Thursday 24th July 2014                 Change text size:

“It’s the ecology, stupid”: a response to the Queen’s speech



Photo: Financial Times via Flickr

Bill Clinton won the 1992 presidential campaign against George Bush senior by addressing one area where the incumbent President was weak. Simon Leadbetter looks at what was missing from Her Majesty’s Government’s legislative programme and Her Loyal Opposition’s response.

Compared to the blockbusting 2010 Queen’s speech, which was as polarising and radical as it was far-reaching, 2012’s speech was an altogether lower key affair. While the Coalition was right to focus their spin on our faltering economy, the list of legislative bills did little to stimulate a sustainable economy or preserve our ecology.

The Government has been highly ambitious with the speed of its budget cuts, significant reforms of education, health and welfare, but it has been insufficiently ambitious or reforming in addressing our country’s long-term economic and environmental needs. The Government needs to be more radical in two areas.

The first is in supporting fast-growth, innovative sustainable businesses. Start-ups are the engines of growth in the economy, disrupting complacent and inefficient existing businesses and introducing new technologies, products and services that are invaluable in terms of the nation’s intellectual property and our export strength.

As one of the world’s most innovative and entrepreneurial nations, we should unleash that potential in the fastest growing sector: clean energy and energy efficiency.

It is well-known that high net worth investors, venture capitalists and business angels back teams not businesses. The United Kingdom is one of the most brilliant nations; our universities and colleges produce some of the highest quality, brightest and talented teams of innovators, scientists and entrepreneurs. Our inability to commercialise and scale those innovations lies with the Government’s failure to understand innovation and its unhealthily close relationship with big business.

The impulsive abolition of Regional Development Authorities (RDAs) was huge strategic mistake; a Government so passionate about reform could have resolved the manifold issues of RDAs through judicious pruning and by refocusing efforts on the enterprise our nation needs. Cutting university funding and the tripling of tuition fees was another major error, given that the UK is increasingly moving towards a knowledge-based economy. A government that is comfortable with policy reversals and focused on economic growth would have addressed these two problems.

All of which segues nicely into the second area where a more radical approach is required. Our economy is hopelessly unbalanced by geography and sector.

Power hungry

The United Kingdom is currently locked into a provincial death spiral where London is the sole focus of the economy and all other regions can go to hell. This is not anti-London. London is certainly by far the biggest contributor to GDP; however, its current scale is the outcome of a spectacularly incompetent financial services sector and massively inflated property market. London’s position in the economy has become a virtuous cycle for the City and a vicious circle elsewhere. And because London is the largest generator of GDP, it must be supported at all cost, even as the provinces and regional cities go into decline, furthering the GDP gap.

Control hungry

The Government needs to be more radical in two areas. The first is in supporting fast-growth, innovative sustainable businesses. Our economy is hopelessly unbalanced by geography and sector.

A geographical concentration was convenient in the age of slow communications and at a time when monarchs needed to keep their allies close and their enemies closer. In the era of distributed production, virtual workforces and instantaneous, low cost communication, such a London-centric system seems very 19th century.

Though it is depressing that the Government has tied the hands of the Green Investment Bank (GIB) behind its back by disallowing it to borrow its own money, more depressing still is that the location of the GIB will be in London and Edinburgh—the epicentres of the biggest banking failures in living memory. Surely, we do not want the same group of people, with the same views and lack of talent, running the show when their great achievement is captaining the global economy into the ground.

Most of Europe and the United States have distributed economies with many centres of activity. It is only in the UK, with its capital-focused media and journalists who cannot heave their privileged carcasses outside the M25, where we are so obsessed with a single city.

Turning attention to our sector bias: financial services are too large a part of our economy— representing some 35% of corporate profits. The sector’s leaders have unashamedly shown that they are unfit to play a leading role in guiding the shape of our economy. They have allowed high executive pay for failure in corporations, exported jobs and capital, and twisted our economy around short-term profit at all costs. Greed, for want of a better word, really does seem good in the City.

The Government could and should have accelerated banking reform, separating investment banks from retail banks before 2019. It could and should have broken up the big four banks, and certainly the two it owned stakes in (Lloyds Banking Group and RBS), to encourage greater competition. Free and transparent competition is the best guarantor of innovation, consumer rights and excellence of service. If banks are too big to fail or wish to privatise profits and nationalise losses, as they have done over the last five years, then they should be taken out of private hands. The ideal solution would have been to stimulate a renaissance of smaller banks, building societies and those with a regional focus. We have a thriving sustainable investment sector and this could have been encouraged if the dominant banks were cut down to size. The British taxpayer should not be required to underwrite private sector risk-taking and failure.

Energy hungry

As one of the world’s most innovative and entrepreneurial nations, we should unleash that potential in the fastest growing sector: clean energy and energy efficiency.

Clean energy needs investment to really take off; just as the nuclear, oil and gas industry have all enjoyed incredible state support throughout the last century, so clean energy requires that same commitment in the twenty-first. This is not some romantic or environmentalist attachment to wind, wave and tidal. It is the first responsibility of any Government to protect its citizens—delivering energy security is foremost amongst those responsibilities at a time when the threat of invasion is non-existent. By tapping into the plentiful wind, wave and tidal resources that batter our windy, wavy and tidal island, we could achieve such energy security and self-sufficiency. And because our clean energy resources are distributed across our nation, a rebalancing shift of geographic concentration would bring much needed income and jobs to economically weaker rural areas.

Fossil fuels and nuclear energy have long needed subsidies to be viable. Fossil fuels, in particular, externalise the vast majority of their real cost—the air pollution and related health problems they generate; the regular wars and dependency on less savoury regimes that they require to maintain supplies. Nuclear energy may well be a necessary evil, but then we have to face the prospects of nuclear proliferation (if we can have it, why can’t Iran?) and the long-term issues of radioactive waste storage.

In terms of energy efficiency, there are 25 million homes in the UK and over half a million commercial properties. Insulating them all properly would significantly reduce our energy consumption while providing much needed work for thousands of unemployed manual labourers.

Rather than throwing billions in quantitative easing at banks who then use it to simply recapitalise, pay bonuses for continuing failure and then lend the money back to the Government at a profit, we should instead invest in creating an emerging, pollution-free, world-beating clean energy–energy efficiency sector.

If quantitative easing of £325 billion was distributed in a more sensible way, it would equate to:

Universities & HE Colleges

Of which there are 280 (Universities UK)

£1,200,000,000 (£1.2bn) each or would fund a University sector 23 times the size it is today

Employers

Of which there are 1,178,745 (BIS Business Population Estimates for the UK and Regions)

 

£275,000 each

Full time average salary jobs

Average salary is £26,200 (ONS, 2011)

 

12,400,000 full time average salary jobs

 

On the facing benches of the House, the Opposition’s proposal is just as unconvincing. Cutting the deficit a little slower appears to be their sole argument. This is not a sufficiently compelling narrative to inspire a nation or win a General Election. The Conservatives, Lib Dem and Labour must each develop a more radical and strategic vision for the United Kingdom, which remains the sixth largest economy in the world.

An idealist’s pipe dream?

Most of Europe and the United States have distributed economies with many centres of activity.

Overconfidence and a privateer mentality took England & Wales from being the weaker players in Europe in the 16th Century, threatened with extinction by continental powers, to being a global British Empire that ruled one-fifth of the world’s population at its height, sparked the industrial revolution with the injection of Scottish genius, and led the information revolution. We could and should be a leader in the clean energy and efficiency revolution.

Powerful interests in incumbent businesses, energy intensive, fossil-fuelled industries, their heavily lobbied friends in politics, the media and financial services will all seek to distort the debate and mislead the public.

A more compelling vision for the United Kingdom would be one where we are leaders in the fastest growing global sector; where we exploit abundant and clean natural resources that are distributed across the nation; where we make all of our homes and businesses more energy efficient; and where we train and deploy our talent and youth to achieve this enterprise.

It is a vision to inspire us to be a great and united nation once again.


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