Conservative ministers are going through a green fit in an attempt to appeal to voters they lost at the last election. They want to show the world they’re doing good. ‘You know what some people call us – the plastic bag party,’ seems to be the political re-branding calculation. As the former No.10 spin doctor Katie Perrior remarked in the Times last week, the Prime Minister’s enthusiasm for protecting the environment may not be insincere, but it is certainly new.
In reality, the May government’s greenwashing is classic displacement activity. Productivity numbers released by the Office for National Statistics earlier this month should be front and centre of every government policy. Normally productivity growth falls in a recession but then bounces back to the previous trend, the ONS says. This time it didn’t. If productivity had returned to its pre-downturn trend, output per hour would have been very nearly 19.8 per cent higher. Imagine – workers’ pre-tax incomes one fifth higher; a fast-disappearing budget deficit; a government able to cut taxes andprovide more resources for the NHS – taxing plastic cups won’t solve the NHS winter crisis – and more money for schools. A strong economy would sail through Brexit and not have ministers quivering in their boots. Instead the conversation is about disposable cups and plastic waste.
This points to a harsh truth. Economic policy is the void at the heart of the May government. There simply isn’t one. The Chancellor sees his job as counting the money in and counting it out, a vital function that does not constitute the totality of sound, pro-growth economics. Rather than grapple with the productivity puzzle, large parts of the Chancellor’s job have been out-sourced to the Bank of England, where the Monetary Policy Committee has gone way beyond its inflation mandate. As Andy Haldane, the Bank’s chief economist says, it is the Monetary Policy Committee, not the Chancellor, that gets to decide the trade-off between employment and productivity.
Another large chunk of Mr. Hammond’s job was shunted off to Greg Clark when he was given the task of fashioning an industrial strategy at the new business, energy and industrial strategy department. A white paper to that effect duly appeared last month, but in last week’s pointless reshuffle, the Prime Minister tried and failed to give his job to someone else. Perhaps the IS white paper hadn’t cut the mustard, for it is a recipe for de-industrialisation dressed up as a post-industrial strategy.
‘The first foundation of our Industrial Strategy is to maintain and enhance the business environment that is so essential to the UK’s success,’ it correctly says, buried on page 165 of the 254-page tome. Energy policy, however, constitutes the strategy’s most calamitous error. Following on from its manifesto commitment, the government had asked Professor Dieter Helm to carry out a cost of energy review. Should ministers decide to stick to current policies, Helm concluded:
‘It will continue the unnecessary high costs of the British energy system, and as a result perpetuate fuel poverty, weaken industrial competitiveness, and undermine public support for decarbonisation.’
Indeed, the ONS numbers show that non-manufacturing production – a sector that includes the energy utilities – recorded the largest fall in productivity of any sector since the beginning of 2008:
By contrast, boosting industrial competitiveness is entirely absent from the Industrial Strategy. The reason is straightforward. Ministers are pushing forward with a clean energy strategy they know means soaring energy costs. ‘Our long-term goals are to make clean technologies cost less than high carbon alternatives,’ the government says, i.e., having more clean energy and less hydrocarbon energy will keep pushing up costs for the foreseeable future.
Inevitably this will make British industry even less competitive. Manufacturing is inherently energy intensive. It is also a source of nearly three million well-paying jobs. The White Paper concedes that industrial firms are paying up to around 80 per cent more for energy than their overseas competitors. Steel industry bosses have complained that the UK industry is being crippled by high energy costs and is a critical reason for the crisis afflicting the industry. Government policies therefore place an increasing and avoidable burden on the ability of British manufacturers to compete. The 2017 manifesto had set the ambition for Britain to have the lowest energy costs in Europe. That’s being dumped to be replaced by a feeble throwaway line on reducing costs ‘where appropriate.’
High costs and scarcity are hallmarks of deep green thinking and the White Paper shows how far Mr. Clark’s business department has succumbed to it. There’s even a section on moving towards a regenerative circular economy, where we learn that ‘the economy exists within the natural world,’ something that could have come straight out of FE Schumacher’s 1972 anti-industrial manifesto Small is Beautiful.