Improving the Climate for Business

The history of the fuel-duty escalator in the UK was a chequered one. Rather than energy policy being determined in the public good, and with respect for the planet, it became an area of political in-fighting and corporate bullying. The fuel protests of 2000 frightened politicians away from a responsible policy of a steadily increasing fuel price.

But perhaps we could go one better. Perhaps we could set an upward trend in fuel prices that would not only send a clear signal to markets that carbon-based energy would only get more expensive, but also support them by ensuring a consistent upward trend, removing the volatility that increases business costs by making long-term planning so difficult.

Price volatility presents a major hurdle to the business and public-sector investment in renewable sources of energy that can serve as an alternative to oil, as well as a hurdle to investment in efficiency measures, conservation, and the general re-ordering of our society to be less energy intensive. A stable oil price across the UK would be a huge support to business. The idea of the policy would be that the government would relate fuel tax inversely to fuel prices, so that it would suffer the volatility rather than business and customers, who would none the less face a steady upward trend in price.

The Conservative government introduced a ‘fuel price escalator’ in 1993, ensuring that the annual increase in fuel duty would be initially 3% and later 5% greater than inflation. This was explicitly intended to help the UK achieve its Kyoto targets. According to the UK Treasury in 2000, ‘The road fuel escalator was a major success in helping the UK to meet its Kyoto commitments. It is estimated that the increases between 1996 and 1999 will have saved 1 to 2.5 million tonnes of carbon by 2010.’

By 2000, the UK had the most expensive fuel in Europe, with fuel tax representing over three-quarters of the price paid at the pump. These relatively high prices led to protests by truckers, including the blockading of key oil facilities and food shortages, which caused the government to announce the end of the escalator in November 2000.

Fuel duty contributes around £18bn. annually to the UK Treasury; it is collected nationally and is not hypothecated. UK consumers pay an additional sales tax (VAT) on fuel, currently at a rate of 17.5%. A specific form of ‘red’ diesel used by those in agricultural and construction sectors has a much lower rate of tax and aviation fuel is not taxes.

In 2008, the UK Chancellor announced that he would postpone the increase of 2p per litre in fuel duty, to support businesses who were struggling with the combination of increases in oil prices and the credit squeeze. However, this policy has not been changed as oil prices have fallen, indicating that the UK government’s approach to fuel duty is still short-termist and essential political, with no seeming motivation towards encouraging the move towards a low-carbon economy in the long term.

The proposal suggest a simple policy with a simple goal: to set a clear upward trajectory for the price of the major input to most industrial companies—that of their fuel. This would support investment in the transition to a low-carbon economy and remove much of the uncertainty that the Stern Review found was prohibiting such investment.

What are the political implications for such a tax proposal? Although any suggestion that fuel prices might increase is likely to be greeted with horror by the corporate oil lobby, it could be demonstrated to be to the benefit of ‘business’ who appear to be the main political constituency these days. As a proposal which is actually a pro-environment measure, but can be framed as a pro-business measure, it could be very attractive to a party wishing to brush up its green credentials without threatening the business lobby. The proposal would also help to level the playing-field between the large corporate players in the economy, who can hedge the cost of their fuel, and the smaller players who suffer most from price volatility.

Of course a government that can introduce such a measure can also abolish it, and the impact on individuals might be unpopular, particularly if there were no parallel measures to protect the more vulnerable against fuel poverty. However, making a clear commitment to removing fuel price volatility could be a virtuous spiral—initially it would give businesses and individuals an incentive to invest in low-carbon developments, but once they had, they would then have bought in to the measure and would be less likely to lobby for its repeal.

What the breakdown of international negotiations over CO2 reductions has made clear is the difficulty of agreeing a policy to deal with this most important issue. The danger for the countries who industrialised first—such as the US and UK—is that they have become so dependent on fossil fuels that they are finding it difficult to adapt. The most powerful argument in favour of making the changes that human survival requires—especially at the corporate level—is that failing to do so will rapidly undermine the power of business in this new century, which will be the century when fossil fuels cease to drive our economies. Thus a policy which encourages the fossil-addicted businesses in those countries to invest in the new future, by removing oil price volatility, could make high-taxing strong central government the true friend of the corporate sector.

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Diverting the Currency Wars

Robert Skidelsky joins the debate about the need for a neutral global trading currency, but this time in the Financial Times which is also available at his personal website. This is the Green Party's policy and was proposed by this blog for the last G20. Skidelsky, being an unreconstructed Keynsian, has not included the planetary limit in his thinking; the EBCU proposal would do this. China will be arguing for a neutral currency, issued by the World Bank, as it has been doing for some time. We should put our energies behind this call, but with the additional twist of a currency that keeps trade and production within environmental limits, as well as bringing balance and equity.


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Gilts and Boars

Now that our national strategy of using finance to energise the economy has been seen so spectacularly to fail, the favoured option of the pro-capitalist, pro-globalisation ideologues is to follow the export-led growth model. Hence our Business Secretary Vince Cable, together with the Prime Minister and several other cabinet members, has headed off to China to advertise what real products we have to sell. The wares as advertised are a motley collection with a resonance of the Sunday-morning car-boot sale. Much of what is on offer, from randy pigs to shit treatment, is distinctly unglamorous. We can only assume that there are major arms deals behind the scenes to justify the cost in sparse sterling and carbon emissions.

Vince Cable has drawn attention to three items which make it intensely challenging to take seriously the Coalition's claim to be the greenest ever government: Jaguar cars, tourism, and education. The environmental impact of encouraging China to consume more in these three areas is deeply disturbing. Latest World Bank Figures show that only 22 people in every 1,000 in China own a car, compared with 463 in the UK. To you this is a relief; to Jaguar it is the biggest market opportunity in the world. You can almost hear them salivating.

In my own sector, education, the encouragement of Chinese students to learn in the UK represents an alternative to supporting our own students in higher education. But the environmental consequences are equally stark. Each return flight a Chinese student takes creates around 5600 kg of CO2, some five times the annual limit under the Contraction and Convergence framework that the Liberal Democrats apparently support. Many of our students travel home and back more than once in a year.

The composition of the trade delegation is also unsurprising. According to the Washington Examiner, the businessmen on the trip include executives from Royal Dutch Shell PLC, Tesco, Barclays bank and Diageo. This is a recovery strategy designed by corporations to serve corporations. Little help here for the struggling small business in a provincial town.

China's dominance in material production is recent; its contribution to spiritual wisdom is ancient and still valuable. Here, in the words of Lao Tzu, Cameron might acquire some strategic guidance:

'When rulers take action to serve their own interests,
Their people become rebellious;'

Verse 75, Tao Te Ching


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Down to Earth

The Politics Show West made an interesting film about global growth vs. local sustainability as responses to the economic crisis. I then got to debate the film in the studio with an investment specialist. It is on iPlayer here (after 29 minutes)

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Ignoble Strife

There was a difficult choice of entertainment for me on Thursday night. We had a meeting about the cuts here in town organised by the the Socialist Workers Party while Channel 4 was advertising a professional butchery job on the green movement. The first would be the talk of our town, and the second was bound to play the same central role amongst the e-debates I am party to. I think I made the right choice: I spent Thursday evening watching John Schlesinger's 1967 film version of the Hardy classic Far From the Madding Crowd.

I suppose it is an advantage of being involved in politics for a number of years that you pick your battles. I now choose those where I think I can make a difference and avoid those that will only frustrate and depress me. We know that our vision of the future does not include dominant media corporations, so we cannot expect to receive a fair hearing from them. To suffer frustration as a result of one's own naivety is an unnecessary loss of energy that we can ill afford. The reason Mark Lynas is given so much air-time is not because he is smarter or better informed than we are, but because his views do not challenge the status quo.

For me, the most serious impact of an unresponsive and biased media - as with an unresponsive and biased political system - is that if you spend too much time immersed in it you begin to believe that it is the central point of public opinion. My visit to Plymouth University yesterday to give the staff research seminar made me realise how I had misjudged where most people are in their thinking about the state we're in.

I went in my role as ideas merchant, with my barrow resplendent with bioregional economics, community farms, and other local produce from Stroud, and attempting to convey conviviality with every fibre of my being. There was the inevitable 'Are you a communist?' question, but for the most part the responses from the audience (and three quarters of the packed room was made up of students) were sensible questions about power and tactics.

Encouragingly, I was asked about the fractional reserve banking system, and my answer, during which I pulled no punches ideologically or intellectually, was clearly understood by a significant minority of the audience and received a smattering of applause. I left feeling encouraged, and that the thinking people of this country are on the move. We are struggling with a monopolistic information system dominated by one hegemonic idea: that the market system is supreme. But out in the country this is not believed, the information is not trusted, and its purveyors are losing credibility.

As for Mark Lynas, I recently debated the issue of climate change policies with him on a public platform. He was relentlessly arrogant and disparaging and I had to call on all my Quaker training not to respond in kind. He explained how he had solved the CO2 problems of the Maldives - apart from the tourist flights that underpin the country's economy, which will require a little more techno-fixing.

During the panel discussion we clashed over figures for emissions of CO2 per head and, after we had finished, I asked Mark where his were from, knowing that my own were pretty out-of-date and China is moving fast. He told me he uses Wikipedia as his source. There is pride amongst ideas merchants, and this immediately told me he is the intellectual equivalent of Delboy, interested in the deal rather than the quality of the product.

The title of the Hardy novel comes from Gray's Elegy, a poem whose theme is redolent of the balanced sense of the modesty and lack of self-importance that country living brings, and whose whole tenor is the antithesis of the modern media culture. I like to think that my decision to watch the film rather than watching the documentary represents a decision to be reminded of the deeper wisdom of our ancestors rather than pure escapism.
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Plutocracy

If you can bear to take a visit to the Daily Mail, you may find something of interest there, with evidence of the extent to which we really are all in this together. Tweet

Time is money

When Robert Owen introduced the idea of time money to the world with the launch of his Equitable Labour Exchange in 1830, he was inspired by the injustice of the fact that the money system enabled the powerful few to steal the value created by the powerless and overworked many. As I wrote in an account of Owen's radical banking activities published to mark 150 years since his death, 'The inspiration for Owen’s unpredictable journey to understand and reform money was his concern to achieve justice for the working person, and an understanding of the nexus that, within a capitalist economy, links money, work and inequality.'

The Tories blundering proposal that those who 'volunteer' to help elderly people will be given 'care credits' that they can then invest for 50 years and claim on to pay for their own care in due course demonstrates clearly the paradox of the Big Society. I have nothing but praise for genuine time banks, where local people share services and the local community is strengthened. But an attempt by the state to intervene in such schemes can only serve to undermine their credibility.

Once 'volunteering' becomes institutionalised and rewarded through an official alternative money system it is no longer voluntary but a poor substitute for a national system of essential public services. The world before such public services was a world of gross injustice, where political and economic power lay in the hands of the few and mutual aid was the only hope of a dignified life for working-class people. Political action led to the taming of the market and a fairer sharing of its product in parallel with the growth of the public sector and we should not now let our concern to defend what is public prevent us from campaign with equal energy against the theft of economic value in the private sector.

The fire of injustice that spurred Robert Owen to create his own money lives on as an inspiration for the Co-operative Bank, which says on its website, 'Owen argued that the acquisitiveness of capitalism encourages deception and the dehumanisation of others. This is especially so where employers fail to give either customer or worker full value for money as they cut corners in their quest to acquire as much profit as possible for themselves.' This is the real purpose of time-based money schemes: to humanise and introduce justice into the private sector, not to provide a diversion from the destruction of the public sector. Tweet