Tackling Fuel Poverty OR Tackling Climate Change

John Leech, MP for Manchester Withington makes a valiant, but failed, attempt to reconcile tackling fuel poverty with combating climate change. The reason’s why such an attempt will always fail are as follows:-

  1. Reducing carbon emissions by 80% will mean moving into zero-carbon fuels. Nuclear power is the cheapest alternative, but still more expensive than fossil fuels, especially when decommissioning at the end in taken into account. Other alternatives – wind and solar – are not only astronomically more expensive per unit produced, but also increase the unit cost of back-up fossil fuel power stations.
  2. Then we have the carbon trading schemes. These act as a cost to pollute. They will only become effective if they are made much scarcer and therefore much more expensive.
  3. For the poor, we could then give them huge grants to insulate their homes and get more fuel-efficient heating systems. However, although some gains can be relatively cheap (loft insulation and thermostatic controls on radiators), the costs mount steeply to gain large reductions. Replacing boilers and radiators, putting in new doors and windows, or cavity wall insulation, are all highly expensive. The payback period is many years, or in some cases not at all (with interest costs taken into account).
  4. The elderly are disincentivised to reduce consumption by the winter fuel allowance. Yet rising fuel costs will lead to calls to increase this subsidy as well.
  5. Whilst in the UK we pay through the nose for non-fossil fuels, oil prices will continue to rise as demand from developing countries continues to increase.

 

Fuel poverty will only reduce substantially if fuel costs come down. That will only happen if someone comes up with a cheaper, clean alternative to fossil fuels. That will not happen for a generation or more. Subsidising alternative energy sources that will always be much more expensive than oil is currently may divert attention away from that search. It is the poor who will suffer from most.

Prejudiced economic analysis in South Manchester

Have responded to a letter in the South Manchester Reporter of 3rd June.

GM’s letter of last week is prejudiced against a small minority and ignorant of economics. The need to cut is mostly due to the government running up a deficit during the boom years, and then going on a wild spending spree to try to shore up the vote as an election approached. (The cyclical part will be (mostly) taken care of by a strong economic recovery.) So in this area, we can look forward to some shiny new trams and gleaming school buildings along with a generation of cuts to pay for it. For instance, the £120m for the Didsbury spur of the Metrolink alone is equivalent to over 30,000 teachers and nurses doing without a 3% annual pay rise for five years.

The consequence of this fiscal irresponsibility is not just financial. People will lose their jobs or have careers de-railed, others will be made ill through over-work, or through seeing their livings standards fall salaries are frozen, whilst taxes, prices and interest rates rise. Rather than opposing cuts now, people should look to areas where they are least painful. That means shelving some of the recently signed-off “investments”, such as the extra bus lanes on Wilmslow Road; less government advertising; or finding better value for money in the provision of local services. The consequence of not doing so is even bigger cuts later, and lower living standards for the next generation.

But why call somebody prejudiced and ignorant? I quote

“Once again, those who really control the wealth and power (the gambler’s in our casino economy and the obscenely wealthy) have demanded that their government makes the poorest people in society pay for the economic crisis.”

 

“….John (Leech MP) will no doubt remind him (The Chancellor) that the multi-millionaires are unlikely to feel any effect whatsoever from the cuts to education, benefits and the health service that will inevitably follow in 2011”

The underlying cause of the recession, I believe, are:-

–         The prolongation of the last boom through cutting interest rates after the dot-com bubble burst in 2000, and again in 2001.

–         Failure to raise interest rates in 2003. This would have been very difficult politically.

–         Failure of the regulatory authorities to realise the systemic risks building up in the financial sector, and the risks building up in individual banks.

–         Deficit spending in the boom years, which kept the boom going at the expense of creating structural deficits.

–         Political spin, and dubious accounting (PFI contracts to put liabilities outside the National Debt figure), to hide the reality.

Whether I have highlighted all the points, I am sure to be closer than someone who just blames the rich. The reason is that I, at least, attempt to understand the issues.