How would UKIP deal with wind power?

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We were recently invited by an on-line trade paper to answer a series of questions about UKIP’s attitude to wind power and other renewables.  Here are my answers.

1  Will the Contracts for Difference system remain in place, what will the budget be and how will you ensure future rounds remain fair to all renewable technologies?  The complex and counterproductive dog’s breakfast of taxes, incentives, feed-in tariffs, subsidies and contracts for difference is hugely damaging to the UK economy and the UK energy industry, and a huge disincentive to future investment in energy infrastructure.  It is riddled with anomalies and special pleading.  It is unsustainable, and should be swept away.

2  Is there a role for increased onshore wind in the UK energy mix? What should that role be?  On-shore wind is unaffordable, and as the recent CPS report shows, is much more expensive than has been admitted.  Unlike solar, it shows little prospect of ever becoming economically viable.  UKIP would abandon subsidies on all new wind projects (although reluctantly respect contracts already in place).

  1. How will you ensure the UK stays at the forefront as a leader in renewables, particularly offshore? We won’t.  Wind power represents a vast misallocation of resources.  Every “green job” claimed by the industry destroys several value-added jobs in the real economy.  The costs of renewables are undermining competitiveness and driving industries, investment and jobs offshore.
  1. What are your plans for meeting the UK’s 2020 renewable energy targets? Will you set specific renewables targets for 2030? A UKIP government would repudiate these targets, and set no new ones.
  1. What message does your party have for the tens of thousands of people currently forging UK careers in renewables? Your jobs cannot be sustained, and are damaging the economy.  Start planning to work in real, value-added industries, not in wasteful projects that are little more than gesture politics.
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CPS Report vindicates UKIP energy position

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                 “The most expensive policy disaster in modern British History”

For three years now, as UKIP Energy Spokesman, I have been inveighing against the high costs of renewables, and the vast economic damage which they are doing to the UK and the EU.  I have argued that we are driving energy intensive businesses off-shore.  I have documented job losses and plant closures.  And while there have certainly been others, including the  TPA  and the  REF  , who have been making the same points, it has sometimes felt like a lonely furrow to plough – especially in Brussels, where “the fight against climate change” is like a Western form of Jihad, obsessive and destructive, and renewables are its weapon of choice.

So it was refreshing and encouraging to see a new report from the Centre for Policy Studies , titled “Central Planning with market features” (perhaps an archetypal reference to “Socialism with Chinese features”).  This is a magisterial analysis of our energy market, by CPS staffer Rupert Darwall.  CPS is one of the UK’s leading independent think-tanks.

Darwall makes a powerful case that if we want renewables, nationalisation of energy is the best option.  If not, regulators should stand back and let the market behave like a market.  He has a point: I have felt for some time that the level of regulation, and regulatory uncertainly, in the UK energy market has reached the point where investors will simply not be prepared to put up the large sums needed for energy infrastructure projects.  The eye-watering striking price at our new nuclear power station at Hinkley Point C is driven not so much by the underlying cost of nuclear energy as by the risk premium demanded by EDF as a hedge against regulatory uncertainty.

But that vital debate is beyond the scope of a short blog.  I just wanted to share with you some of the points from the CPS report that support positions which we in UKIP have taken on energy.

“(UK) Energy policy …is on course to become the most expensive domestic policy disaster in modern British history. By committing to high-cost, unreliable renewable energy, its consequences will be felt for decades”.

“The result of imposing an arbitrary form of decarbonisation … is that the privatised electricity industry is being transformed into a vast, ramshackle Public Private Partnership promising the worst of all worlds – state control of investment funded by high-cost private sector finance, with energy companies set up as fall guys to take the rap for higher electricity bills”.

“The Government presumed that fossil fuel prices would rise continuously, a view now rapidly being overtaken by falling coal prices and the halving of oil prices”.

We have “a policy framework to encourage renewables that systematically conceals their true costs” … “the costs of intermittent renewables are massively understated … higher plant costs… massive amounts of extra generating capacity (as back-up)”.   “Massively subsidised wind and solar flood the market with near random amounts of zero marginal cost electricity  … impossible to integrate large  amounts of intermittent renewables into a private sector system and expect it to function”.

“To keep the lights on, everything ends up requiring subsidies, turning a once-profitable sector into the energy equivalent of the Common Agricultural Policy”.

You get the picture – and it’s exactly the picture I’ve tried to paint over my last three years as UKIP Energy Spokesman.

One other element of the report is worth mentioning.  The narrative of the old political parties is to blame high electricity prices on “profiteering” by energy utilities, who buy cheap but fail to pass on savings.  The truth is that prices are primarily driven by green subsidies and taxes, and by the fact that we have turned our backs on secure, low-cost generation like coal.  Darwall presents a list of the cost structures of the “Big Six” electricity companies.  And guess what: the average “EBIT” (“Earnings before Interest & tax” – a common accounting measure) is just 2.8% in 2013.  A very modest figure.  So much for Ed Miliband’s plan to save the world – and the hard-pressed consumer – by imposing a price cap.

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Telegraph makes mischief for Suzanne

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There’s an extraordinary piece in Tuesday’s Telegraph saying “The Policy Chief writing the UKIP manifesto (the redoubtable Suzanne Evans) has said she agrees with David Cameron’s position on Europe”.  This is an extraordinarily mischievous piece of misreporting – she said no such thing.

According to the detailed report, she was asked “If you could negotiate reforms you were happy with, would you agree to stay in?”.  This question effectively says “If you were happy with the terms, would you be happy with the terms?”.  Put like that, it’s a truism to which the only answer can be “Yes”.

I’d certainly stay in if we could negotiate the EU down to nothing more than a Free Trade Area based solely on trade and voluntary intergovernmental cooperation, and I daresay that would be Suzanne’s position.  It certainly isn’t David Cameron’s position, and we certainly don’t agree with David Cameron’s position.

First of all, Cameron won’t get any significant concessions.  And secondly, he’ll recommend staying in the EU on the basis of a few minor cosmetic changes.  That is about as far away from UKIP’s policy position as it’s possible to get.  The Telegraph report is frankly disgraceful.

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Open Europe goes native

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         Or is Open Europe batting for the Status Quo?

Open Europe have asked me (quite rightly) to clarify their position: they presented four scenarios, two negative, two positive, for Brexit.  They are quite right to point out that it was the choice of the media, and especially of the Telegraph and the FT, to lead on the down-side.  The media could just as well have headlined their articles “Report shows that Britain could prosper outside the EU”.  I apologise to Open Europe if I misrepresented them in the heat of the moment.

I used to think of Open Europe as a half-way sensible, reliable, euro-critical think tank.  Some of their reports were quite helpful, at least for their data if not always for their conclusions.  So it is disappointing just before a General Election to see them going into over-drive as apologists for Brussels.

First there was their report, a few days ago, claiming that leaving the EU would save only a tiny fraction of the regulatory costs of EU membership, so we’d do better to stay in and renegotiate – a proposition that could have come straight from the spin doctors at Conservative Central Office. They said that EU regulation currently costs £33 billion a year (a serious under-estimate, but let that pass).  But if we left, and (say) adopted the Norway model, as many recommend, we should still be subject to EU rules costing 90% of the current figure.  So stay and fight.

What they have done is to make a great case against the Norway option (which in any case UKIP could never accept, since it involves keeping the EU’s “free movement” rules).  They have not, however, made any case at all against Brexit.  And they’ve sought to give credence to the idea that significant renegotiation is possible.  If you can’t take the word of Jean Claude Juncker and other EU leaders that they will not give way on basic elements of the Treaties, then look at the history.  For over forty years British politicians have been declaring that they would win key concessions in Brussels, but they have failed over and over again, and we are ever deeper in the mire.

Then we had Dominic Grieve saying that any post-Brexit Free Trade Deal with the EU would necessarily imply free movement.  Plain ignorant nonsense, Dominic.  The EU has dozens of free trade deals around the world, and is negotiating dozens more, and only a handful — the EEA deals — involve free movement.

Now Open Europe does it again, headlining the news that “Brexit could lose the UK 2.2% of GDP”.  Even the headline is misleading — it cites the worst-case outcome from four scenarios.  The headlines ignore the best-case scenario, in which Britain gains 1.55% of GDP.  This report (say the media) “represents a significant challenge to Nigel Farage’s demand for Britain to leave the EU”.  OK.  So let’s respond to the challenge.

Of Open Europe’s four scenarios, only one bears any relation to UKIP policy, and that (surprise surprise) is the best-case scenario.  Let’s look at the four approaches:

1        “A hostile exit”: Britain would introduce “strict immigration controls and protectionist trade policies”.  UKIP wants managed immigration, not “strict immigration controls” (I assume Open Europe mean “closing the borders”).  And we are a free-trading party, absolutely opposed to protectionism.  This worst case scenario, that the Tory press has rushed to headline, is wholly unrealistic.  Nor do we anticipate a “hostile exit”.  Our trade with the EU will continue to be covered by WTO rules, and it is inconceivable that we should not negotiate an FTA with the remainder of the EU.

2        The Swiss model: According to Open Europe, this would still be negative (despite Swiss government studies showing that if they joined the EU as full members, like theUK, Switzerland would be much worse off).  But we don’t want the Swiss model, for much the same reasons that we don’t want the Norway model.

3        “Britain would begin to benefit if it signed FTAs with countries such as China”.  Exactly.  And that’s what UKIP would plan to do.  Outside the EU, we should be free to do so.  If little Iceland can negotiate an FTA with China, it beggars belief that the UKwould be unable to do so.

4        “Unilateral free trade” with deregulation.  We’re not sure we’d prioritise unilateralfree trade, but free trade and deregulation are a main part of our agenda, and here we agree with Open Europe that the effects would be positive — though we think that they under-estimate the benefits (including the massive competitive benefit of reforming our energy markets free of EU rules).

In summary, the Open Europe report is partly wrong, partly misleading, and wholly unhelpful.

One final point, particularly relevant in the context of my remark about Iceland.  We are constantly told that EU membership puts us in a much stronger position to negotiate trade deals.  It gives us “clout”.  But those familiar with such negotiations know that exactly the opposite is true.  The EU negotiators are ham-strung by the need to juggle the conflicting interests of 28 member-states, whereas their interlocutors on the other side of the table have to focus on just one country’s interests.  The EU negotiates from a position of invincible structural weakness.

I know this from my own experience in Korea in the early 90s, when I was MD of a Diageo/United Distillers subsidiary.  The EU representative office (I won’t call it an Embassy) back-pedalled on market access for Scotch (and Cognac and other European spirits) so as not to queer its pitch in trying to sell French or German high speed trains for the Seoul/Pusan route.  So much for “clout”.

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It’s The Sun Wot Dun It!

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All of us in politics remember the famous headline It’s The Sun Wot Won It”, from April 11th 1992, when the Conservatives squeaked a narrow and unexpected victory from the jaws of defeat.  But change just two letters, and you have an interesting comment on the current climate debate: “It’s the Sun Wot Dun It”.

On Friday, the day of the solar eclipse, there were widespread reports that the temperature dropped as the Sun was temporarily occluded, and it struck me that this was a telling confirmation of the obvious — that the primary driver of global temperature and climate is the Sun.  You might think that this observation, which I Tweeted, was so blindingly obvious that no confirmation was necessary.  But there are those who believe that the earth’s complex and chaotic climate system can be reduced to a single factor — and that that single factor is an odourless, harmless, non-toxic, invisible trace gas amounting to 0.04% of the atmosphere.  (Although CO2 is of course important — CO2 is vital for live on earth — and the current level is very low in geo-historical terms.  Indeed if it were halved overnight — as I’m sure Al Gore would love to do — plants would struggle to grow, and we’d struggle to eat).

Nonetheless I thought my Tweet was timely, topical and relevant, and an opportunity to draw attention to one of those self-evident facts that is, nonetheless, occasionally lost sight of.

I was therefore fairly astonished when my usual retinue of Twitter trolls went into overdrive to draw attention to my “scientific illiteracy”.  Better yet, the Huffington Post ran a headline “Helmer says eclipse proves that the Sun is heating the earth”?  This after I had received an e-mail from HuffPost Journo Jessica Eglot asking me to “explain my Tweet”.

Jessica, please get your facts right.  I did not claim that the eclipse “proved” anything.  I merely pointed out that the rapid cooling the moment the Sun was obscured clearly illustrated the importance of solar radiation in maintaining the Earth’s climate.  And that, surely, is beyond dispute.  Of course if the Sun were not heating the earth, then the terrestrial temperature would be close to absolute zero, and we’d all be dead.

But perhaps the trolls who accuse me of “scientific illiteracy” should do a bit of science themselves, rather than taking their environmental theories straight from that noted scientist Al Gore (or Railway Engineer Ravendra Pachauri).  They could start by reading Professor Fritz Vahrenholt’s book “The Neglected Sun” .  Vahrenholt by the way started out as a green socialist politician, became an Environment Minister, and ended up as CEO of RWE’s major renewables business “Innogy”.

The fact is that there is a rather good correlation between solar activity and climate — and a rather poor one between CO2 levels and climate.  Particularly striking is the fact that the two particularly cold periods of the Little Ice Age , the Maunder  and Dalton Minima, occurred when the Sun was exceptionally inactive (in sunspot terms).  And as Vahrenholt remarks, the Sun appears to be entering a new quiet phase, which could presage a new cooling period.

More generally, there has been a 1000-year cyclical pattern of mean global temperature for at least ten thousand years, and arguably longer.  The slight warming we have seen in the last 150 years is entirely consistent with that pattern — we need no anthropogenic explanation.  For those who believe that industrial CO2 emissions are driving temperature, they have a problem explaining what drove earlier warm periods long before the Industrial Revolution.

Of course leaving aside the eclipse, solar irradiance is actually rather consistent, which is why the IPPC feels justified in ignoring it.  But work by Svensmark and others has shown that the solar magnetic field (closely linked to sun-spot activity) is highly variable, and appears to affect the cosmic ray flux reaching the Earth.  This in turn affects cloud formation, albedo and climate.

If we leave aside the effects of nuclear decay in the Earth’s core, the Sun is the source of practically all energy on earth.  Even fossil fuels are “fossilised sunlight”, while bio-fuels are last season’s sunlight.  If you choose to believe that a trace gas (actually less significant than water vapour in terms of its greenhouse effect) is more important in determining the Earth’s climate than our friendly neighbourhood Star, you’re free to do so.  But it’s an odd idea.

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The Budget: fiscal triangulation

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Growth: The elephant in the room

 

Most political parties, including UKIP, agree that the UK needs to cut the budget deficit.  And to the extent that George Osborne’s new budget seeks to do that, he deserves half a cheer.  The main thrust of UKIP’s criticism is not that he’s cutting the deficit, but that there was no mention of the immigration issue which is causing massive wage compression at the bottom of the income scale, and damaging the living standards of unskilled and semi-skilled workers.   We also argue that while cuts are necessary, he’s cutting the wrong things — attacking the living tree while ignoring the dead wood.

But there’s also a fundamental misunderstanding out there amongst some of the old parties, especially Labour and the Lib-Dems.  They see the need to cut the deficit, but they regard that as a simple, binary, either-or proposition.  You can cut spending, or you can increase taxes.  Take your pick.  A billion pounds off spending?  Or a billion on taxes?  Simple choice.

Except that it’s not that simple, and it misses a third key factor: growth.  Economic growth has a massive impact on the fiscal position.  Higher growth, with higher incomes and more jobs, has a hugely positive effect on government revenues — to the extent that if we had sufficient growth, we wouldn’t need to cut spending at all.  We in UKIP believe that the best way to stimulate growth is to free British industry from the deadweight of EU membership, of EU regulation, and of EU energy policy.  But leave that aside for a moment.

Even as we stand within the EU, we have to take into account not just two factors but three – spending, taxation and growth.  And of course they interact together – you can’t change one without changing the others. Low growth forces higher welfare spending. But also – and this is the key point that Ed Balls and Danny Alexander entirely miss – higher taxes suppress growth.

So it isn’t a case of a billion pounds off spending or a billion on taxes.  Raise taxes, and growth falls.  So the billion you thought you had gained in taxation is partly off-set by loss of revenue resulting from loss of growth.  And taxation is a business of diminishing returns.  The higher the tax rates become, the more damage any further tax hikes will do.  It’s that Laffer Curve again — and in the view of many economists, we’re already perilously close to the point where tax rises fail to increase revenues at all — but succeed in punishing growth.

So Osborne is right to focus primarily on spending cuts, not taxation, to close the gap.  But that brings us to UKIP’s point: he’s cutting the wrong kind of spending.  Britain’s gross EU contributions are (round figures) £20 billion a year; net £10 billion.  When we leave the EU, we’ll probably save say £15 billion even after we’ve protected the things we’d want to do anyway, like farm support.  The government has ring-fenced 0.7% of GDP — around £13 billion — as foreign aid.  UKIP would keep a smaller aid budget primarily for disaster relief, but we could save say £10 billion.  By dropping the climate paranoia — and the green subsidies — we could make further massive savings.  And dropping HS2 would save a further £50 billion (maybe £80 billion allowing for over-runs).  A billion here, a billion there, and pretty soon you’re talking real money.

But the biggest point of all comes back to growth.  Outside the EU, outside the stultifying regulatory structures, and especially outside the EU’s energy policy, UK growth will be dramatically enhanced.  And growth will be the biggest contributor to deficit reduction.

Memo to George Osborne: by all means cut spending, George.  But cut the dead wood, not the living, growing tree.

Note: UKIP’s 2015 General Election Manifesto will be fully and professionally costed.

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Brave new automotive world

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I’ve just attended a debate organised by CLEPA, the European Association of Automotive suppliers, and I’ve seen the brave new world to which we seem to be heading.  The event took place in the Representation of the Free State of Bavaria, a rather fine building just across from the Brussels parliament.  The German lande mostly have representation offices – in effect, minor embassies – here in Brussels.

There is a plethora of automotive systems with impressive names, from ESC (electronic stability control ) widely available at the moment, to intelligent speed adaptation; advanced emergency braking; lane support; highway piloting; and electronic collision avoidance.  Your 2020 vehicle may not just have parking sensors.  It will be looking forward, backward and sideways, and its systems will be watching like a hawk to take over control of your vehicle in a millisecond if they detect danger (or think they do).

We read a lot about fully automated driving, where the driver can go to sleep or watch a movie during the journey.  And maybe we think of it as a big bang technology, that arrives all in one go.  The industry sees it rather differently – as a series of new technologies phased in over time, each taking over a little more of the driving function, each allowing the driver less engagement and less autonomy, until at last fully automated driving arrives as the last stage of an evolutionary process, rather than a big bang.

So far so good.  They say that this could save thousands of lives every year in Europe, and significantly reduce the frequency and severity of collisions, so I suppose we should all welcome it.  Yes but…..

For those of us who still regard driving as a skill and a pleasure, we see the prison doors closing around us.  In these new connected, interactive vehicles, information is potentially available to manufacturers, to insurers, to the police.  Privacy is lost.

The industry insists that data protection will apply, so you’ll be able to control who gets this information – but for how long?  Already some cars are coming with systems capable of communicating with manufacturers.  You don’t have to agree to the information being passed on – but some manufacturers’ services will be limited in the case of owners who don’t agree.

But insurance is the big problem.  Of course you’ll be able to deny your insurer the information about your driving (and some of us brake harder, accelerate harder and corner harder than many insurers would like).  But how long before the insurers start denying cover to those who choose not to share the information?  Or demand exorbitant premiums from those who exercise their right to privacy?

I’m afraid I see no stopping this process.  In this brave new world of surveillance, Big Brother will be watching you all the time.

On another subject, I think someone needs to mention to the Free State of Bavaria that you can’t be a Free State while you’re also a German land.  Nor can you be a Free State within the European Union – a point which someone might also mention to Alex Salmond.

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