even on that he was half-hearted, despite being wholly persuaded intellectually of the merits of this long overdue measure.  It wasn't until John Major's often derided regime that serious progress was made, with a degree of success that made Lawson's (and Peter Walker's) efforts look like very uncertain baby steps.  A genuinely confident heavyweight proponent of free markets in his position could have moved much farther and faster. 

Feel free to add to this equivocal story BTL !

ND

Green Energy Day. Eventually.

Oh, what sport!  Is it to be Green Energy Day in a field somewhere?  No, it's to be Energy Security Day in industrial Aberdeen.  Oh, no wait, it's Green Energy again - in a nuclear fusion lab.

But are nukes green, as the French desperately (really desperately) want the EU to declare, or are they nasty old 20th century heavy industry?  HMG itself is out to consult on that question too: ministers are hoping a lot of ESG money will come swinging in if it's *serendipitously* concluded nukes are green.  Meanwhile, maybe nuclear fusion seemed suitably whizzy-hi-tech-future-ish and, well, green-ish, for the purpose.

Ironically, it's also a rather good metaphor for something costly that never actually arrives ... 

I haven't had a chance to read yesterday's monster documentation, so I'm afraid the usual C@W precis service is somewhat delayed.  Have a good weekend, all.

ND

Open Thread: BUDGET DAY

Any signs of an Actual Strategy that we can see?  Or is that too much to expect?

ND

How the media (still) works: princes and pressure groups

A report out today ...

How far back do we date the phenomenon of vested interests putting out spurious press releases masquerading as news?  It definitely pre-dates the 1980s because I can remember instances of it back then quite clearly.  Commercially, the 'launches' of books, films, new products etc have been doing it forever, to amplify their advertising efforts.  Pressure groups muscled in on the act, and made it their own: the ghastly phrase "a report out today ..." is always the giveaway.

Why are they indulged?  That's easy: the media are bone idle.  In the case of, for example, local newspapers, they are and always have been grotesquely understaffed, and rely to 95% on stuff being handed to them on a plate: sometimes you can tell they've barely read what they've been sent.  But ... shouldn't MSM which have the slightest pretensions to, errr, standards of reporting, be above that crap?

Here's a wonderful example from the Grauniad.  (Did I say pretensions ..?) 

Labour MPs to lobby Keir Starmer to put green policies at heart of manifesto

This lengthy piece is completely devoid of news and, for afficionados, is a gem of its kind.  The press release / briefing that the Graun has swallowed whole, is from a new groupuscule that hasn't even launched yet!  So everything is about what "they" (assuming anyone joins the group) might do in future.  Classic stuff.

Which brings us to poor Prince Harry.  As an old mate of mine (a Tory MP) used to say, you can always get on the front page if you're willing to take your trousers down in public.  Was there ever a neater illustration of this maxim?  Put it away, son, everyone's laughing at you.

ND

Strikes: Government will stick - it has nowhere to go

The winter strikers have, inadvertently, made the Government's strategy for it.  There are so many strikes, all essentially pleading with ministers to intervene with the big public chequebook; and the government simply can't do that.

This problem (for the unions) presumably stems from (a) zero inter-union coordination: this ain't the Revolution; and (b) the relatively new phenomenon of 1-day strikes.  

Time was when strikes (of the non wildcat variety) were indefinite, all-out affairs that had to be planned months in advance, with a big fighting fund laid up to be able to foot the bill for Strike Pay.  In those days, unions couldn't do much else than coordinate these things, at least to some degree, in the manner of record labels of the same era who would keep "loosely in touch" to avoid big albums being launched competitively in the same window.  They needed mutual aid, not least on the picket lines, from people still drawing a wage.  One major front at a time.

How fragmented everything is these days.

Except, of course, the Government, which is (relatively) monolithic and, after years of nonsenses, quite well versed in messaging: yes we know it's shitty, but we all have to WFH / tighten belts / look after each other / etc etc, and just get on with things as best we can.  Blitz Spirit Lite (again).  The total inertia of Kier "shoo-in" Starmer, while he waits for everything to fall in his lap at the next GE, is quite helpful in this regard too.  Makes everything seem like some kind of unavoidable natural disaster.

So it looks like that's what it'll be: a piecemeal mess with minimal government movement, despite endless careful, ultra-reasonable-sounding union counter-messaging on the lines "all that needs to happen is the government to step in with a bit of compromise: we don't really mean 19%"**.  Which is gonna continue to fall on deaf ears: because where on earth does that lead the government?  They just ain't gonna pay out 10% to everyone on the active payroll - even if, perversely, they have done just that for the pension / social security roster.

ND

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** There's another emollient union line being peddled of late: It's not really about wages, it's about conditions - just scrap those provocative "reforms" & that'll do the trick ...

Europeans Don't Understand Markets, Part 37

Not a new theme around here, but the examples keep rolling in.  Now it's the protracted attempt to enforce a "European gas price cap".  Even the ECB knows this one is crazy: and for once, the Germans (the usual butt of my scorn on this issue) are more-or-less on the side of the angels.

The idea is this.  Almost all the economic ills of Europe are the fault of high wholesale gas prices.  (Never mind that this ain't true: French electricity prices are even higher, caused by the chronic state of their ailing nuclear fleet.)  So: if we simply legislate to cap wholesale gas prices ... all our troubles are over - right?

Most of the wrangling is over what the magic number should be.  Too high, and "it has no effect".  Too low, and, errr, well hang on, what does "too low" mean?  We want it to be low!

This fighting over exact numbers is an entirely fatuous fracas because the whole idea is structurally bonkers, whatever the level of the "price cap".  How is it supposed to work?  Unlike its predecessor, the "electricity price cap" (which was in effect to be paid for by governments, via a cash subsidy whenever prices actually rose above the cap - like the UK's present "energy price guarantee"), this one is an outright ban on gas dealings above the capped level.  Dealing, that is, on the leading exchange platforms handling spot trade at the main European gas trading hub, the Dutch TTF.  On an automated basis, no deals would be accepted at prices above the cap.

So, errr, no gas for Europe then, if the TTF price goes too high?   That's the German worry; but actually, nope - trade would simply migrate to other forums: bilateral dealing or, whisper it softly, platforms not coming under the EC's jurisdiction (London, NY and Chicago come to mind).  Any problems with that?  Well, there's the question of clearing and credit support: but bear in mind that in the days of yore, almost all gas trades were bilateral - and there are viable (if clunky) means of instituting bilateral credit support.  They'll just need to dust off those old ISDA Master Swaps.

In their deep ignorance, Euro-politicians work themselves into fine frenzies over this stuff - and burn a great deal of precious midnight oil.  Presumably they're all on double-time, free meals and 5* hotels when they work after 4pm or something.  And when it goes predictably tits-up, they all look around in wonderment and call for an enquiry.  What is the point of these people?  

ND 

"Oil Price Cap" - what do they think it means?

The EU has been at it today, and the G7 will follow, we're told.  We can easily state what they think it means.  Shippers of oil will not qualify for "western insurance and maritime services" if they are buying Russian oil at more than $60/bbl.  

Well, some folks say the Russians can only get ~$50 for their oil on world markets anyway.  But aside from that: since nobody running Russian oil at, say, $65 will feel obliged to, errr, tell this to the authorities - dear me no, guv'nor: $59.95 and not a cent more, look at my paperwork! - the most they'll suffer is presumably that the cargo will only be insured for that lesser amount.  OK, so they'll screw Russia down another dollar for their pains, but no big deal.  Or the Chinese will insure them.   (Good luck making a contested claim on that policy, though.)

All this "capping wholesale prices" in liquid global markets is crazy.  The EU is at it again with gas prices, though that's even less meaningful - they will only be "capped" by governments stumping up the difference between actual import prices and whatever cap they come up with.  And the UK may end up getting subsidised EU electricity, as a delightful quirk of the rules, haha. 

Incidentally, several EU nations are beginning to get fed up with Germany using the power grids of neighbouring countries to keep itself in imported electricity, and are limbering up to take steps to stop them.  Most serious of all is public sentiment in Norway, which hitherto thought it would be great to sell even more of its cheap hydro power into Germany (and other countries, but mostly DE).  Well, the hydro producers and the Norwegian grid (which coins transmission fees) still think that: and the taxman, too.  But Norwegian consumers have noticed that the export of a load of electricity means the import of German power prices!  And on this particular export, they aren't trussed up by EU rules.  Watch this space.

ND

Heat Pumps Ahoy

Green Blob, personified

As we all probably know in the back of our minds, the Green Blob** plans to make us scrap our gas-based home heating rigs in favour of heat pumps, and that one day we shall perhaps need to think about the subject.  For the privileged few, this might be a ground-source HP, but for most (including new-builds, which rarely have enough land, if any, these days) it will be an air-source HP.

I'm starting to read my way into this, and am running into massive promotional propaganda on the one hand, and serious skepticism on the other.  Unsurprisingly, I find myself somewhat averse to the cheer-leading.

Does any reader have knowledgeable contributions to make?  (On HPs, that is: I know you all have definitive views on Ukraine, Covid etc.)

ND

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** Somehow, whenever I hear "Green Blob" it's always a vision of Gummer that comes to mind.  I just can't take that man seriously - I know it's unfair ...