Why are all the politicians talking nonsense right now? It’s just too difficult. The political classes are in denial, left and right, north and south.
The complexity of the crisis is too manifold, the implications for society too frightening. At times like these, politicians resort to addressing their own narrow constituencies, their tribes.
Probably the most obvious politician who doesn’t make sense is our next Prime Minister, Liz Truss. She wants to tackle the cost of living crisis through tax cuts rather than “handouts”.
It is unlikely because reducing the taxes of people who have nothing or very little, the most at risk this winter, means nothing or very little. Even middle-income people would see a negligible decrease in their bills by scrapping the National Insurance hike.
The Institute for Fiscal Studies insists that tax cuts at this time will only increase inflation and public debt, so why is Ms Truss persisting with this policy? Because it works well with the narrow composition of the Conservative Party for whom taxes are a kind of religion.
Tax cuts allow people to keep more of what they earn, stimulate business investment and prevent politicians from “spending other people’s money”.
The madness of the “Big Five”
THE CONSERVATIVES aren’t the only ones in a state of ideological denial. The Scottish Green Party and most of the left believe the solution to the energy crisis is the nationalization of energy companies like British Gas. “It will only cost £2.85bn to nationalize the Big Five as the government seeks to subsidize them with £29bn,” they shout on Twitter. “You do the math.” But when you do, you see it’s nonsense on stilts. Spending public money to nationalize loss-making energy supply companies, those that have not yet gone bankrupt, will not help people who will not be able to pay their bills this winter. This only adds to the tens of billions the government will need to cover crippling global energy costs
It’s the international oil and gas companies like BP and Shell that are making super profits. The aptly named Bernard Looney of BP confessed that his business is currently a “cash machine”. But the left knows that nationalizing companies like BP, Shell and Total would be next to impossible. Their market capitalization is over £400 billion.
They are also international companies. BP is merged with Amoco, America’s largest oil producer. If Big Oil were threatened with seizure by the UK state, it would likely move to low-tax Ireland and halt renewable energy investment in Scotland. Trying to seize Equinor and Norway’s assets in the North Sea would cut off 30% of UK gas supplies.
THE left always accuses its opponents of ‘lying’ – for example, claiming the UK sent £350million a week to the EU. Actually, it wasn’t a lie – just extremely misleading. But their energy campaign is even more misleading. Nationalizing retail baskets like Bulb would plunge the UK government into a chimerical battle against the international energy market.
What politicians could do is apply a higher windfall tax to energy super-profits and provide incentives to accelerate investments in renewable energy. Now that Britain is no longer in the EU, the government could also take what is called a ‘golden share’ in BP and pressure the board to maximize oil and gas production in the North Sea.
Greens, of course, think it’s better to import oil and gas from repulsive regimes like Russia and Saudi Arabia. They want to keep North Sea oil and gas ‘in the ground’, no matter how many old people are frozen. Nicola Sturgeon also adopted this stupid rhetoric.
She says we can count on the 25 gigawatts of offshore wind power in the recent ScotWind license. She was rightly criticized for giving away that bounty for a measly £700million, but that’s another issue.
ScotWind farms will not produce electricity for at least a decade and the energy crisis is now. The government should ask world experts like Sir Ian Wood to advise on how to extract more oil and gas from the North Sea. Importing hydrocarbons is much more carbon intensive and harmful to the environment than using our own.
It’s obvious to everyone, but people are afraid of being labeled as climate change deniers, so they shut up.
Yet helping fund Putin’s war machine doesn’t advance net zero a single day. North Sea oil and gas is a strategic resource and must be managed rationally as part of the transition to renewable energy.
Scrapped by the SNP
In 2017, Nicola Sturgeon promised to create a state-owned energy supply company, a much-deserved policy at the time. In a market of five million people, where competition is weak, there is room for state ownership in the event of regulatory failure. But that plan was scrapped, which is why Ms. Sturgeon doesn’t talk about it. Nor does she want to talk about North Sea oil revenues which have recently rebounded. The SNP prefers to reprimand the British government and demand more money.
It has become a dismal game of public sector pass the parcel. Local government workers, such as garbage collectors in Edinburgh, are on strike for more pay. Nicola Sturgeon says give them 5%, half of which should come from Cosla, the local government confederation. Cosla says he can’t afford it because the Scottish government has cut local government funding for a decade. To break the deadlock, the two sides unite to demand more money from Westminster.
Yet the Scottish Government has its own revenue collection powers and can set income tax rates and brackets. It also benefits from generous funding from Westminster, meaning Scotland spends 20% more per capita than England. And the power to borrow up to half a billion a year and issue green energy bonds for more.
Cash-strapped Scottish local councils have also had the power to raise revenue since the end of the council tax freeze. But they don’t want to take the political risk of putting their money where they say. This abdication of fiscal responsibility is humiliating and helps no one.
Finally, the unions of Enough is Enough who are campaigning for a general strike are also in a world apart. Only 14% of private sector workers belong to unions, which are now overwhelmingly the preserve of public sector workers with relatively secure jobs.
The wages of public sector workers are paid by taxes from private sector workers, who make up 80% of the labor force.
These ragged-pants philanthropists are paid less if you take into account the generous pensions of the public sector. Therefore, a general strike by state employees, from doctors to garbage collectors, would be politically disastrous for all concerned.
Either way, there is no way to meet the Enough is Enough demand for inflation-indexed public sector wages without destroying public services.
There is simply no more money. In the coming winter of discontent, sectoral interests would do well to exercise their muscles sparingly.
And a bit of consistent thinking all over the place wouldn’t hurt.