Something that I think more political-types should remember about government spending is that most people think that vast amounts of current spending are wasted and that, by switching money from wasteful things to the things that they want done, there would be no need to increase taxes to spend money on actually important things.
Not only that, they are right as individuals, though they are wrong as aggregates. There are a host of major government spending commitments that 5-10% of the country thinks are complete wastes of money and could be cancelled entirely. The military (for pacifists). The NHS (for libertarians). The police (for lefties). The entire legal system (for righties). Transport (for NIMBYs). "welfare" (for evil people). And so on. Every major spending programme has majority support in the UK. But a majority of people oppose at least one of the things that the UK spends £28bn or more on already.
But most people think they, themselves, are normal, and that most people agree with them. People really don't like being told they are in a 5% minority. I don't get why; I'm in minorities that small or smaller on all sorts of things and I'm fine with that. But most people don't. So they fool themselves that far more people agree with them than actually do and then wonder why (insert object of ire) is still going after all these decades. If you're attentive to politics and to wider popular opinion, you know the answer (plenty of Tories would happily scrap the NHS, but they have to say otherwise. Corbynites wanted to scrap the MOD, but even in opposition, they pretended otherwise and they never would actually do it in office). But, as we all know, most people aren't attentive to politics and popular opinion.
Most people also think there is a lot more fraud and abuse than there is - the COVID-era PPE scandal was a scandal precisely because that amount of fraud is really unusual, but I think the general perception is that it is the normal state of affairs, and they're just pleased someone finally got caught.
What this means is that the link between increasing spending and increasing tax in the popular perception is much weaker than you'd think, which is why not spelling out tax increases doesn't result in people thinking "oh, they're going to put up taxes", but in "they're finally going to eliminate the terrible thing that I have always opposed" or "they're finally going to stop the fraud". And that's why "Labour's Tax Bombshell" can work: people don't think spending programmes come from tax increases, but when a credible messenger tells them that they will, they dislike that. The point here is, as you made (correctly) clear: the Tories aren't credible messengers. If they say "Labour will put your taxes up", much of the public will tune out or say "pull the other one".
Richard - I think you're conflated two concepts there. Most people think money is 'wasted' in the public sector because they assume that civil servants are fed caviar by swans all day.
I don't think many people think money is wasted in the sense of being spent entirely on the wrong things. Even the hypothetical Tory getting rid of the NHS still thinks that they should get healthcare and even Corbyn thinks Britain should defend it's borders - they just think the money being spent at the moment is being spent on the wrong means, not ends. Just my view though, happy to be shown wrong.
The difficulty is that people think stopping the weekly caviar-swans will solve all their problems and mean that spending on the things they want is not touched. That in turn allows the mythical 'Government waste fairy' to be used in opposition to fund pretty much anything.
(1) You are totally right to bring up Liz Truss, who is a serious blind-spot for most politically engaged commentators, pundits, and strategists. As far as most of these people are concerned, Truss has been memory-holed, and the news cycle moved on from her long ago. But I think this understates how much The Truss-aster cut through with those who don't usually follow politics that closely. I guess you can't write a column every week about how Truss effectively doomed the Conservatives, even if it remains true.
(2) As I understand it, one of Labour's big worries is that making big spending commitments plays into the perception that Labour is the party of higher taxes. I think this gets the logic the wrong way around, for two reasons. One is that this perception is so baked-in that nothing Labour says will convince voters otherwise. The other is that even if there was no £28bn plan, Labour would have to raise taxes because the fiscal status quo is unsustainable. Labour should just be upfront and say it will do this, even if it means raising taxes, because that's what voters think anyways and at least the party will look more honest than it does now. In any case, falling interest rates will mean mortgage costs will go down for the kind of voter Labour really needs to reach, and that feel-good effect will cancel out any tax hikes.
Agree on both fronts! I'm sure "we will raise taxes" would lose some votes in some places, but given the state of the public sector, it's going to feel very different to raising taxes when public services were actually okay.
And on Truss - Labour ought to turn her into their own "Long Term Economic Plan". Though we weirdos know that Truss and Sunak are from different wings of the party and hate each other, most people will just see two politicians wearing the same blue jersey.
Moreover, Keir Starmer has put an absolute ton of work into communicating to the British public how he is different from his disastrously unpopular predecessor. Rishi Sunak... hasn't.
Yep - also re: Truss, the long-term effect is that her premiership basically turned mortgage-holders into solid Labour voters. This, and how that month-and-a-half transpired, gives Labour more latitude for planning reform (these voters learned the hard way that interest rates matter more for them than house prices do) and tax hikes (they also learned that interest rates matter more than marginal tax rates).
Also an argument for the "we will have to raise taxes" position is that the current position of pretending that radical improvements are possible without raising taxes is idiotic - witness the "VAT on independent school fees" debate - a tax that will raise essentially zero £s will apparently fund all things for all people.
There is perhaps some coherence in a "taxes will have to rise, but Labour will do it fairer/nicer/more progressively" position".
I can't help but think that the average voter doesn't really understand large numbers, and so arguing about the electoral impact of replacing one multibillion spending figure with another is no more useful than arguing about the impact of what I had for breakfast this morning on the Tigray war in Ethiopia. This should be an area where "is this actually a good policy?" is the question Labourites should be asking.
This is another thing I want to write about at some point. My impression is that big numbers are just a thing that people use to rationalise whatever their view is otherwise - "that thing I don't like is too expensive!" etc.
Oh definitely. And the most pernicious thing is that it's very easy to spot when someone you disagree with is doing it, but almost impossible to notice when you do the same thing yourself.
I've been quite a fan of the policy recently as something firm to point to in response to a lot of common criticisms of current Labour.
There seems to be a lot of mission-type stuff announced but as far as I know this is the most firmly "policy-ward" thing on the list - dumping it gives the "no plan Labour" / "no idea what Starmer stands for" lines a bit more bite.
Probably helps with the cries of "no magic growth lever" too - there kind of is one, and it's kind of right here. Perhaps I'm blinded by my solarpunk optimist glasses, but cheap energy looks from where I am like a silver bullet for a whole lot of problems right now.
Making a big investment in service of bigger rewards is a good hammer against the Tories too, since they currently seem to like cutting CapEx more than they like breathing in and out.
Plus if a country-sized middle finger to Putin doesn't make you warm and fuzzy inside, then I don't think you have a heart.
Oh, and there's the whole saving the planet from catastrophe thing.
Great piece, James (and not just because I agree with it!). It also touches on what is - without hyperbole - the single worst thing in the world ever: "Fiscal Rules". How we have ended up in a situation where completely made up 'rules' based on guesswork (sorry, 'economic forecasts')' for the next 5-10 years and which can change at a whim (sometimes we count infrastructure, sometimes we don't) are apparently the sole test of economic competence. I do not understand.
I'm sure there's *some* logic to them - I suppose it is like setting a benchmark to reassure city types that they're not going to do anything crazy. But I broadly agree - one thing I couldn't work into the piece was how for all of the hyperbole about the macroeconomic implications of the 28bn... surely the markets are well aware of the difference between CapEx and OpEx – and (eg) buying bonds on money spent on wind farms and other green infrastructure seems like an extremely safe bet?
Also, in the context of Government spending, £28 billion is not *that* much. Find it hard to believe that the "Green Investment Plan" will spook the markets in ways that e.g. unfunded adult social care or open-ended commitments to Ukraine will not.
Surely the answer is for Labour to get friendly City-types to come out and say 'we're not worried, but are more worried about stability if this goes belly up'?
To play devil's advocate - look at what happens when a leader doesn't set fiscal rules, and starts throwing around money they don't have. That's Liz Truss territory right there (albeit in her case the problem was exacerbated because she threw her nonexistent money at the least deserving recipients).
It may be that the fiscal rules that exist could be relaxed somewhat - but I still think it's better than having none at all.
So I disagree, and I think you are diagnosing the symptoms rather than the disease. The issue with Truss-Kwarteng was not that there was no plan, it was that no believed that the plan would work - probably exacerbated by the "move fast and break things"-vibe.
Or, to put another way. If fiscal rules 'mattered' would it have made any difference if Kwarteng announced a new fiscal rule which incorporated that following elements:
a) a two year 'growth derogation' in which the rules didn't matter;
b) the removal of "Covid emergency spending" from the balance books via an accounting wheeze;
c) a new goal of 4% growth per annum by 2030 and
d) spending being 40% of GDP by 2035.
In this scenario he has set some clear rules which appear superficially sensible and plausible (although, to be clear, I have made up the numbers)- do these 'new rules' calm the markets? If they do, then we have to accept it's all just a game of Chancellors putting in the right numbers to convince someone else they know what they're doing. There's no accountability to them if they can be changed whenever suits and they just have to "sound right".
I live in a 3rd floor apartment with no way to get in if I leave without my keys, it’s absurd how often I check my pocket for keys when leaving the apartment, like even though I just checked as I grabbed my bag and before that know I picked them up 5 seconds earlier, I still stand in the doorway holding it open and check again before I let the door close
(Now I guarantee I’ll lock my keys inside tomorrow)
I used to live in a flat that was exactly the same – even now I live in a house with a normal lock I won't even take the bins out without carrying the key... just in case.
I've got nothing really to add to your excellent piece other than I live by the mantra "some bloke on the internet, knows better than the politicians and professional political operators."
Re airports (so completely tangential) someone once said “if you’ve never missed a plane you’re spending too much time in airports”. To which my reply is “1) clearly it’s not your money spent booking those planes then because you would bloody well make sure not to miss them if it were, and 2) I actually quite like airports.”
Firstly, its not government, or the public that decides what you can spend, its financial markets as was long since known and amply demonstrated by Liz Truss (although I'd argue a large part of that was the energy support which could have cost 120bn that scared the markets)
So it doesn't matter what politicians say, its financial markets which will dictate what is possible or not.
Secondly, this was announced on the back of the Germany government's "green plans" which came to power in 2021 and after trying to force this stuff ob the public had to row back and is now the most unpopular government in German history.
Ditto, the same is happening in Australia, where as a result of this green push electricity bills are going through the roof after promising that bills would fall by $275 a year.
Here in the UK, when gas prices actually fell between 2013 and 2021 renewables went up from 9% to 42% and did bills come down? No, according to the Commons Library they went up 36% more than inflation and it was all down to renewables and green taxes.
Further to that, look across Europe where Farmers are out in massive numbers, as are truck drivers over green policies putting them out of business.
But by all means carry on with the 28bn, it will make a Labour government the shortest and most unpopular in British history.
Green is all very well, until of course people see windmills blotting their landscape and views and their bills going through the roof.
And believe me, £28bn is a drop in the ocean, just greening grid infrastructure is estimated to cost 54bn, decommissioning the gas network 65bn and god only knows the cost of providing long term storage for energy when the wind doesn't blow and the sun doesn't shine.
It would be sheer folly, it won't drive growth, look at who is growing, China and the USA, not Europe, why? because energy prices there are HALF what they are in most major European economies and energy is a base business cost for every business - are they green? No they are on coal, gas and oil.
If Labour wants to commit suicide, this is the noose to do it
You're right, cheap energy is the ultimate. Personally I think it's madness that the UK has signed up for "Net Zero by 2050" without any clear plan on how to do that without knackering the economy in the long-term. This is the original sin here.
On the other hand, if your starting position is "Net Zero" (and that is the political consensus) then the question becomes how to do net zero and produce cheap energy. There's only really three (and a half options).
i) Drop Net Zero and stay locked into fossil fuels - with the fun condition that you give Russia and Iran et al leverage over your foreign policy to get cheap fuel.
ii) Mass expansion of nuclear - which, regardless of it's merits, is not going to happen in the West (thank you the Soviet Union and the Simpsons for that).
iii) Some combination of renewables.
Option 3 is the only one that seems politically doable (regardless of its merits). So then the question becomes how best to get there - either you trust entirely to the market (which, by the way, is already distorted by subsidies and various levies and the planning system) or you 'pump prime' and more openly distort the market by overt state intervention.
The debate about the £28 billion is ultimately stupid because in practice both the Conservatives and Labour are going down the 'direct state intervention'-route and are merely arguing about the small percentages of how much to do it.
Point 1 - correct, you should not sign up for something of this magnitude without a clear plan how to do it, and that plan getting full parliamentary scrutiny which it didn't, it was a fit of virtue signalling that will come back to haunt them all.
You raise a good point - if not renewables then it either has to be fossil fuels or nuclear or a combo there of.
There is the "security of supply" issue of having to import increasing amounts of oil and gas, or to frack, or to re-open coal mines or rely on potentially volatile supply and prices going forward.
And the other point, that eventually gas, oil and coal will run out, and recovering remaining reserves will over time get increasingly expensive.
Therefore a SOME POINT we will have to move from fossil fuels to either nuclear or renewables or a combo thereof.
That brings us to two questions, and the primary one of "cheap energy" underpinning a successful economy. and secondly, when and how you should move to the alternatives
Firstly "cheap" is not an absolute price term, but relative to all other economies. If fossil fuels run out, they run out for everybody and therefore everyone will have to move to another "next cheapest" alternative so competitiveness is relative not absolute.
The dash for renewables is on the back that it will stop climate change, and cutting ours certainly won't do that, and use of fossil fuels is still going up.
Add to that, that on the history of the last 800,000 years of climate change, temperature does appear strongly linked with atmospheric CO2, but most importantly it shows that when CO2 levels exceed 300ppm the climate tips into global cooling.
As you no doubt know, we are currently at 420ppm, well past the historic tipping point AND under NOAA (US climate change agency) under the best case scenario of CO2 emission reduction the earth would not get under 400ppm before 2100.
So the climate "pressure" to tip into global cooling is going to continue for at least another 100 years.
BUT - add to that that we are in a rapid NATURAL warming phase the earth would be heading up to that tipping point anyway without man made CO2 emissions, so you are fighting a losing battle.
And evidence of a climate tip is already there, the AMOC, or Atlantic conveyor which keeps Europe warm is weakening, and salinity measurements have been showing that since the early 1970's.
The belief is that the UK will keep getting warmer under climate it change, it won't, when that Atlantic conveyor of heat switches off, we will be plunged into Canadian style winters with average temperatures 8 - 15C lower than they currently are.
Under a "renewables" future, wind turbines will ice up reducing their blade efficiency by upto 50% and potentially unbalance them and air source heat pumps won't be able to get anywhere near heating your home.
So there is somewhat of a conundrum
1. If you are dashing for renewables for climate change reasons, its highly unlikely to work and leave you with sky high energy costs that will cripple the economy and living standards.
2. If we continue with fossil fuels, they will become increasingly volatile in supply and price, but the time horizon to "sort" that is decades and will be worldwide, and therefore as that becomes increasing obvious there will be a gradual shift to Nuclear and renewables without cost disadvantage as everyone else will have to follow similar solutions at similar costs.
So that brings you back to what to do now?
My assertion is that we will need renewables and we already have a lot, arguably too much already and its driving up prices - we have the second most expensive energy in Europe only just behind Germany.
Why do they drive up prices? several reasons
1. They are quoted in price at the wind turbine exit, not the whole cost, to connect these into the grid is very expensive to remove bottlenecks and will on current pricing requires 5 TIMES the grid cabling at a cost of 54bn estimated and ongoing maintenance costs for the grid 5 times higher than now going on your bills.
2. Renewables currently marginalises gas generation, gas is essential as the only large scale high variability means of balancing the grid on now both highly variable supply and demand, there is nothing credible that's cost effective to replace it.
3. As renewables output goes up, gas generation goes down. If I own a gas plant capable of 10GW output annually, I can spread the fixed costs like staff, maintenance, insurance, rates, water rates across that 10GW output cost.
If I have to run back to 5GW or 2GW a year to allow renewables onto the grid, those fixed costs remain the same (actually they go up) and therefore the cost gas stations will have to charge to break even and make a profit goes up to cover those fixed costs over lower output thereby increasing the cost per MWH charged to generate.
Finally, the more you load vary a gas plant, the higher the thermal component stress which shortens the life of the gas station and increases maintenance costs, further driving up gas generation prices.
Therefore the more generating assets you have, unable to maximise their output the more costs go up, and as a recent commons library document showed, that over the period renewables grew from 8% to 42% between 2013 and 2021 electricity prices went up 36% ABOVE inflation and that was before the gas price spike in late 2021 and gas prices were stable over that period.
There are also other rubicons we have not yet passed. to manage the grid, you don't just need a balancing of supply and demand of power, you need to manage something called reactive load, and this is handled by large generators with AVR's like nuclear and gas plants.
Nuclear will be all but decommissioned by 2028, that only leaves large gas plants to provide reactive load and voltage support mechanisms, that's not something renewables can do.
And we haven't even considered the huge costs of energy storage which will be required for when the wind doesn't blow and the sun doesn't shine, which is a whole new world of pain and expense.
So yes, in the end we will have to transition to a renewables/nuclear generation, I'd argue we won't stop climate change and the fears are in the wrong direction, and that we need a very slow move off fossil fuels over several decades, not a suicidal move over 5 years, which i might add is impossible anyway.
A new grid connection these days takes 13 years from application to delivery.
"Add to that, that on the history of the last 800,000 years of climate change, temperature does appear strongly linked with atmospheric CO2, but most importantly it shows that when CO2 levels exceed 300ppm the climate tips into global cooling.
As you no doubt know, we are currently at 420ppm, well past the historic tipping point AND under NOAA (US climate change agency) under the best case scenario of CO2 emission reduction the earth would not get under 400ppm before 2100.
So the climate "pressure" to tip into global cooling is going to continue for at least another 100 years."
Is a wild (and perhaps wilful) misinterpretation of what the geological record shows in relation to CO2. In the time period you're talking about CO2 isn't the primary control on global temperature, orbital cyclicity is. CO2 peaks at 300ish ppm during the warm interglacials, but then is forced down when we go into glacial periods by weathering and oceanic feedbacks. There's a really good explainer here: https://www.carbonbrief.org/explainer-how-the-rise-and-fall-of-co2-levels-influenced-the-ice-ages/
They correlate, but the causation is an external forcing from orbital periodicity.
Orbitally speaking we wouldn't be due to tip into another glacial interval for 15,000-50,000 years. Artificially high CO2 will guarantee at least that long, not induce it to happen sooner. We are absolutely 100% not about to tip into a global cold period short of a series of supervolcanoes or meteor impacts.
AMOC slowdown *may* be a thing. But it will be a local effect on NW Europe. It probably won't get anywhere near as cold as your worst case scenario. And we'd have much worse problems with our UK housing stock than reduced efficiency heat pumps. In any event, this will be on a 50+ year timescale and well outside the expected lifespan of most heating systems.
Not enough of the Green Offer is framed around "it'll create X number of jobs." Sell the job offer, with a green and pleasant land as a bonus. They should set up green hubs in various towns. There must be tens of thousands of jobs that the green economy could provide.
They'll only have themselves to blame if they get in with a dull 30 seat majority because their plans to bore us all into government go down with a meh.
Recommend reading the Akehurst piece linked above. Interestingly, according to his analysis, the jobs argument actually performs pretty badly. (He argues it's because voters distrust politicians arguing about job creation as they've had their fingers burnt so many times.)
Something that I think more political-types should remember about government spending is that most people think that vast amounts of current spending are wasted and that, by switching money from wasteful things to the things that they want done, there would be no need to increase taxes to spend money on actually important things.
Not only that, they are right as individuals, though they are wrong as aggregates. There are a host of major government spending commitments that 5-10% of the country thinks are complete wastes of money and could be cancelled entirely. The military (for pacifists). The NHS (for libertarians). The police (for lefties). The entire legal system (for righties). Transport (for NIMBYs). "welfare" (for evil people). And so on. Every major spending programme has majority support in the UK. But a majority of people oppose at least one of the things that the UK spends £28bn or more on already.
But most people think they, themselves, are normal, and that most people agree with them. People really don't like being told they are in a 5% minority. I don't get why; I'm in minorities that small or smaller on all sorts of things and I'm fine with that. But most people don't. So they fool themselves that far more people agree with them than actually do and then wonder why (insert object of ire) is still going after all these decades. If you're attentive to politics and to wider popular opinion, you know the answer (plenty of Tories would happily scrap the NHS, but they have to say otherwise. Corbynites wanted to scrap the MOD, but even in opposition, they pretended otherwise and they never would actually do it in office). But, as we all know, most people aren't attentive to politics and popular opinion.
Most people also think there is a lot more fraud and abuse than there is - the COVID-era PPE scandal was a scandal precisely because that amount of fraud is really unusual, but I think the general perception is that it is the normal state of affairs, and they're just pleased someone finally got caught.
What this means is that the link between increasing spending and increasing tax in the popular perception is much weaker than you'd think, which is why not spelling out tax increases doesn't result in people thinking "oh, they're going to put up taxes", but in "they're finally going to eliminate the terrible thing that I have always opposed" or "they're finally going to stop the fraud". And that's why "Labour's Tax Bombshell" can work: people don't think spending programmes come from tax increases, but when a credible messenger tells them that they will, they dislike that. The point here is, as you made (correctly) clear: the Tories aren't credible messengers. If they say "Labour will put your taxes up", much of the public will tune out or say "pull the other one".
Richard - I think you're conflated two concepts there. Most people think money is 'wasted' in the public sector because they assume that civil servants are fed caviar by swans all day.
I don't think many people think money is wasted in the sense of being spent entirely on the wrong things. Even the hypothetical Tory getting rid of the NHS still thinks that they should get healthcare and even Corbyn thinks Britain should defend it's borders - they just think the money being spent at the moment is being spent on the wrong means, not ends. Just my view though, happy to be shown wrong.
The difficulty is that people think stopping the weekly caviar-swans will solve all their problems and mean that spending on the things they want is not touched. That in turn allows the mythical 'Government waste fairy' to be used in opposition to fund pretty much anything.
Really liked this. Two thoughts:
(1) You are totally right to bring up Liz Truss, who is a serious blind-spot for most politically engaged commentators, pundits, and strategists. As far as most of these people are concerned, Truss has been memory-holed, and the news cycle moved on from her long ago. But I think this understates how much The Truss-aster cut through with those who don't usually follow politics that closely. I guess you can't write a column every week about how Truss effectively doomed the Conservatives, even if it remains true.
(2) As I understand it, one of Labour's big worries is that making big spending commitments plays into the perception that Labour is the party of higher taxes. I think this gets the logic the wrong way around, for two reasons. One is that this perception is so baked-in that nothing Labour says will convince voters otherwise. The other is that even if there was no £28bn plan, Labour would have to raise taxes because the fiscal status quo is unsustainable. Labour should just be upfront and say it will do this, even if it means raising taxes, because that's what voters think anyways and at least the party will look more honest than it does now. In any case, falling interest rates will mean mortgage costs will go down for the kind of voter Labour really needs to reach, and that feel-good effect will cancel out any tax hikes.
Agree on both fronts! I'm sure "we will raise taxes" would lose some votes in some places, but given the state of the public sector, it's going to feel very different to raising taxes when public services were actually okay.
And on Truss - Labour ought to turn her into their own "Long Term Economic Plan". Though we weirdos know that Truss and Sunak are from different wings of the party and hate each other, most people will just see two politicians wearing the same blue jersey.
Moreover, Keir Starmer has put an absolute ton of work into communicating to the British public how he is different from his disastrously unpopular predecessor. Rishi Sunak... hasn't.
Yep - also re: Truss, the long-term effect is that her premiership basically turned mortgage-holders into solid Labour voters. This, and how that month-and-a-half transpired, gives Labour more latitude for planning reform (these voters learned the hard way that interest rates matter more for them than house prices do) and tax hikes (they also learned that interest rates matter more than marginal tax rates).
Also an argument for the "we will have to raise taxes" position is that the current position of pretending that radical improvements are possible without raising taxes is idiotic - witness the "VAT on independent school fees" debate - a tax that will raise essentially zero £s will apparently fund all things for all people.
There is perhaps some coherence in a "taxes will have to rise, but Labour will do it fairer/nicer/more progressively" position".
Hmm, “Truss-aster”? I think we should try “Ca-Truss-trophe”.
"Catac-Liz-m"
Maybe the public aren't intelligent enough to know what "cataclysm" means, but sod 'em, it's a fine pun regardless.
I was trying to coin a new one because I’d heard Cat-Truss-trophe before 🥲
I can't help but think that the average voter doesn't really understand large numbers, and so arguing about the electoral impact of replacing one multibillion spending figure with another is no more useful than arguing about the impact of what I had for breakfast this morning on the Tigray war in Ethiopia. This should be an area where "is this actually a good policy?" is the question Labourites should be asking.
This is another thing I want to write about at some point. My impression is that big numbers are just a thing that people use to rationalise whatever their view is otherwise - "that thing I don't like is too expensive!" etc.
Oh definitely. And the most pernicious thing is that it's very easy to spot when someone you disagree with is doing it, but almost impossible to notice when you do the same thing yourself.
I've been quite a fan of the policy recently as something firm to point to in response to a lot of common criticisms of current Labour.
There seems to be a lot of mission-type stuff announced but as far as I know this is the most firmly "policy-ward" thing on the list - dumping it gives the "no plan Labour" / "no idea what Starmer stands for" lines a bit more bite.
Probably helps with the cries of "no magic growth lever" too - there kind of is one, and it's kind of right here. Perhaps I'm blinded by my solarpunk optimist glasses, but cheap energy looks from where I am like a silver bullet for a whole lot of problems right now.
Making a big investment in service of bigger rewards is a good hammer against the Tories too, since they currently seem to like cutting CapEx more than they like breathing in and out.
Plus if a country-sized middle finger to Putin doesn't make you warm and fuzzy inside, then I don't think you have a heart.
Oh, and there's the whole saving the planet from catastrophe thing.
Preach!
Great piece, James (and not just because I agree with it!). It also touches on what is - without hyperbole - the single worst thing in the world ever: "Fiscal Rules". How we have ended up in a situation where completely made up 'rules' based on guesswork (sorry, 'economic forecasts')' for the next 5-10 years and which can change at a whim (sometimes we count infrastructure, sometimes we don't) are apparently the sole test of economic competence. I do not understand.
I'm sure there's *some* logic to them - I suppose it is like setting a benchmark to reassure city types that they're not going to do anything crazy. But I broadly agree - one thing I couldn't work into the piece was how for all of the hyperbole about the macroeconomic implications of the 28bn... surely the markets are well aware of the difference between CapEx and OpEx – and (eg) buying bonds on money spent on wind farms and other green infrastructure seems like an extremely safe bet?
Also, in the context of Government spending, £28 billion is not *that* much. Find it hard to believe that the "Green Investment Plan" will spook the markets in ways that e.g. unfunded adult social care or open-ended commitments to Ukraine will not.
Surely the answer is for Labour to get friendly City-types to come out and say 'we're not worried, but are more worried about stability if this goes belly up'?
To play devil's advocate - look at what happens when a leader doesn't set fiscal rules, and starts throwing around money they don't have. That's Liz Truss territory right there (albeit in her case the problem was exacerbated because she threw her nonexistent money at the least deserving recipients).
It may be that the fiscal rules that exist could be relaxed somewhat - but I still think it's better than having none at all.
So I disagree, and I think you are diagnosing the symptoms rather than the disease. The issue with Truss-Kwarteng was not that there was no plan, it was that no believed that the plan would work - probably exacerbated by the "move fast and break things"-vibe.
Or, to put another way. If fiscal rules 'mattered' would it have made any difference if Kwarteng announced a new fiscal rule which incorporated that following elements:
a) a two year 'growth derogation' in which the rules didn't matter;
b) the removal of "Covid emergency spending" from the balance books via an accounting wheeze;
c) a new goal of 4% growth per annum by 2030 and
d) spending being 40% of GDP by 2035.
In this scenario he has set some clear rules which appear superficially sensible and plausible (although, to be clear, I have made up the numbers)- do these 'new rules' calm the markets? If they do, then we have to accept it's all just a game of Chancellors putting in the right numbers to convince someone else they know what they're doing. There's no accountability to them if they can be changed whenever suits and they just have to "sound right".
I live in a 3rd floor apartment with no way to get in if I leave without my keys, it’s absurd how often I check my pocket for keys when leaving the apartment, like even though I just checked as I grabbed my bag and before that know I picked them up 5 seconds earlier, I still stand in the doorway holding it open and check again before I let the door close
(Now I guarantee I’ll lock my keys inside tomorrow)
I used to live in a flat that was exactly the same – even now I live in a house with a normal lock I won't even take the bins out without carrying the key... just in case.
I've got nothing really to add to your excellent piece other than I live by the mantra "some bloke on the internet, knows better than the politicians and professional political operators."
Re airports (so completely tangential) someone once said “if you’ve never missed a plane you’re spending too much time in airports”. To which my reply is “1) clearly it’s not your money spent booking those planes then because you would bloody well make sure not to miss them if it were, and 2) I actually quite like airports.”
Oh dear, another deluded greeny
Firstly, its not government, or the public that decides what you can spend, its financial markets as was long since known and amply demonstrated by Liz Truss (although I'd argue a large part of that was the energy support which could have cost 120bn that scared the markets)
So it doesn't matter what politicians say, its financial markets which will dictate what is possible or not.
Secondly, this was announced on the back of the Germany government's "green plans" which came to power in 2021 and after trying to force this stuff ob the public had to row back and is now the most unpopular government in German history.
Ditto, the same is happening in Australia, where as a result of this green push electricity bills are going through the roof after promising that bills would fall by $275 a year.
Here in the UK, when gas prices actually fell between 2013 and 2021 renewables went up from 9% to 42% and did bills come down? No, according to the Commons Library they went up 36% more than inflation and it was all down to renewables and green taxes.
Further to that, look across Europe where Farmers are out in massive numbers, as are truck drivers over green policies putting them out of business.
But by all means carry on with the 28bn, it will make a Labour government the shortest and most unpopular in British history.
Green is all very well, until of course people see windmills blotting their landscape and views and their bills going through the roof.
And believe me, £28bn is a drop in the ocean, just greening grid infrastructure is estimated to cost 54bn, decommissioning the gas network 65bn and god only knows the cost of providing long term storage for energy when the wind doesn't blow and the sun doesn't shine.
It would be sheer folly, it won't drive growth, look at who is growing, China and the USA, not Europe, why? because energy prices there are HALF what they are in most major European economies and energy is a base business cost for every business - are they green? No they are on coal, gas and oil.
If Labour wants to commit suicide, this is the noose to do it
You're right, cheap energy is the ultimate. Personally I think it's madness that the UK has signed up for "Net Zero by 2050" without any clear plan on how to do that without knackering the economy in the long-term. This is the original sin here.
On the other hand, if your starting position is "Net Zero" (and that is the political consensus) then the question becomes how to do net zero and produce cheap energy. There's only really three (and a half options).
i) Drop Net Zero and stay locked into fossil fuels - with the fun condition that you give Russia and Iran et al leverage over your foreign policy to get cheap fuel.
ii) Mass expansion of nuclear - which, regardless of it's merits, is not going to happen in the West (thank you the Soviet Union and the Simpsons for that).
iii) Some combination of renewables.
Option 3 is the only one that seems politically doable (regardless of its merits). So then the question becomes how best to get there - either you trust entirely to the market (which, by the way, is already distorted by subsidies and various levies and the planning system) or you 'pump prime' and more openly distort the market by overt state intervention.
The debate about the £28 billion is ultimately stupid because in practice both the Conservatives and Labour are going down the 'direct state intervention'-route and are merely arguing about the small percentages of how much to do it.
Point 1 - correct, you should not sign up for something of this magnitude without a clear plan how to do it, and that plan getting full parliamentary scrutiny which it didn't, it was a fit of virtue signalling that will come back to haunt them all.
You raise a good point - if not renewables then it either has to be fossil fuels or nuclear or a combo there of.
There is the "security of supply" issue of having to import increasing amounts of oil and gas, or to frack, or to re-open coal mines or rely on potentially volatile supply and prices going forward.
And the other point, that eventually gas, oil and coal will run out, and recovering remaining reserves will over time get increasingly expensive.
Therefore a SOME POINT we will have to move from fossil fuels to either nuclear or renewables or a combo thereof.
That brings us to two questions, and the primary one of "cheap energy" underpinning a successful economy. and secondly, when and how you should move to the alternatives
Firstly "cheap" is not an absolute price term, but relative to all other economies. If fossil fuels run out, they run out for everybody and therefore everyone will have to move to another "next cheapest" alternative so competitiveness is relative not absolute.
The dash for renewables is on the back that it will stop climate change, and cutting ours certainly won't do that, and use of fossil fuels is still going up.
Add to that, that on the history of the last 800,000 years of climate change, temperature does appear strongly linked with atmospheric CO2, but most importantly it shows that when CO2 levels exceed 300ppm the climate tips into global cooling.
As you no doubt know, we are currently at 420ppm, well past the historic tipping point AND under NOAA (US climate change agency) under the best case scenario of CO2 emission reduction the earth would not get under 400ppm before 2100.
So the climate "pressure" to tip into global cooling is going to continue for at least another 100 years.
BUT - add to that that we are in a rapid NATURAL warming phase the earth would be heading up to that tipping point anyway without man made CO2 emissions, so you are fighting a losing battle.
And evidence of a climate tip is already there, the AMOC, or Atlantic conveyor which keeps Europe warm is weakening, and salinity measurements have been showing that since the early 1970's.
The belief is that the UK will keep getting warmer under climate it change, it won't, when that Atlantic conveyor of heat switches off, we will be plunged into Canadian style winters with average temperatures 8 - 15C lower than they currently are.
Under a "renewables" future, wind turbines will ice up reducing their blade efficiency by upto 50% and potentially unbalance them and air source heat pumps won't be able to get anywhere near heating your home.
So there is somewhat of a conundrum
1. If you are dashing for renewables for climate change reasons, its highly unlikely to work and leave you with sky high energy costs that will cripple the economy and living standards.
2. If we continue with fossil fuels, they will become increasingly volatile in supply and price, but the time horizon to "sort" that is decades and will be worldwide, and therefore as that becomes increasing obvious there will be a gradual shift to Nuclear and renewables without cost disadvantage as everyone else will have to follow similar solutions at similar costs.
So that brings you back to what to do now?
My assertion is that we will need renewables and we already have a lot, arguably too much already and its driving up prices - we have the second most expensive energy in Europe only just behind Germany.
Why do they drive up prices? several reasons
1. They are quoted in price at the wind turbine exit, not the whole cost, to connect these into the grid is very expensive to remove bottlenecks and will on current pricing requires 5 TIMES the grid cabling at a cost of 54bn estimated and ongoing maintenance costs for the grid 5 times higher than now going on your bills.
2. Renewables currently marginalises gas generation, gas is essential as the only large scale high variability means of balancing the grid on now both highly variable supply and demand, there is nothing credible that's cost effective to replace it.
3. As renewables output goes up, gas generation goes down. If I own a gas plant capable of 10GW output annually, I can spread the fixed costs like staff, maintenance, insurance, rates, water rates across that 10GW output cost.
If I have to run back to 5GW or 2GW a year to allow renewables onto the grid, those fixed costs remain the same (actually they go up) and therefore the cost gas stations will have to charge to break even and make a profit goes up to cover those fixed costs over lower output thereby increasing the cost per MWH charged to generate.
Finally, the more you load vary a gas plant, the higher the thermal component stress which shortens the life of the gas station and increases maintenance costs, further driving up gas generation prices.
Therefore the more generating assets you have, unable to maximise their output the more costs go up, and as a recent commons library document showed, that over the period renewables grew from 8% to 42% between 2013 and 2021 electricity prices went up 36% ABOVE inflation and that was before the gas price spike in late 2021 and gas prices were stable over that period.
There are also other rubicons we have not yet passed. to manage the grid, you don't just need a balancing of supply and demand of power, you need to manage something called reactive load, and this is handled by large generators with AVR's like nuclear and gas plants.
Nuclear will be all but decommissioned by 2028, that only leaves large gas plants to provide reactive load and voltage support mechanisms, that's not something renewables can do.
And we haven't even considered the huge costs of energy storage which will be required for when the wind doesn't blow and the sun doesn't shine, which is a whole new world of pain and expense.
So yes, in the end we will have to transition to a renewables/nuclear generation, I'd argue we won't stop climate change and the fears are in the wrong direction, and that we need a very slow move off fossil fuels over several decades, not a suicidal move over 5 years, which i might add is impossible anyway.
A new grid connection these days takes 13 years from application to delivery.
Just a note that this:
"Add to that, that on the history of the last 800,000 years of climate change, temperature does appear strongly linked with atmospheric CO2, but most importantly it shows that when CO2 levels exceed 300ppm the climate tips into global cooling.
As you no doubt know, we are currently at 420ppm, well past the historic tipping point AND under NOAA (US climate change agency) under the best case scenario of CO2 emission reduction the earth would not get under 400ppm before 2100.
So the climate "pressure" to tip into global cooling is going to continue for at least another 100 years."
Is a wild (and perhaps wilful) misinterpretation of what the geological record shows in relation to CO2. In the time period you're talking about CO2 isn't the primary control on global temperature, orbital cyclicity is. CO2 peaks at 300ish ppm during the warm interglacials, but then is forced down when we go into glacial periods by weathering and oceanic feedbacks. There's a really good explainer here: https://www.carbonbrief.org/explainer-how-the-rise-and-fall-of-co2-levels-influenced-the-ice-ages/
They correlate, but the causation is an external forcing from orbital periodicity.
Orbitally speaking we wouldn't be due to tip into another glacial interval for 15,000-50,000 years. Artificially high CO2 will guarantee at least that long, not induce it to happen sooner. We are absolutely 100% not about to tip into a global cold period short of a series of supervolcanoes or meteor impacts.
AMOC slowdown *may* be a thing. But it will be a local effect on NW Europe. It probably won't get anywhere near as cold as your worst case scenario. And we'd have much worse problems with our UK housing stock than reduced efficiency heat pumps. In any event, this will be on a 50+ year timescale and well outside the expected lifespan of most heating systems.
Not enough of the Green Offer is framed around "it'll create X number of jobs." Sell the job offer, with a green and pleasant land as a bonus. They should set up green hubs in various towns. There must be tens of thousands of jobs that the green economy could provide.
They'll only have themselves to blame if they get in with a dull 30 seat majority because their plans to bore us all into government go down with a meh.
Recommend reading the Akehurst piece linked above. Interestingly, according to his analysis, the jobs argument actually performs pretty badly. (He argues it's because voters distrust politicians arguing about job creation as they've had their fingers burnt so many times.)