Promote industry. Bag a banker.

Boris Johnson is quoted in MoneyWeek as having said to Management Today:

"To the banker bashers I say, what's your economic model? We can't ignore and hate the bankers. What would that achieve? Show me how reducing financial services boosts manufacturing."


For years, the UK ran a massive balance of trade deficit, i.e. as a nation we bought and consumed more than we produced and sold. It is no more sustainable for a nation's income to exceed its outgoing than for an individual.

Bureaucracy for beginners

What do they teach these people on Oxbridge human sciences courses? First the Cameroons demonstrate their ignorance of what it is that is holding British business back (clue: it isn't that it takes 14 rather than 7 days to register a business). Now, with their plans for "worker co-operatives" to run public-sector services (echoing their calls for a "post-bureaucratic age"), they demonstrate their ignorance of the difference between bureaucratic management and profit (or commercial) management.

It looks like George has been reading the wrong book.

Osborne for Dummies 

Here's a tip, George: try Ludwig von Mises' Bureaucracy, and then you'll understand what profit management means, why it is preferable but not always suitable, where bureaucratic management is necessary, and how it operates on an entirely different basis to profit management. It's only a little book, and a better introduction to real economics than any mainstream textbook or Oxbridge course. Excuse me for quoting at length, but it has never been more clearly explained (and the Tories obviously need it spelling out in very simple terms):

Bureaucratic management is management bound to comply with detailed rules and regulations fixed by the authority of a superior body. The task of the bureaucrat is to perform what these rules and regulations order him to do. His discretion to act according to his own best conviction is seriously restricted by them.

Business management or profit management is management directed by the profit motive. The objective of business management is to make a profit. As success or failure to attain this end can be ascertained by accounting not only for the whole business concern but also for any of its parts, it is feasible to decentralize both management and accountability without jeopardizing the unity of operations and the attainment of their goal. Responsibility can be divided. There is no need to limit the discretion of subordinates by any rules or regulations other than that underlying all business activities, namely, to render their operations profitable.

The objectives of public administration cannot be measured in money terms and cannot be checked by accountancy methods. Take a nation-wide police system like the F.B.I. There is no yardstick available that could establish whether the expenses incurred by one of its regional or local branches were not excessive. The expenditures of a police station are not reimbursed by its successful management and do not vary in proportion to the success attained. If the head of the whole bureau were to leave his subordinate station chiefs a free hand with regard to money expenditure, the result would be a large increase in costs as every one of them would be zealous to improve the service of his branch as much as possible. It would become impossible for the top executive to keep the expenditures within the appropriations allocated by the representatives of the people or within any limits whatever. It is not because of punctiliousness that the administrative regulations fix how much can be spent by each local office for cleaning the premises, for furniture repairs, and for lighting and heating. Within a business concern such things can be left without hesitation to the discretion of the responsible local manager. He will not spend more than necessary because it is, as it were, his money; if he wastes the concern's money, he jeopardizes the branch's profit and thereby indirectly hurts his own interests. But it is another matter with the local chief of a government agency. In spending more money he can, very often at least, improve the result of his conduct of affairs. Thrift must be imposed on him by regimentation.

In public administration there is no connection between revenue and expenditure. The public services are spending money only; the insignificant income derived from special sources (for example, the sale of printed matter by the Government Printing Office) is more or less accidental. The revenue derived from customs and taxes is not "produced" by the administrative apparatus. Its source is the law, not the activities of customs officers and tax collectors. It is not the merit of a collector of internal revenue that the residents of his district are richer and pay higher taxes than those of another district. The time and effort required for the administrative handling of an income tax return are not in proportion to the amount of the taxable income it concerns.

In public administration there is no market price for achievements. This makes it indispensable to operate public offices according to principles entirely different from those applied under the profit motive.

There is much more of similar insight and clarity in this little book, which I urge you to read (it's worth buying, or available to read online if you prefer). But hopefully you get the drift. An understanding of and preference for markets does not imply rejection of bureaucracy where necessary, but it does require an understanding of the critical differences between them. Someone with a real understanding of markets can easily distinguish between the activities where markets are the best means of coordinating social cooperation and the activities where the conditions necessary for markets to work are not present and where bureaucratic management is therefore necessary. In fact, many people unencumbered by an Oxbridge education would probably have a reasonable intuition of which type of management is best to apply in many cases. But the Tories (and Philip Blond, the "Red Tory" who originated this nonsense) are so sophisticated that they believe they can breed exotic hybrids from markets and bureaucracy to coordinate activities in private- and public-sector activities. Of course, they end up with a mule.

Banking on the taxpayer

Third in the list of this week's bad policy ideas* is the revival of talk of a state-owned or -backed infrastructure bank. The FT wrote approvingly of how both major UK parties are considering this option:

By reducing the risk to investors, it could bring down the cost of capital for the industry and hence the ultimate cost to consumers... 

The bank could fund projects such as nuclear plants and wind farms, spreading the risk over a range of investments and issuing bonds that could carry tax advantages and possibly a state guarantee...

In return for the cheaper funding, the industry would have to accept tighter regulation, moving away from the UK's free market for energy towards a framework of returns agreed between companies and the regulator.

The Conservatives' New Economic Model, launched on Tuesday, promises:

We will create Britain’s first Green Investment Bank, which will draw together money currently divided across existing government initiatives, leverage private sector capital to finance new green technology start-ups and back the bright ideas of the future. Lord Stern has agreed to advise us in the creation of this Bank. 

It turned out that Lord Stern had agreed no such thing, thank goodness (haven't the Tories noticed that fewer and fewer people think the Stern Review's approach to carbon valuation holds water?). But that's just a sideshow. The point is that, with or without Stern, the Tories are quite committed to the concept.

Meanwhile, Labour (according to the FT) is:

considering such a bank as a way to raise funds from long-term investors such as pension funds

It looks like most of our intellectual class thinks we need goverrnment-managed lending to deal with the difficulties of long-term investment in infrastructure. They are wrong. We need to deal with the reasons that businesses judge there to be insufficient reward to justify the risk of investment in infrastructure, not preserve those inefficiencies by hiving off a chunk of the risk to taxpayers, pension-fund beneficiaries and the like. The following is an attempt to explain how and why.

Attack or surrender in the battle of ideas

In the long run, it's ideas that matter. And they aren't all equal. Truth is not subjective, and neither are right and wrong. Political tactics and novelty may seem all-important to the chattering class, but expedient can never make wrong right, or prevent reality from finding ways around illusion. Tactics and rhetoric can endlessly extend and exacerbate the harm that is done by bad ideas fighting a Canute-like battle against the tide of reality. They may prevent good ideas from being heard, understood and implemented. But they can't stop the effect that the true concept describes.

Most modern think-tanks are engaged in the political battle. Their ideas are superficial, inconsequential and often nonsensical, and developed in pursuit of a political objective, rather than the truth. Organisations like IPPR and Policy Exchange are window-dressing in the political shop-front. They may be effective in terms of short-term political influence (though effective may not be the right word to describe justifying concepts that their audience had already assumed to be true), but their shallow ideas will mostly fail in practice and be forgotten in due course.

The IEA exists for a different purpose. It exists to fight the intellectual, not the political battle. It does not trim its sails to the political wind. It has no political or commercial affiliation, although critics on the left often assume that it does, seeing everything through tribal eyes as they do. Its purpose is to preserve and promote the classical-liberal philosophy, and explore the ramifications of that philosophy for our understanding of policy, history, economy, society, etc.

At least, that's what I understand the purpose of the IEA to be, and that is why I am proud to support it. So what am I to make of the following bit of tittle-tattle in this month's Prospect magazine?

"the grandest name on the right, the libertarian Institute of Economic Affairs (IEA), finds itself in crisis. This June it gave director John Blundell the heave-ho. Officially, it was time for the long-serving Blundell to move on. Unofficially, his failure to impress team Cameron took its toll."

John's departure was indeed unheralded, and there has been little effort to pretend that the usual platitudes are the real reason for his departure. Despite the absence of any more credible explanation, I was prepared to give the trustees the benefit of the doubt that they had good reason and had made the change in the best interests of the Institute and its objectives. But "failure to impress team Cameron" is not a good reason, and bringing in someone more to team Cameron's taste would not be in the best interests of the Institute.

The most likely explanation is that Prospect's diarist is talking out of his backside. He goes on to attribute Philip Blond's departure from Demos to the fact that "senior Cameroons were unconvinced by Blond's philosophical style". I don't know whether Prospect has an inside line at Demos, but it's unlikely that it has one at the IEA (they're not exactly on the same philsophical wave-length). The juxtaposition of these stories makes it look like the author wants to puff the influence of the Cameroons, whether at their instigation or not we cannot know. One gets the impression that it wouldn't be out of character.

But in the unlikely event that there is some substance to this rumour, the trustees would have made a serious misjudgment. We would be in quis custodiet ipsos custodes territory. Not because they decided it was time for a new Director, but because of the reason for that decision, and what that would imply for the direction they wanted the Institute to take in future. The IEA should not seek the approval of the Cameroons or any other group. The IEA should promote its principles and ideas as strongly as possible, but it is largely out of the IEA's control whether those principles and ideas find favour with leading political figures. After all, only for a small part of its history has the IEA found itself in this happy position. Should they have replaced Ralph Harris or Arthur Seldon because their ideas didn't generally impress Harold Macmillan or Ted Heath? If the IEA finds itself in philosophical opposition to the dominant group in the Conservative party, far from seeking approval and compromise, it should do its best to reveal why that group's philosophy is mistaken, and to provide intellectual artillery for those in any party (or none) who agree with the IEA's point of view, whether or not they are in control of the party.

Too many Cameroons have been soaked in the swamp of paternalism and positivism that is an Oxbridge or LSE human-sciences education. Too few of them have spent long enough outside politics to gain a first-hand understanding of the pernicious effects of well-intentioned government intervention. There is nothing that anyone at the IEA or elsewhere can do about that except point out their errors, promote a better alternative, and wait either for a conversion or (more likely) for their failure and replacement.

The remorseless decline of tribal socialism

My copy of Dan Hannan and Douglas Carswell's book, The Plan, arrived today. Haven't read much yet and don't agree with all that I've read, but all the same, if you haven't got a copy, you should. It's well worth the read, and more right than wrong.

Something struck me about a graph of voter turnout in UK general elections, early in the book. It looked like Conservative wins were generally on higher turnouts than Labour wins. I thought I'd check.

What follows is not strongly statistically significant, but it's not insignificant.

My impression was confirmed by the figures. Since the war, the average turnout at elections where the Conservatives won was 76.4% and when Labour won was 72.5%.

In collating the figures and looking for an explanation, some other trends suggested themselves. The Labour vote appeared to be much more consistent than the Conservative vote. And indeed it is. The standard deviation in the Conservative vote is 1,932,000, whereas the standard deviation in the Labour vote is 1,393,000. The standard errors from the linear regression lines show similar but even stronger outcomes (1,955,000 for Conservative, 1,224,000 for Labour).

Graph of votes for 2 main parties in UK elections since 1945

And even this overstates the variability of the Labour vote, due to two extraordinary performances (one good, one bad) in 1983 and 1997 (the reasons for which are well known and not representative of Labour's performance under normal circumstances). Without these two, the standard deviation in their vote is only 1,122,000, whereas you can take the two most extreme performances by the Tories out of the equation and the variability of their other performances would still be such that their standard deviation would be around 1,600,000, much higher than Labour's all-inclusive figure.

The consistency of the Labour vote made it relatively easy to spot another trend. Their vote is heading quite remorselessly downwards (with the exception of 1997), even as the voting population increases. So, statistically, is the Tories' vote (though marginally less so). But in the Tories' case, this trend is dominated by their dismal performance in the last three elections, again for reasons that are well known. Taking those performances out of the equation, the Conservative trend is somewhat upwards, whereas the Labour trend remains unremittingly downhill.

Some highly-speculative conclusions suggest themselves to me.

  1. The Labour vote is more tribal and dependable (and, I am tempted to say, unthinking).
  2. Elections are won or lost by the extent to which non-Labour voters are sufficiently alarmed by Labour to turn out for the Tories, or sufficiently disillusioned with the Tories to stay at home and let Labour win by default. With the exceptions of '83 and '97, the electorate seem to swing to or from the Tories, much more than they swing to or from Labour.
  3. Labour may not be able to rely on disillusion with the Tories bringing them back to power in the future, as their core vote is declining, and they don't usually pick up much of a swing vote. Recent events won't have helped.
  4. Going by the trend, even with a fair wind and a competent and likeable Prime Minister, they would be doing well to pick up 10,000,000 votes at the next election. If they are out for more than one term, their core vote may be down to 9,000,000 and that will rarely be enough to win an election, even against an unpopular Tory party, and even if the Tories don't correct the constituency boundaries that are currently gerrymandered to Labour's advantage.
  5. Labour are unlikely to have a fair wind between now and the election, and they bottled the chance to ditch their incompetent and contemptible Prime Minister, so 8 to 9 million votes looks like a realistic expectation for the coming election.
  6. If the last three elections were representative of a sustained trend, but assuming that Cameron will come in above trend, the Tories could expect upwards of 11 million votes.
  7. But the last three elections look like aberrations rather than part of a trend to me. If so, the Tories have a decent chance of being in the 12 to 14 million range for votes. Psephologists may doubt the likelihood of such a strong swing, but 1997 demonstrated that something of that scale is possible, and Brown's government is every bit as unpopular as Major's was, Brown is personally much less well-liked, and Labour won't be able to point to three years of strong economic performance and good guardianship by a judicious Chancellor.

Unless the Tories self-destruct or Brown gets his economic miracle, this highly-speculative, statistically-weak analysis hints that Labour may be about to get drowned by a democratic tsunami greater even than the media have been starting to suggest.

Good on the British people. It may be slow progress, but it seems that each time we give the socialist alternative a chance and discover what a disaster it is in the long-run, a few more people learn the lesson and don't forget it again. They may still be susceptible to all sorts of woolly, interventionist, paternalist nonsense from wet, one-nation Tories, but at least they have recognized that the socialist snake-oil doesn't work. I haven't felt so optimistic in a long time - not about the political options that we have at the moment, but about the fundamentally-sound economic sense of a good swathe of the British public, despite all the best efforts of our intellectual class. It confirms my belief that British voters could be persuadable to support a genuinely-economically-liberal party, if one were to present itself to them.

That's not a pensions crisis. Want to see a real pensions crisis?

A couple of weeks ago, I went to a drinks party for a Climate Campaign organized by the Conservative Energy & Climate Change team. The crowd was amiable enough - mostly pin-striped types with a leavening of tweedy country squires and the odd celeb, as one might expect. But the level of bullshit was off the scale. And I'm not principally talking about the politicians, though there wasn't much substance to their words. I am talking about the guests - the people the Tories are talking to and apparently listening to on energy and climate policy.

One squire told me about the Energy-from-Waste (EfW) project that was planned for his neighbourhood, in which he was involved. This was not any old EfW project. It was a full-blown, cloud-cuckoo, mad-hatter's EfW project. Though located in the sticks, it was going to take twice as much material as the giant EfW plant that has just been built near Heathrow. It wasn't going to use conventional technology (like the Heathrow project), but gasification - a technology that people have been trying and failing for decades to implement commercially to run on waste. And this was not "vanilla" gasification (which is unproven enough for waste), but a particularly high-temperature version known as plasma technology. It wasn't just going to take municipal solid waste (MSW - the stuff in our bins), but waste straw and other agricultural residues and energy crops (which was where the squire came in), despite the fact that this plant would be located around 30 miles from one of the biggest existing straw-burners in the country, which had so distorted the market for waste straw when it was commissioned that it had pulled in material from a 150-mile radius. By some magical means, it would produce absolutely no waste by-products at all - not a tonne of char, tar or contaminated recyclate would need to go to landfill. And this, I have since discovered, was the scaled down version - it was originally intended to be twice as big, using technology from a different supplier (who had never built one before to demonstrate the commercial and technical feasibility of the concept). But most worryingly, though this fantasy project using unproven technology was expected to cost £200 million (according to the squire; £250 million, according to my subsequent research), they already had three-quarters of the funding in place, and had funders falling over themselves to provide the final 25%. Or so he said. I don't know if he had been fooled, or if he was trying to fool me, but someone somewhere was being kidded in a big way.

But perhaps he was just a lone fantasist. Or so I hoped until I spoke to a pin-striped type who ran a green-energy investment fund. I suggested to him that his difficulty would be finding enough projects that were solid enough and offered a good enough return to satisfy his investors, and that as a result he might have to be settling for less than ideal average returns. Not so, apparently. It seems that the world is awash with attractive, solid, green-energy projects, to the extent that he was confident of averaging 24% returns. That is some performance, when one considers that none of the renewable-energy companies that I am aware of is delivering figures like that, nor indeed many companies of any description. "Carbon prices" are low, support for mature technologies is being reduced, and estimated costs of immature technologies are being repeatedly increased. T. Boone Pickens has just knocked his plans for the biggest wind farm in the world on the head because he couldn't make it stack up, despite levels of support that have been making America the favourite country for new wind developments. Nothing in the world of green energy or the wider economy gives grounds for optimism, and yet this fund-manager was confident of returns to make a speculator blush.

But what was really concerning was the type of fund he ran. He claimed his fund acted as a middle-man to bridge the gap between pension funds and green-energy developers. If he was telling the truth (a big "if"), the money that he was taking to invest in these mystery projects, was money that ought to be invested in the safest, dullest investments available. But instead it was going into high-risk (whatever he claimed, you don't get 24% returns with low risks) green-energy projects promising returns that no experienced developer in the sector would believe remotely feasible.

Perhaps the room was just awash with fantasists, and the finance was not in reality so easily available for their fantasies as they claimed. In that case, we need "only" worry about the sort of advice that our probable future government is being given. This tone that there is easy money to be made in energy and climate change, and that the City can deliver masses of investment, profit and jobs in the sector if suitably encouraged certainly chimes with the Tories' policy pronouncements in this sector so far.

But just possibly, people in the City really believe this (as well as the Tories). The room was certainly throbbing with optimism. And there were a lot of pin-stripes there. And you can certainly find reports prepared by consultants that could justify this sort of delusion, if you were ignorant enough of the practicalities that you believed the consultants' bullshit. Could these people be representative of a City view that genuinely believes, despite never having built anything real in their lives, that longstanding technical obstacles, energy-price volatility, and sovereign risk from inadequate, badly-designed, micro-managed, government interventions, are details that can easily be overcome through a combination of their cash and their genius?

Replacing the state with charity and community action

This is a mantra of the right. Martin Vander Weyer voiced a fairly standard version in today's Sunday Telegraph:

Those reductions of state provision will be met in part by a reinvigorated voluntary sector, to which the retired and unjobbed middle classes will happily turn their energies. In the new austerity era, local community activity of all kinds could become "the new shopping" or "the new going on holiday". It is even possible to imagine a return to a lost age - an idealised version of the late Fifties, when Harold Macmillan told us we'd never had it so good - in which neighbourliness and mutual respect will count for more than greed and envy

This is pretty standard fair for the Conservative Party now, who are very keen on the "Third Sector" delivering more of what the state currently delivers. Even my friends at the IEA and other classical-liberal think-tanks support the replacement of the state by voluntary and not-for-profit groups in many sectors, including health and education.

Just one problem. The Third Sector cannot fund itself. It has to be paid for, from that small proportion of proceeds that can be spared in a competitive market by businesses and their employees. By definition, the Third Sector is dependent on outside funding, whether as a charity or a not-for-profit organisation. The availability of that funding is closely linked to levels of prosperity and disposable income. The straitened circumstances (such as at present) in which we are likely most to rely on these organisations, should they take over from the state, will be circumstances in which these organisations cannot raise enough money to maintain the services that they were able to provide in better times.

Many on the right like to rely on the deus ex machina of the voluntary sector to pretend that we can reduce the size of government and still have as generous social provision as before. This is a lie.

Even when times were good, if we relied on the voluntary sector to provide services, market information would be as obscured as it is in the public sector. And little money would be freed (we might expect it to be a little more efficient than the state, but those who have seen how charities are run would not expect a huge improvement); it would simply be diverted from the tax bill to the charitable-contributions item of domestic spending. In reality, of course, we would all find, if we weren't feeling flush, that this was the first item of expenditure that could be cut back.

That is exactly what is happening at the moment. How could anyone have imagined otherwise? If we don't have enough money to pay the bills, charitable contributions will be straight out the window. And even if we have some residual income after necessary expenditure, if we are insecure about our jobs or the economic future generally, then we will be inclined to save that residual income rather than give it away.

The reality is this: the state will have to become less generous, and the Third Sector will not fill the gap. We have been living beyond our means, and taking for granted the cheap availability of goods for which we will have to pay more in future. These taxpayer-subsidised goods will have to be moved into the market and we will find that, priced rationally, we can afford less of them.

More Tory spend-save

It's not true that the Tories don't have any policies. They have a policy for each of us. Do you want lower taxes? They support that. Do you want more public investment? They support that too. Worried about the national debt? They are worried too, and plan to bring it down. You want it, they support it.

George Osborne had an article in yesterday's Sunday Times attacking the debt culture, and extolling the importance of building any recovery on a more sustainable balance of saving and borrowing.

Quite right. But then why was he also advocating a £6,500 energy-savings entitlement for each home, financed against the property, to be repaid (apparently) over a 40-year period? Isn't that boosting the debt culture?

And now he is advocating spending an additional £600 million on training scientists, technologists, engineers and mathematicians, of which over half (£350m) would go to an extra 25,000 Masters degrees in the subjects.

If we have a thriving industrial sector, they will need more engineers (and other skills). If there is a shortage, they will have to pay more to get them or train people in-house. If vacancies are plentiful and terms are good, more people will be drawn into the field. Supply will expand to meet demand.

If we try to boost the sector through supply-push (training graduates) rather than demand-pull (industrial expansion and recruitment), we will end up either with unemployed engineers, or over-qualified graduates trying to find ways to use their skills in other sectors, as happened so successfully with the quants in the City, who calculated that they had eliminated risk.

The very fact that so many STEM graduates went into the City tells you that we don't have too few STEM graduates, we have too few attractive STEM jobs.

And the right horlicks that these people made in the City tells you that academic education isn't always the best way to train people in what's important - it's intelligence and understanding of what you are doing that really matters. Understanding is best acquired by "scratching an itch". We need lots of businesses looking to solve lots of problems in lots of different ways, employing lots of people (graduates or not) to deal with the many little complexities that arise in trying to improve every business process.

And if that doesn't come to 25,000 extra Masters students, then we should never have trained that many. How do the Tories know how many students we need of one type or another?

So the key is creating an entrepreneurial climate. That means low taxes, no micro-managing incentives, reduced regulations, no winner-picking grants and subsidies, etc.

...which is an approach that the Tories support.

...and an approach that the Tories oppose.

Depends who is listening.

Are the Tories spending or saving?

On the front page of today's FT is the headline: "Osborne warns of big spending cuts to come".

But in a speech yesterday, he announced 10 measures that should be implemented in the Budget to "kickstart a green recovery". Just his first measure alone - £6,500 energy-efficiency entitlement voucher for every home in Britain - would cost (given that there are around 25 million homes in Britain) over £160 billion. Others of the 10 announced measures would also cost billions of pounds.

That will help reduce the government deficit. Frown

But according to George, the measures will "only" cost £30 billion, "without adding a penny to the national debt".

Three questions:

Right-to-Move-Out, not Right-to-Move

ConservativeHome's ToryDiary reports on a Right-to-Move policy to be announced tomorrow by Grant Shapps. Under this scheme, "good social tenants can demand that their social landlord sell their current property and use the proceeds, minus transaction costs, to buy another property of their choice – anywhere in England.  The new home will remain a state-owned property but will aid mobility."

The policy was developed by Tim Leunig (of the LSE) for Policy Exchange. Tim has some interesting ideas, but he is stronger on transport (which I understand is his speciality) than housing and planning issues. It was Tim, for example, who was partially responsible for the Policy Exchange paper suggesting that we should stop resisting London's economic gravitational force, allowing some northern cities to die and developing more cities in the south (as though it is the job of a central-planning office to decide this sort of movement). And it was Tim who came up with the scheme to deliver cheap social-housing by getting landholders to sell land cheap to councils who would then grant themselves planning permission and sell the land to developers at a large profit.

This latest idea exceeds Tim's usual daftness when he ventures away from transport. As I posted in the comments at ToryDiary:

Right-to-buy was about moving people from the public sector to the private sector.

Right-to-move is about keeping people in the public sector, but trying to pretend that the public sector can be made to offer similar flexibility and freedoms to the market.

I'd rather social-housing was as inflexible as possible, to give people the incentives to get out of it. It should be a minimal safety-net, not a public service.

Better still, change the welfare system to a Basic Income (BI) including an allowance for minimal rent, place an obligation on councils to provide housing to minimal standards at costs linked to the BI to people falling into tightly-controlled eligibility criteria (with costs recovered from local taxation), and leave it to people and markets to choose what to do about their accommodation.

Typical Cameroon/Policy Exchange idea. It has little in common, other than the name, with Right-to-buy. Tim, you're much better at transport; I'd stick to that, if I were you.

Hot air on green gas

For numerous reasons (some set out on other posts on this site), heat is a huge, vital, yet ignored sector of our energy systems. It is responsible for nearly half the carbon emissions from the energy sector. It is the reason we are so dependent on imported gas. Twice as much of our gas goes to producing heat as producing electricity. Europe could replace all its gas-fired electricity generation, and would still be as badly affected as this winter if there were further interruptions to one of its major gas supplies during a cold spell in winter.

Despite this, the British government has so far done almost nothing to reduce our carbon emissions and insecurity in the heat sector. Indeed, policy to date has been to keep gas heating so cheap that alternatives are not viable. As a result, we have grown steadily more dependent and inefficient (no point spending money or changing habits to conserve something so cheap).

The Government has finally proposed to consult on a possible support mechanism for green heat, but unlike the simultaneously announced policy to support largely-irrelevant micro-generation, it has refused to commit to a timetable to introduce the heat mechanism by April 2010. It will be 2011 at the earliest, they say.

The eagle-eyed may spot a slight problem with that: 2011 will be after the next election. In current circumstances, a promise by a Labour government to implement a mechanism in April 2011 should be more heavily discounted than a Ukrainian bond. It is unlikely that any new government, possibly apart from another Labour government with a big majority, will place support for green heat at the top of its legislative agenda. Most flavours of government (of the options likely to result from the next election) would not be likely to implement a green-heat mechanism in the form developed under this government. The upshot is that it is unlikely that any effective action on heat will be taken before 2012 at the earliest.

As it follows from this that Tory policy on green heat is likely to be more important, I went to see what they had to say. They have put so much effort into Energy and Climate Change that I had first to look up who their spokesman was. It is Greg Clark. (Readers may be equally surprised to learn that the LibDems' spokesman on the brief is now Simon Hughes. The Minister, Ed Miliband, has at least achieved a degree of visibility in presenting his brief to the public.)

Clark regards the DECC policy consultations on heat and energy efficiency as both "a knock-off copy" of Tory policy, and as "dithering" (which says what about Tory policy?). Instead of dithering, he wants the Government to "adopt the green policies outlined in our plan for a low carbon economy".

The only component of those plans, announced by Cameron in January, to deal with green heat are to "enable biogas, methane produced from farm and food wastes, to replace up to 50% of our residential gas heating". It looks like National Grid's bullshit has not been in vain, but has been swallowed whole by the Tories. In fact, the Tories have gone further, probably because they didn't read or understand the National Grid paper (perhaps because they only saw a pre-publication draft), which at least assumed that some of this gas would have to be ACT (advanced combustion technology) syngas, not just biogas.

Our company knows a bit about green heat and anaerobic digestion (AD, the process that produces biogas). One of our subsidiaries is the largest AD business in the country, producing more power from biogas than the rest combined (it's a big fish in a small pond). Another is a leading supplier of wood pellets for heating. I am the heat man, my brother is the AD man. What follows is my first stab to demonstrate how absurd this Tory "ambition" is. I will probably post again later with refinements based on more detailed and accurate figures from my brother, but the following figures are not unreasonable for illustrative purposes.

Don't take the following the wrong way. AD and green heat both have an important contribution to make (we wouldn't be leading the efforts to develop them if we didn't believe so). I am pointing out that they cannot contribute what the Tories think they can contribute, not arguing that a more achievable contribution from them would not be valuable. There is a strange perversion of logic in political circles, where something is only interesting if it can solve the whole or most of the problem on its own. Dismissing options that only make a partial contribution is like dismissing carrots because they only make a partial contribution to our diet. But it is an attitude regularly exhibited by politicians of all colours.

Anyway, with that said, let's proceed to the preliminary assessment of the Tory policy on biogas heating...

Residential gas consumption in the UK is around 350 TWh p.a. (more than total electricity consumption in all sectors). So the Tories' target is around 175 TWh of biogas. (1 TWh = 1,000 GWh = 1,000,000 MWh = 1,000,000,000 kWh or units.)

All the landfill gas produced and captured in the UK each year would provide around 1% of that target. Our sewage gas would provide another 0.2% or so. Just another 98.8% to find, then (and that's assuming these two sectors stop producing electricity).

If we need around 400 m3 of biogas for a MWh, 175 TWh for heating would need 70,000,000,000 m3 of biogas p.a. That's around 8,000,000 m3/hr.

A m3 of good putrescible waste @ 12.5% solids produces around 175 kWh. So to produce that much gas, we will need around 1,000,000,000 m3 p.a. of good putrescible waste.

Most waste isn't good putrescible waste of course, and one of the largest categories on which they hope to rely - agricultural slurry - produces little gas and needs a much higher ratio of waste and tank space to volume of gas produced. We could grow more, but we would need vast areas of land sacrificed to production of energy crops, which wasn't exactly a success recently even at smaller scale (proportionately) than required by the Tory policy. But for the sake of simple calculation, let's assume for a moment longer that this much waste of this quality could be found.

A m3 of digester tank can process around 13.5 m3 of waste @ 12.5% solids in a year. So we will need 74,000,000 m3 of digester tank to achieve their target. That's 9,260 Holsworthys (our AD plant in Devon - comfortably the largest plant in the UK, responsible for half of all UK biogas production outside the water industry); one for every 26 km2 and every 6,480 people.

And this assumes that no biogas is consumed or lost in the process of clean-up for grid-injection, and that no biogas is used for other purposes (e.g. electricity generation). Nor does it consider what we would do with that volume of digestate (nitrate vulnerable countries, anyone?).

The upshot is that we'd better grow and eat one hell of a lot of food if the Tories get in; an utterly impossible amount, in fact. Our current obesity epidemic has nothing on what they have in mind for us.

The reason they've gone for this technological "winner", of course, is that it seems painless (as all magic bullets do, until you have to explain why you missed the target), and it is promoted by a big company (National Grid), supported by a report from a big consultancy (Ernst & Young). Plus ça change, plus c'est la même chose.

We have tried to engage with political parties on these sorts of subjects. But as we won't encourage their delusions, but will actually challenge them, they find that the best approach is to ignore us and cling to their delusions.

There is no point small companies, or others of independent mind, trying to engage directly with major political parties. They are not interested in the truth. They are blinded by money and power, and deaf to reason. It doesn't matter which flavour, they are all the same, other than in the choice of which interests to favour and lies to believe.

Cameron sees the light

It is being reported that the heir to Blair now wants to be the heir to Thatcher - apparently the whole Blair thing wasn't working.  The good news out of all this is Cameron has realised that green taxation as a means of looking green rather than actually tackling the issues associated with climate change was a bad thing after all.  It is expected that Cameron will u-turn at next week's election and scrap the bonkers talk about taxing second flights and car parking at supermarkets.  All he need do now is get rid of Zac Goldsmith, never ask John Gummer to write him

Lies, damn lies, and government statistics

I listened this morning to Nick Ross and James Brokenshire (Tory spokesman on Home Affairs) arguing about crime statistics on Radio 4. Brokenshire claims that the statistics show that violent crime is on the increase. Ross accuses him of cherry-picking from the figures, which show an increase in certain figures but a more general decline. Brokenshire says that the figures he is looking at are the important ones, and anyway his constituents tell him what is really going on.

It is the latter point that really counts, though it is unverifiable. If Brokenshire is lying about what his constituents are telling him, he is at risk of being voted out at the next election. MPs' impressions from their communications with constituents may not be a reliable guide to reality, let alone the correct course of action, as they are necessarily subjective, but they are a more reliable guide to people's experiences than any number of government statistics.

The problem with many debates nowadays is that they rely on statistics, without considering the reliability, accuracy and relevance of those statistics. The Government has helpfully provided (at the time and expense of those who fill out their forms and of taxpayers who pay for it to be processed) a range of statistics for almost any circumstance. Surprise, surprise - amongst these, a statistic can always be found to argue, however obliquely, that the Government is succeeding in its objectives. But as Sir Josiah Stamp observed (quoted in Paul Seabright's The Company of Strangers):

"the Government are very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root and prepare wonderful diagrams. But you must never forget that every one of these figures comes in the first instance from the village watchman, who puts down what he damn well pleases."

It is mostly middle-managers rather than village watchmen filling out the forms nowadays, but the result is the same, if not worse, because there is no prospect that the middle manager or his employer may be rewarded or punished according to the accuracy of the information provided. Their optimal strategy is to waste as little time on it as possible, and to tell the Government what it is in their interests for the Government to believe, not necessarily the truth. Not very different to the village watchman, but with even fewer consequences of dereliction of duty.

Nevertheless, we regularly hear people claiming that crime has risen or fallen, rather than that recorded crime has risen or fallen; or that inflation or unemployment is rising or falling, not that the Government's measure of inflation or unemployment is rising or falling; or, as reported in the news today, that children under 16 are drinking twice as much as they did only a few years ago, rather than that children of that age say they are drinking more. The distinction is crucial, because it is just as likely, perhaps more so, that what has changed is the reporting of a phenomenon, not the actual phenomenon itself.

When we see a Third-World election where the incumbent wins 95% of the vote, we know that it is probably a fraud. In the First-World we are more subtle - governments know that absurdly high numbers are not credible, and anyway most bureaucrats are not consciously corrupt enough to deliberately distort the figures. We have a more subtle form of corruption, but also a more pernicious form because of its subtlety. It is the form of corruption that was seen most strongly in the Soviet Union, where government by central-planning and targets was more successful at delivering ever-increasing volumes of ever-improving statistics, than at actually delivering the goods that the statistics were supposed to be measuring.

In this regard, we are living in a neo-Soviet Britain. We are governed and incentivized and judged - in short, we are micro-managed - by targets and statistics. No wonder people's efforts become focused on improving the figures rather than the underlying products. We see it most glaringly in the grade-inflation in our education system, but it is ubiquitous in every aspect of our lives. We no longer believe the figures that the ruling and chattering classes love to cite, because we know that they bear little resemblance to reality. And we are right not to believe them. It is no more credible that the educational attainment of our students has improved every year for quarter of a century than that a despot would be supported enthusiastically by 95% of the population.

When Brokenshire and Ross argue about what the statistics tell us about crime levels, they are engaging in entirely sterile debate. We will form our judgments about levels of crime from our experiences, the experiences of people we know, and from the stories we see in the media. If Brokenshire's constituents really are telling him that they feel less secure (and I don't doubt that they are), he should rest his case on that, and not get sucked into bandying unreliable statistics with people who believe that levels of reported crime are the same thing as levels of crime.

The real lesson of the Tories' campaign on hospital closures

The Times reports that the Tories' hospital campaign "was in disarray last night". One can pontificate on whether the campaign was the right point of attack (no), whether the mistakes are serious (in credibility terms, yes), and whether the media's reporting is biased (maybe, but it didn't half invite the criticism). But those aren't the main points. The main lesson is that the Tories are sadly lacking in critical faculties. Whether it's the activists, who militate for policies that owe more to instinct and prejudice than reason (even if many of those instincts are sound), or the researchers, who seem unable to provide coherent material for the many points of attack left gaping by an incompetent government, or the political representatives, who are unable to point the researchers in the right direction and to sort the wheat from the chaff of the material provided to them, there seems to be a general dearth of smarts on the right.

Is it the left-wing bias of the universities, which means that the part of our population most inclined to go into politics receives a thorough schooling in interventionism and socialism? Or that the smarter people on the right can earn a better living in careers outside politics, whereas politics is the pinnacle of ambition for many of the intelligentsia of the left? Or that politics is now a career to be embarked on straight from university, which means that the right can no longer rely on the real-world experience that would once have been their trump card? If you don't have extensive experience of life outside politics, it is hard to understand the damage that well-meaning intervention can do, which makes it hard to put together a convincing case against such interventionism.

There will be smart people there, as there are anywhere. But are they being allowed to rise to the top? Or are they being dragged down by political triangulation, which judges the merits of a proposal on the basis of whether it is an acceptable compromise between the opinions of the dumb and the not so dumb, and the merits of a person by how well they can justify such semi-dumb compromises?

A real classical-liberal party would be about encouraging quality to prosper, whether in the economy or within its own ranks. Chances are, this can't be done in a party that likes to think of itself as a broad church welcoming uncritically a range of perspectives. If everyone's opinion is equally valid, how will you distinguish between them?

UPDATE: I wrote this before I saw the other article in the Times, on the comments of Sayeeda Warsi. QED.

Osborne finds 14 billion new ways to waste our money

George Osborne has welcomed the report of John Redwood's Economic Competitiveness Policy Group, which identifies £14 billion that could be saved by cutting red tape and bureaucracy and recommends tax cuts of £10 billion, as "the most impressive and comprehensive analysis of the state of the British economy produced by any political party in recent times".

Pickles' rubbish economics

Fly-tipped asbestos in Thornton (from The Times, 17/08/06)Here is Cameroonian Conservatism in action. If people are inclined to avoid paying for goods, get taxpayers to pay for them, so they appear to be "free" at the point of consumption, in order to reduce the temptation to commit unlawful acts.

The specific example is that Eric Pickles, the Conservatives' Shadow Local Government Secretary, thinks it is wrong to charge people proportionately for the waste-disposal services that they require:

"We all want to increase the level of recycling but bin taxes will harm the local environment by leading to a surge in illegal dumping and backyard burning. Whether they can't pay or won't pay, many irresponsible people will dump instead."

Having discovered this radical, socio-centric approach to law & order and public welfare, there is no limit to the ways in which this logic can be applied in other fields. The Tories will doubtless wish to propose:

  • The extension of this model to all other waste producers. The image (right) associated with this article in The Times illustrates that fly-tipping of commercial and industrial waste is a more common problem. Shouldn't we also relieve businesses of the temptations of illegality, in the interests of society?
  • As many burglaries and thefts are committed in order to fund drug habits, we should legalize drugs, and if that doesn't make them sufficiently cheap, provide them free to ensure that junkies are not tempted to steal to fund their habit.
  • Provide free snacks and drinks outside convenience stores, so shoplifters are not tempted to steal. The same, of course, will go for a selection of the latest fashions outside clothes stores, and phones and ipods outside electrical-goods stores.
  • Make cars and motorbikes freely available to young people, so they don't have to hotwire someone else's vehicle.
  • Free taxi-rides from pubs and parties, so no one is tempted to drink and drive.

The opportunities are endless, now that we can forget about economics and focus on the good of society.

Centrist politics - stealing or sharing clothes?

Andrew Pierce, Assistant Editor of the Telegraph, reviewing PMQs on Radio 5Live today, was laughing at how Brown had once again stolen the Tories' clothes (this time, on border police), leaving Cameron "standing naked at the dispatch box". He claims the Tories are furious about it, but have no option but to agree that Brown's proposals are a jolly good thing, if the proposals were theirs in the first place.

The Tories have brought this on themselves by seeking the managerialist "centre-ground". If they look to adopt positions close to Blair and Brown's Third-Way programme, they should not be surprised if the Government adopts their ideas. Now that they all share the same sizes and styles, their wardrobes are interchangeable. This isn't stealing, it's sharing, like co-habiting girlfriends. Stealing is selfish, sharing is mutual - Dave was today trying on Gordon's "56-day detention" outfit for size, though he's not quite sure whether it suits (DD was said to be sure that it didn't this morning, but then his taste is more conservative).

The only way to prevent this from happening, and to provide voters with a good reason for voting for a party other than the Government, is to adopt a philosophy and policies that are distinct from the Government's interventionist position.

I have been writing about the three irreconcilable branches of the Tory party - the social-democrats, conservatives, and classical-liberals. Brown will have no difficulty borrowing social-democrat policies - that's exactly his size and style. And, although people like to imagine that leftists are socially liberal, the working-class instincts of many of their supporters will have no trouble reconciling themselves with socially-conservative policies, so long as they incoporate sops to the poor and disadvantaged, which Cameron's social-democratic instincts and determination to stop the Tories looking like the "nasty party" oblige him to incorporate in any proposals. And as lefties from Lenin, Stalin, Mao, Mussolini and Hitler,* down to the modern-day Kim Il Sung, Kim Jong Il, Fidel Castro and Hugo Chavez have demonstrated, the left are enthusiastic adopters of authoritarian (and often even racist) positions - again catering to the prejudices of what they view as their core constituency (or class).

The one position with which lefties find it difficult to reconcile themselves is classical-liberalism. They can handle the social-liberal aspects of that (though in a meddling, "let's make everything perfect for everyone" rather than "laissez-faire, laissez-passer" kind of way), but the economic liberalism and individualism is simply incompatible with their beliefs. Brown and Blair have made a good job of pretending it is otherwise (and in the case of Blair, I believe there was a genuine modicum of belief in free markets), but scratch beneath the surface of almost everything they have done, and you find a corporatist, managerialist, effectively-socialist solution disguised as a market mechanism. They have coopted the large corporations and City institutions, and consulted economists till they (or we) are blue in the face, to maintain the charade of market-delivery, but they have at all times hindered the freedom of businesses large and small to respond freely to unbiased market signals.

The Tories should accept that Uncle Gordo will try to look as authoritarian as them (if not more so) on law-and-order issues. They should argue for what they believe is right on security issues (strong, well-funded defence of personal liberty, property, and nation - pretty much what DD has been promoting very effectively), and live with Gordon stealing the parts of that agenda that are more authoritarian and less liberal. But exactly contrary to the Letwin/Willetts brainbox-nonsense about "socio-centric not econo-centric paradigms", they should try to drag the focus back to the size of the state, whether in its intrusion into people's private lives, or into our economic activities. Those are clothes that Gordon simply couldn't wear comfortably if he tried to steal them. But it would require them explicitly to abandon the Letwin programme and to commit to cuts in government-funded activities and in taxation. Is Cameron brave enough, and could he carry it off convincingly given his position to date? If not, those who think that politics really is about the battle of ideas, and not just about who can best run other people's lives, should leave the Tories to flounder in Gordon's wake, and go off and set up a real alternative.

Lessons from Rwanda

A couple of months ago, I suggested that the claims for the benefit of the Tory trip to Rwanda might be inflated. In the current mood of dissatisfaction with David Cameron, much of the media and many private commentators are making cynical observations about this trip. Much of this cynicism is simply gut-reaction to an apparently shallow publicity-seeker travelling on another foreign jolly in the immediate aftermath of the exposure of the hollowness of his claims to have transformed the electoral prospects of his party by abandoning principles and moving to the centre-ground. These are not unreasonable grounds for cynicism, but it is nevertheless possible that this trip has genuine merit, despite the troubles at home. It would be useful to be able to judge the trip according to the tests and claims that Team Cameron have set themselves.

You may remember from the earlier post that the key to this trip was that it is "a genuine two-way learning process, with each side leveraging the skills and knowledge of the other", with "targeted professional help in support of the development of Rwanda". The "importance of the projects' legacy" is emphasised. To ensure that the participants actually bring something useful to the trip, "there has been a rigorous interview process of prospective participants to ensure a correct fit between skills and assignments".

I questioned exactly what skills, useful to African development projects, most Tory MPs would bring. Helpfully, Adrian Yalland, the boss of the company organising the trip, responded to my challenge on Iain Dale's site, though he was unable to name names, to enable us to test the claims. We had to wait for the trip, and rely on the Conservatives to tell us who was doing what.

Well, the trip has started, and so far the Conservatives have not given us a list of participants and the particular skills that they are bringing to the projects. But it is possible gradually to extract the names of participants from reports on the trip. So, for instance, we know that Andrew Mitchell is leading the trip, which, as Shadow Minister for International Development, is entirely reasonable. Earlier suggestions that David Mundell and Hugo Swire would be involved have not been confirmed (Hugo may be less keen, now he has been dropped from the Shadow Cabinet). But we learn instead that "Tobias Ellwood, the shadow culture spokesman and former officer in the Royal Green Jackets, shared some of his considerable carpenting expertise with Brooks Newmark, a new whip". So that's another military man, like Swire, of which there is not a shortage in Rwanda. But at least Ellwood has carpenting skills (to accompany his military and City experience), which the Guardian seems to be hinting that Brooks Newmark, a former venture capitalist, lacks.