In the midst of the confusion created by Boris Johnson, Nadine Dorries and others, it was easy to overlook the contribution to the climate crisis that Rachel Reeves made last week. She announced that Labour's plan to spend £28 billion a year on the environmental crisis was now delayed.
The commitment to spend this sum in every year of the next Labour government has been dropped. Labour will now build up to this sum in the first half of the next parliament Reeves told the BBC on Friday. Thereafter the spending (now much diminished in value since she first announced it because of the impact of inflation, but mysteriously unchanged, nonetheless) will be at £28 billion per annum.
I hate to say this, yet again, but this makes no sense. The climate crisis is real. It is definitely not going away. The one thing that we emphatically know about it is that it will get worse unless action is taken to tackle it. And yet, because the scale of government borrowing is apparently too high we cannot afford, according to Labour, to do anything about it. It is better, apparently, to balance the government's books than to save the planet.
Unsurprisingly, I did not agree. We would not delay war for the sake of balancing the books. To his credit, Johnson did not hold back on Covid for that reason. But we can hold back on the biggest existential crisis of all that we face for the sake of a supposed fiscal rule that says we will balance the books when, as I noted here last week, both GDP and the national debt are in any case overstated and as a consequence represent meaningless criteria as goals for anything.
So what should Reeves do? First, she should update the commitment made for inflation that has happened since she first issued her plan. At least another £4.5bn now needs to be added to the annual commitment for that reason. Inflation has not reduced the scale of the climate crisis.
Second, she should maintain the commitment, which is essential to many, and a reason to vote Labour.
Third, she should make clear that it may be hard to spend this sum in the first year in office, simply because it takes time to plan and start an investment programme. But what she should then make clear is that any initial underspend will be caught up with later by way of an overspend in later years.
Fourth, she should make clear that nothing will deflect Labour from this path: people want to know it is clear on the very few commitments it has so far made.
And fifth, Reeves should make clear that she believes that this programme is capable of delivery within the context of the UK economy, if necessary by ensuring that other activity is sacrificed to it. That could be achieved by paying people enough to want to work on it, or by taxing harmful activities more. It's not hard to do.
Finally, and as I have so often said now, Reeves needs to think more innovatively about the funding for this programme. If the UK government cannot find £28 billion a year for this programme when £70bn a year is saved in ISAs (mostly in cash, which creates no useful economic activity, plus secondhand shares that provide almost no capital to companies) and well over £100bn is saved in pensions (largely, again, in secondhand buildings, shares and debt) then there is something seriously wrong with the UK financial services sector. It is not plausible that so much money can be apparently used for speculation and £28 billion cannot be found to help save the planet (I say help, because that sum is anyway seriously inadequate). Instead of wanting pension money to go into companies, as Reeves says she does, most of whom have no serious problem with raising capital, Reeves should be looking at how to use these funds to save the planet, which really is not hard.
So, why is Labour delaying then? Most especially why is it delaying when doing so suggests that it still does not get the distinction between capital and revenue spending and now thinks both must be delayed because of Tory spending plans, when the reality is that delay is pointless except for the fact that a billion or two of interest charge might accrue as a result? I wish I could answer that, but I cannot: delaying this programme makes no economic sense at all. If it is agreed that climate change must be tackled (and I presume that is not disputed) then incurring a small interest cost is not the reason to defer action. Except to Labour, apparently. And that is worrying.
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Let’s face it Starmer is an ignorant Market Fundamentalist completely failing to understand that the only arbiter who can determine whether there’s a need to expand or contract money supply in the face of uncertainty is the state, an Arbiter of Last Resort!
Your blog is magnificent: knowledge, logic, insight, courage and not a little wisdom.
The above post is right … but it does not go nearly far enough. On climate – a supreme challenge – you appear to miss some inconvenient truths:
First, there is too much CO2 in the atmosphere NOW and there has been for too many years already. Every bit of fuel used makes our problems worse.
The ‘net’ and ‘2050’ (or any other year) as in ‘net zero 2050’ are deceptions. [See first paragraph in https://www.sgr.org.uk/resources/turning-delusion-climate-action-prof-kevin-anderson-interview%5D
Second, international ‘negotiations’ such as the COPs are not even close to being effective.
Third, humanity is losing the climate ‘war’ with itself – and losing badly.
There are lessons from May 1940 when democracies were losing WW2. There were British soldiers in France and the navy had made an attempt to save Norway from Nazi tyranny. There was petrol rationing but newspaper owners (and the Foreign Secretary, Lord Halifax) wanted a peace agreement with Hitler so that business could ‘prosper’.
Churchill formed a coalition government – which was able to implement policies that would have been easy to oppose for party political advantage.
Such policies are badly needed NOW. [Like Churchill, Caroline Lucas has been warning parliament. Unlike him, she was not heeded.]
His rhetoric was uncompromising: ‘We will fight on the beaches, in the towns and on the hills. We will never surrender.”
Determination of this kind is badly needed NOW.
Churchill did not wait for the agreement of the United States – or any other nation. No question of COP-like time wasting; Britain was willing to stand ‘alone’ knowing that other nations would eventually support the cause.
NOW, every nation has reason to implement rational climate change policies – especially low-lying countries. Britain has every reason to act without waiting.
Some possible actions on CO2 emissions:
50 mph maximum speed from midnight tonight (as said Ted Heath during an OPEC Crisis in 1973(?)). Further restrictions to follow.
No external lights unless necessary for safety or security.
Campaigns: (a) Explaining the dangers like ‘Is your journey really necessary?’ (b) Also explaining, safer and quieter roads, cleaner air.
Laws forbidding the use of fuels for anything which is not necessary.
Restrictions on advertising.
‘Net zero 2050’ is political cowardice that is costing lives now … such as smoke in Canada and the United States this week.
There will be no escape – and, dangers are getting closer (19 Jul 2022: Houses ablaze as grass fire engulfs village outside London )
Thank you for a sane encapsulation of the dire dimensions of what is happening and what needs to be put in place immediately. The lukewarm to worse response to FIRES suggests there is a very long way to go before people will be forced to extreme measures to have any functioning society at all.
Excellent post but unfortunately alongside politicians, the Bank of England, the media (including the Guardian) there is widespread corruption of thinking. When I stated above the state is the arbiter or decider of last resort in regard to whether to expand or contract money supply in the face of uncertainty this obviously implies the state can create its own money supply from thin air. This is the corruption of thinking that lazily or venially refuses to accept both of these truths.
At a technical level the state can regulate the underwriting standards of private bank creation of loans for certain domestic purposes, most obviously house mortgages. For capital investment or indeed speculation however we need to recognise that lending is now global and unless states work together particularly to dampen down destabilising speculation uncertainty will continue to be magnified or exacerbated. The same is obviously true with individual states creating money for national as opposed to international benefit. For example, Biden is using state created money to green the United States and big beneficiaries will be businesses based in the United States. The EU is now being forced to respond. Britain? The Tories aren’t that interested, greed is more important. The Starmer led Labour Party has just announced deferment of it’s green spending presumably on the advice of Andrew Bailey who hasn’t yet caught up with a huge increase in immigrants to the UK and that Putin is the prime driver of inflation along with greedy UK companies not UK wage earners!
I accept the thrust of the point – delaying to balance the books makes no sense – but are there sufficient good projects ready to go but just waiting for money? I can imagine that it might take one or two years to build up the capacity to make best use of £28 billion or £32 billion or whatever the number is, and there are risks inherent in throwing a large amount of money at whatever projects are currently available (or can be created at the drop of a hat). Scaling up in a way that minimises fraud and waste takes time.
Hence my point – build up and overspend later
Abd I rather think there are ample projects already
Andrew like the majority of voters and politicians in this country you are missing the central point Starmer is a Market Fundamentalist believing the ignorant Thatcher lie that the state has no money of its own. Accordingly in office he will be persistently using the lie the government must automatically balance its books to stupidly avoid tackling the problems raised by uncertainty of which the planet burning up is one of them albeit the most critical to address.
As to your green spending argument apparently the Ukraine last year installed more wind turbines than the UK and that’s whilst fighting a war. There is also a big spend on re-nationalising businesses that affect climate change, the former CEGB being a case in point. Obviously a Market Fundamentalist like Starmer won’t be interested in this!
https://en.wikipedia.org/wiki/Central_Electricity_Generating_Board
https://en.wikipedia.org/wiki/Central_Electricity_Generating_Board
The Ukraine thing is a nice headline. But what is the substance of that story?
As I understand it, it is claimed that just two onshore wind turbines were installed in the UK last year (although I suspect this is an underestimate). https://www.theguardian.com/environment/2023/may/28/ukraine-built-more-onshore-wind-turbines-last-year-than-england
And Ukraine completed the first stage of a wind farm with 19 turbines, although 6 were installed before the war started.
https://www.theguardian.com/environment/2023/may/28/ukraine-built-more-onshore-wind-turbines-last-year-than-england
Well done them. Life goes on, even in wartime. Slava Ukraini!
The UK’s planning restrictions on onshore wind since 2015 are terrible. But a more than six fold increase in onshore turbines – from 2 to 13 – is not going to eat £28 billion. I repeat, what projects – not just wind farms, of course – are available immediately to deploy £28 billion of funding, next year and the year after?
The UK’s oldest wind farms are about 20 years old – North Holye offshore 2003, Crystal Rig onshore 2004. As I understand it a typical design life of a wind turbine is about 20 years, so not only do we need to plan expansion, we also need to plan for recycling and replacement. (This is not dissimilar to the need for facilities to recycle and replace solar panels when they come to end of their useful life after perhaps 30 years.)
Andrew you didn’t respond to my point about a big spend being needed to re-nationalise certain companies, most previously state owned.
No spending a needed for this. It would be a bond for share swap as happened in 1947.
“but are there sufficient good projects ready to go but just waiting for money”
Example: Port Talbot/steelworks is pretty much the last substantive primary steel works in the UK. It needs asap to convert to direct reduction using hydrogen. There was a plan to build a couple of GW of off-shore between South Wales & Devon. This needs to be revived asap – excellent project for “British Energy” to cut its teeth on.
This would power the electrolysers & I have not noticed that Wales is noticeably short of water. 4GW of offshore wind? couple of billion. How long to build, 2 – 3 years. Electrolysers – UK has ITM – world leader in electrolysers etc etc.
The problem is not large-scale (or indeed small scale) projects (I could show you 14 – 15 small-scale community projects), the problem is nutless, gutless, brainless politicos, like Reeves, Starmer and most of the shadow cabinet – as bad in every single respect as the vile-tories, indeed, possibly worse. Aat least with the vile-tories you know what you get (congential liars to a man) – but Liebore is a wolf-in-sheeps clothing – witness the leading role that the ghastly chancer Mandelson plays in Liebore deliberations.
This for me at least has all the hallmarks of political funder intervention and horse trading attached to it.
That might be well too cynical for a Sunday morning but there you go.
Already, we can see Labour coming in like whipped curs rather than avenging angels. So sad.
Prem Sikka is going to be on nottheandrewmarrshow at 10.30 today to discuss Rachel Reeves statement. Should be worth watching.
You used to advocate for green QE and then more recently started advocating using ISA and pension savings for funding green investment. Years ago I remember you saying £50bn a year green QE. Do you still want green QE alongside savings funding, and if so what kind of mix of the two would you have?
I have no problem with Green QE, but when other funds are available I treat it as a backstop and not an answer in itself
Interesting that you mention Johnson’s willingness to spend to help get the country through the initial waves of Covid. I have to say, I’m not convinced that we’d have seen the same under Starmer/Reeves!
I noted the announcement about the delay in spending on green projects the other day and it struck me as the thoughtless short-termism I’ve already come to expect from the current Labour Party leadership.
There is so, so much that needs to be repaired once the Tory wreckers are finally booted out, but all we will get is tinkering around the edges in every area and it won’t be enough to turn things around. I can already imagine them whining that they can’t afford to do something because of the Tories as we approach 2030.
Maybe she’s of the opinion the whole idea’s a scam and only ever conceived as an excuse for further enabling the age of oligarchy. In that case we may well see her suggesting that in order to fight climate change, while life as usual can go on for the wealthy, in order to save the planet, well, the rest of us will just have to get by with less access to healthcare, education, food, heat, light, water, shelter, travel, law etc. etc.
Do they believe in the “economy as a household” budget model? If so, the prudent home owner knows that if the house is about to fall down they absolutely need to take out a loan/extend the mortgage to pay for repairs and keep the roof over their head.
If they know that the sovereign, fiat-currency-issuing State can afford anything required *if it is available to purchase and priced in its own currency*, then the “can we pay for it now?” question does not apply.
It’s an **either** choice but the politicians, enabled by the media, have elected to choose **neither**. And that should never have been on the table.
I personally don’t care too much who wins the next election. I doubt it will make much difference either way.
My friends on the left tell me that they are planning to stand a number of Independent Labour candidates in Starmer’s target key constituencies. They are somewhat optimistic in thinking they will win but the effect could be enough to prevent a Labour victory. The Labour lead is also slowly but steadily diminishing. Just 12% according to the latest ‘Opinium’ poll for the Observer.
The widespread assumption that Starmer will be the next PM could yet turn out to be totally misplaced.
I agree with the overall sentiments. I am concerned with the “framing”.
The word spend or spending is used 8 times, e.g: “Labour’s plan to spend £28 billion a year on the environmental crisis was now delayed.”
Likewise the use of the word borrowing: e.g. ” because the scale of government borrowing is apparently too high”. Begging the question why borrow?
Investment is used once; “because it takes time to plan and start an investment programme”.
The UK’s energy transition/transformation is an investment programme – in renewables, power networks, energy efficiency etc etc.
Some elements will have a better business case (RoI) than others but gov funding is required, absent substantive action by energy companies & others.
Shell announced this week it will expand oil&gas investment and shrink their renewables investments – so you can quietly forget about the oilngas mafia doing anything to expand RES/reduce emissions. Which leaves gov.
Both vile-tories and vile-liebore stick with the corner shop accounting model – although even corner shops would recognise the benefit of an INVESTMENT in roof top solar on their shop roof.
However, in Liebore-land and with imbeciles such Reeves (who has probably never done a discounted cash flow for a RES project in her life) everything reduces to “spending” with the welded on assumption that any spending has NO RETURN. A 9 year old could see the fallacy in that argument and how using the word spend or spending – is an attempt to frame the argument regarding gov investment programmes.
I see a few HoC seats will be coming up in byelections. It is important that vile-tory and vile-Liebore do not win, the former for obvious reasons, the latter because they are simultaneously vaccous and imbecilic. I’m in the process of deciding what to do & what to fund. I’m inclined to fund attack adverts on vile-Liebore.
“Shell announced this week it will expand oil & gas investment and shrink their renewables investments – so you can quietly forget about the oil-n-gas mafia doing anything to expand RES/reduce emissions. Which leaves gov.”
Exactly! And the Starmer/Reeves plan to counter-act? Manana! Manana!
Couldn’t agree more that “spending” by Government is completely misleading use of language. Not only does it chime with the household analogy of the economy but also with a consumerist model of money. Governments don’t “buy” new railways or wind farms (for instance) as if they come readymade off the peg from a shop, they “fund” them as long-term “investment” in the future of society with social, economic, and health benefits as returns on the investment.
The language is used to confuse and obscure reality to maintain the status quo. It’s deliberate. It comes as part of reductionist communications – slogans, cliches, banalities, gossip – what is sometimes called bite-sized chunks or dumbing down, and is endemic in management speak, mainstream media, celebrity culture, much so-called educational material, etc.
So the government spends – which as a matter of fact it does, passing cash from its central bank into the economy – so what do you call it?
Creates (into the economy) which it does despite any objections that the CB creates it because the Central Bank itself is part of govt.
Creation is technically a process separate from spending
Sorry, but I think you are making an issue when there isn’t one here
OK, by way of a convenient example, if you take your recent post:
“We can have a better NHS, but not without spending a lot more money on it and Wes Streeting should be honest about that”
I tend to think that the replies immediately pounce on the ‘public purse’ analogy – e.g. ‘we don’t have the money’ or ‘ there’s no magic money tree’ or ‘the bottomless pit of Labour spending” etc. It’s always “spending money like water” where the cash just disappears. If we say:
“We can have a better NHS, but not without significantly increased investment …..” there’s an implicit suggestion of specific outcomes in the return.
Maybe I’m being pedantic …. but instinctively I find “spending” conjures up something domestic, circling back to the household analogy.
OK – so what is better that people will understand, because unless they do there is no point using it as it fails the test of communication?
I was taken something of a Wittgenstein approach to the word “spending” in terms of how the majority of the population understands and uses the term. “I spent £2 on a box of cornflakes”. “The government is spending £2 billion on green measures”. Liebore is trying to conflate spending with investment.
One is an “investment” in breakfast or ”a breakfast expense” (spending to help you get through the day/through to lunch time). The other is an “investment” in either energy efficiency or energy production. The difference being that one has a measurable and objective return, the other a subjective return, or falls into the class of day to day expenses.
Spending/spent has a negative connotation (oh dear, we have to reduce spending we don’t have enough money), investments has a positive connotation, given it implies a future & usually it has quantifiable return.
Liebore in its arguments to delay the £28bn is engaging in a “spending” argument – which demonstrates its intellectual dishonesty. What it wants to do is delay investments. I think it is important to call a spade a spade and that investments is something we need to do to secure a green future.
In a nutshell the private sector “invests” but the state or government “spends”. Very Orwellian 1984 framing by the majority of the media including the Independent, the Mirror, and the Guardian all of whom ought to know better by now with the advent of MMT!
A) They don’t know MMT
B) I would say sums invested were ‘spent on’
Sorry, but this is pedantry for no gain.
It’s starting to look like searching for victims to target in his party is more important for “Witch-Hunt” Starmer than dealing with pressing issues like climate change and re-building public services after the Tory decimation. :-
https://www.theguardian.com/commentisfree/2023/jun/11/labour-opposition-power-keir-starmer-party
Presumably such “witch-hunting” is regarded as attracting rich private sector donors!
All told he really doesn’t feel like a fit person to lead the nation!
Does Rupert Murdoch secretly have leverage over the Guardian? Here’s another “market fundamentalist” argument by Larry Elliott which makes no effort to explain why Japan has a base rate of 1.5% and the UK 4.5% with both trade deficits and current accounts being in a similar position:-
https://www.theguardian.com/business/2023/jun/11/labour-green-prosperity-plan-fiscal-stability
I admit I don’t read that as market fundamentalist.
I also admit Larry is a friend, and to the right of me. But I read that as Larry also having doubt about Labour policy.
Many MSM economist commentators seem to use a globe upon which Japan is noticeable only for its absence. It’s clearly the place to look to for answers.
There is a problem using Japan as a comparator. It is that they save vastly more than anyone else and we cannot relocate that.
Why is high Japanese domestic saving such an advantage? If the Government sector is in deficit here, then someone else must be in surplus. If not the UK domestic sector it must be the overseas sector.
If there is a ever going to be a problem with debts and deficits (unlikely but maybe just about possible) it is probably easier for our Government to negotiate with other Governments than its own voters.
You miss the point (as usual)
What happens in Japan is not formulaic: it is social
Sop looking for theory in all cases: look for an explanation for behaviour as well.
I confess I seem to be missing the point too. I’d have said having a central bank which doesn’t appear hell bent on creating wholly unnecessary misery for the general population is their economy’s redeeming feature.
Maybe
But they don’t dictate the savings plans of tens of millions of Japanese people
Simply: Labour are not fit for purpose.
I live in a Lab-Con marginal. This announcement together with the authoritarianism means I know longer have a reason to vote Labour. I’m voting Green.
“It is not plausible that so much money can be apparently used for speculation and £28 billion cannot be found to help save the planet (I say help, because that sum is anyway seriously inadequate).”
Of course even an ‘adequate’‘sum being spent in Britain and Northern Ireland can only help save the planet. We obviously need a global coordinated effort. An adequate sum being committed by ‘ the first industrial nation’ could be globally inspirational nevertheless.
Is Labour not willing to invest in saving the planet because the state can’t make a profit on it? It would seem it’s more than happy to give private sector banks carte blanche to create money from thin air to invest in projects that can make a profit but damage the planet. I mean by golly making a profit certainly balances the books does it not so must be good right??? That’s the Starmer gang mentality surely! There’s plenty of ways it can regulate to reduce money creation going on planet damaging private sector investments and create scope for government created money to be invested on helping reverse previous private sector damage.
https://static1.squarespace.com/static/53568703e4b0feb619b78a93/t/5367981ce4b0124f24031674/1399298076240/the-entanglements-of-humans-and-things-a-long-term-view.pdf
The Green Economy is very much more than investing in renewable energy. The whole point is to reduce our impact on the environment. Insulating our homes, is a ready to go spend, massive investment/spending on electric public transport and active travel infrastructure, localising our economy, so our food producers, shops and reduce/reuse/repair/recycling industries provide us with useful employment on our doorsteps is another. The need to have, fit for purpose public services, social services, health needs massive spend, as does care for and enhancement of our green and blue wild-spaces.
£28 billion a year, or more like £100 + billion a year is ready for investment now to tackle, the climate, social and nature emergencies. Sadly so many of these plans we are told are the “green future” are rooted in a very narrow definition of what life should look like.
Agreed
This is a sweet little paper on green jobs
https://www.imf.org/-/media/Files/Publications/WP/2022/English/wpiea2022101-print-pdf.ashx
They cost more and make us less productive unless you count nuclear as green.
But all the other green jobs require more labour per GwH.
Wind isn’t too bad, but in the UK we won’t provide permissions to build onshore wind which is cheaper than offshore in National Parks and AONBs where the hillsides and the best winds are.
So we’re doomed as I keep telling people.
I don’t see the point of that paper. We need power and we need jobs. All those people working in oil and gas offshore will need jobs working on renewables.
Dale Vince says that renewable energy needing more jobs is a good thing. I agree with him. I remember years ago going up a wind turbine at Castle Acre belonging to Ecotricity. At the top you could see Peterborough, Ely and Norwich cathedrals. It will probably need replacing now if it hasn’t been already, but the replacement will be more efficient, and the materials from the older one will be reused.
Ten minutes drive away is a large windfarm, the largest in northern England. It is owned by an Irish company now, having been built by a British mining company which realised it would have to diversify.
When I stand on my doorstep I can see a field up the hill which a company called Solarig want to make into a solar farm. We’ve had consultations and the decision should be next month. I would love to be able to see it, but the council is tory run even though the tories need every group apart from labour to back it. This is a redwall constituency.
If it passes it will be up and running next year. Remind me how long it takes for a nuclear plant to be developed.
Solarig is a Spanish company.
I have nothing against Spain or Ireland, but if the labour party or tories had got their act together we could have had masses more British owned jobs in this country in
renewables.
I’m confusing myself now, but I’m sure you get the gist.