TODAY, in case you didn’t know, is Green Day, so dubbed to alert us to a new set-piece event in the parliamentary calendar. It’s the day when Chancellor Jeremy Hunt will tell us how he is going to spend £20billion that he does not have to square the circle of the UK’s increasingly problematic energy supply and bring down bills, all at the same time. And we can look forward to what the man whose novel economics assert that raising corporation tax will deliver growth, and whose magic-money-tree enthusiasm convinced him that printing money wouldn’t lead to inflation, is planning for us.
To put his £20billion piggy bank in perspective, this pretty much equates to the cost of Sizewell C which, when it comes on line, will deliver about 7.5 per cent of the UK’s present electricity demand. Given that in 2021 (the most recent figures published by the Department for Business, Energy and Industrial Strategy) electricity delivered 18 per cent of the UK’s energy, one Sizewell and £20billion is not going to solve the problem. Even if the Cabinet Office’s Defence and Security ‘Reset’, published earlier this month, was correct in its blithe assertion that there is ‘a clear pipeline of new nuclear power projects’, where is the money to pay for it? Maybe this is what Mr Hunt will announce although, as he’s committed to bringing down energy bills as well, I fear he’s using Enron accounting techniques. Certainly the accounting company KPMG doesn’t think energy will be cheaper any time soon.
The bottom line is that for a net zero growth plan to which Hunt appears committed, the UK needs about 30 Sizewell Cs, or five to ten times the number of wind turbines that we have (and they will have to come with credible storage, which has so far eluded the industry – the current battery installations could power the UK for less than 10 minutes). That adds up to about £1trillion of capital expenditure to produce the electrons. Then there’s the need to move them to where they’re needed when they’re wanted. Say another £1trillion.
Mr Hunt’s £20billion is just 1 per cent of the money needed and he hasn’t got it anyway. This government, like its predecessors for over 20 years, is running a huge deficit. So that money will have to come from the bond markets which, as you may have read, have got a bit complicated.
The interest cost on UK government debts (‘gilt yields’ in the argot) has doubled in a year. Worse, about a quarter of all the UK government’s £2.8trillion debt has inflation linkage, so the cost is rising in line with inflation, or 10 per cent per annum. With the market seeking such interest rates it’s far from clear who will provide the finance required to build the infrastructure for net zero, let alone at what cost.
Of course, the government is not stopping there. It is also about to release its ‘advanced manufacturing plan’. That is ‘governmentspeak’ for subsidies and threats to the car industry to build electric cars and the battery factories required. Tata (owner of Jaguar Land Rover) might build one, but only if it gets £500million of subsidy for its steel plant. Perhaps tellingly, Toyota (which has made a few electric cars in its time) has concluded that the future for cars is hydrogen fuel cells, not batteries. It’s entirely possible that the government may propose to throw money it doesn’t have at a declining technology.
Like the ludicrous and costly Covid lockdowns the dash to net zero has been motivated by political grandstanding. Public support has been developed though yet another Project Fear, this time of global warming. Again we’re told that the government is following ‘the science’, again costs are already out of control and anyone who questions anything – particularly affordability – is denigrated as a denier. In place of mask-wearing fools we have the deluded vandals of Extinction Rebellion, whom the police seldom find grounds to arrest and some lawyers refuse to prosecute.
This government has transformed policy making from rationality to fear-based ideology. In this Hancockian world facts don’t matter, the scientific methods which brought us the technology that has defeated disease and famine count for nothing. All that matters in Whitehall and Westminster seems to be to hold on to control through the next soundbite, the next headline, the next vacuous interview. Maths, statistics and thermodynamics can all be ignored in the need to keep the public confused, frightened and compliant.
Like the Chinese Communist Party, the Blob fears that one day the people (that is, you and me) will work out that none of the political parties in Westminster has policies which can possibly deliver what matters in the real world; affordable energy and housing, public services that work and taxes are reasonable. That day is coming – for many TCW readers it came a while ago.
What are we going to do about it?