The extremist wing of the green movement wants a deindustrialised Britain and zero carbon. Will we get a glimpse this winter of their promised land?
No, says Kwasi Kwarteng. There is “no question of the lights going out or people being unable to heat their homes,” he told the Commons earlier this week. Which was unambiguous. He also said that “we do not expect supply emergencies to occur this winter”, which was just a bit less unambiguous.
Not so sure, say others – pointing not only to the months ahead but to what’s happening now. Ministers have reportedly been warned that consumers could face food shortages within days (the meat industy and food packaging are dependent on carbon dioxide supplies) and that six gas-cooled nuclear reactors may have to close.
What’s going on? In a relatively minor key, Russia is holding back on gas supply to put pressure on Germany over Nord Stream 2. In a more major one, the rise in gas prices is part of a wider story of supply bottlenecks as the world begins to open up post-Covid. The good news is that we’re not dependent on Russian gas. The bad news is inherent in our wider energy policy.
Essentially, this has three main aims, pursued by governments of all the main parties. First, security of supply. Next, low prices for consumers. Third, reducing emissions – and, now, delivering Net Zero by 2050. These are applied in a country that has a long attachment to property rights, a complex planning system, green awareness, litigation-conscious local campaigners, and pressure on space.
It also has a strong Treasury that is institutionally suspicious of grand projets. Put all that together, and no wonder there’s no third runway at Heathrow. Or that although Britain established the world’s first civil nuclear programme, the industry’s contribution to the nation’s electricity has been in decline since 1997. Or that nervy Conservative backbenchers have frightened the Government off fracking.
So we’ve gone for the pain-freer option of importing gas from abroad. It supplies roughly 40 per cent of our electricity grid’s supply – the largest contributor by some way. Won’t renewables drawn from our sea-surrounded, wind-visited country help us to achieve security of supply?
One green friend of ConHome says that “I do think there is now very strong evidence that electric cars (on a lifetime basis), wind and solar energy, and insulation will save consumers and businesses money, but there are less mature clean technologies (heat pumps, clean hydrogen, carbon capture, bioenergy, etc.) which are currently more expensive.”
So wind power, for example, will help – but it is in the nature of wind that it doesn’t blow all the time at the same strength, and a combination of a cold winter and calm weather would be problematic at least. And as our friend conceded, some of the new technologies will pay their way and others may not.
In sum, the first leg of the policy stool, security of supply, has been less stressed recently than the second, reducing emissions – hence the move away from coal and gas towards renewables and developing technologies). As for low prices for consumers, policy faces both ways: on the one hand, there is the price cap; on the other, green levies, and other taxpayer spending and subsidies.
The Government’s response to some smaller suppliers going bust is to refuse either to drop the cap or to bale them out. The second is right, the first questionable. The cap is basically an Ed Miliband policy taken up during the Theresa May era to help the “just about managings”. (Remember them?)
It’s impossible to enthuse about a policy that will limit the resources available for investment among suppliers. Still, we are where we are, and Ministers aren’t going to drop the cap at time when inflation is doing its stuff, Covid subsidies like the Universal Credit top-up are being withdrawn, there are some food shortages, and there’s a squeeze on living standards (despite the buoyancy of wages).
Instead, Boris Johnson is in America, urging that we all produce fewer emissions. And Kwarteng has been meeting with companies that supply CO2 here in order to ensure that they produce at least the same amount. Such is the paradox of government policy – though Ministers are right to say that we are less exposed than some of our neighbours.
On this site on Monday, John Redwood wrote that “the Business Secretary needs to review the complex mesh of subsidies, regulations, penalty taxes and import arrangements that passes for an energy policy” with an emphasis on security of supply. That is surely right, and has implications for the main net zero target, about which we are sceptical.
We end by returning to prices. It makes sense for help from government to be targetted on the poorest people – whether that’s a cut in their taxes, principally VAT, or payments to help counter poverty. The price cap is a pretty blunt instrument. Universal Credit would be a better targeted one. Iain Duncan Smith wrote recently on this site about raising the taper rate.
Rishi Sunak is in the business of putting VAT back up to its pre-pandemic levels, not cutting it. And there is a solid case for taxation falling more heavily on spending than on income. But that only returns us to the wider debate about tax, or should do. The Just About Managings will be hit by the national insurance rise and the new health and social care levy.
They are not well-off enough to be rich. Nor are they among the very poorest in society. Lots of them voted to “Get Brexit Done”, and are now being hit by a perfect storm of tax and price rises. Boris Johnson is perilously reliant on there being no credible alternative for them.