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July 8, 2020 - 7:00am
Rishi Sunak has to do three big things in his summer statement today. None of them are impossible on their own — but his problem, and ours, is that all three have to happen at the same time.
Firstly, he needs to give our crisis-hit economy a fast-acting, job-creating shot-in-the-arm. Secondly, he has to pass the Dominic Cummings test — investing in technologies that put Britain at the cutting edge. Thirdly, he has to instil some sort of confidence in our solvency as a nation. Investment is great, but so is not running out of money.
Luckily, he’s spotted something that can jump through all three hoops: Energy efficiency.
No, come back! I promise you won’t find this boring (but if you do, here’s a post about sex with aliens instead).
Energy efficiency is something that can get Britain back to work, fast. Sorting out our draughty, energy-guzzling buildings is a job that needs doing across the whole country right now. There’s no need to wait for planning permission or a public inquiry or new legislation. We can just get on with it. There’s a lot of slack in the construction industry — and therefore the skills, equipment and materials to do the job.
This is more than mere make-work. The relevant tech is coming along in leaps and bounds. Take lighting, for instance. An LED bulb uses less than a fifth of electricity of a traditional incandescent bulb — and lasts twenty times longer. If all our technologies were improving that fast, we’d be living lives of luxury. And it’s not just LEDs — we’re only beginning to exploit the potential of techs like heat pumps and aerogel insulation.
This stuff isn’t just about saving energy and carbon — it’s about saving money too. We could radically improve our household and national finances if we stop wasting expensive resources. What’s more, every unit of energy that we save as consumers generates further savings — like the new power stations we’d no longer have to build or the fuel we wouldn’t have to source from hostile foreign powers. A country that’s as deep in debt as we are is by definition one without enough money — so let’s stop burning it.
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SubscribeWishful thinking. No government in history – certainly not in British history – has ever spent money intelligently.
Not quite true, Ancient Rome spent very judiciously indeed.
In 586 AUC/167 BC, for example it even indefinitely suspended Direct Taxation for Roman citizens.
Ah those were the days… 😄
I am constantly amazed by the ability of a Tory Chancellor to find new ways to give away money he does not have?
I am very supportive of boosting the economic activity but at some point the wealth creators and wealth holders will have to pay for it.
I am wondering exactly when that pay back will be, and what will the mechanisms for doing it be?
I was having a similar conversation with someone who is a bit more clued up about such things than I am and was told that after WW2 our deficit was something like 250% of GDP and now we are at 101% so really “nothing to worry about”.
He then said something like: Sunak and Johnson are banking on all their infrastructure spending generating enough income in the future to pay down our debts to more respectable levels, but then also said that the only time we would need to worry is if interest rates had to rise and we were at the same time in the middle of a recession because that would lead to inflation.
Now I’ve really tried hard to understand this new fangled thing called Modern Monetary Theory (which I think is what he was discussing) and have had to conclude that it is some sort of Magic Money Tree. I also fear that Venezuela may have tried it but forgot to pull back at the right time.
The post war governments were able to handle high levels of debt effectively. GDP to debt ratios fell from 250% at the end of the war to around 50% by the end of the 1960s. They did this because GDP grew consistently around 2.5%, there was full employment and there was a increasing but not spiralling inflation. If you think of a fraction with GDP as the numerator and debt as the denominator if the former is growing faster than the latter you can deal with debt without effecting public spending, which is what post war governments did. This does at leas show that the There is not alternative brigade are wrong and austerity is not a given.
If only we can automate the damn fruit picking
Of course, one way to reduce the debt would be to re-introduce rationing.
After all it lasted after WW2 for eight years. Think of the benefits- less money spent on food and clothes – all available for taxation. It would also help the health of the nation – no obesity and cost to the NHS.
And finally, if the debt was really reduced, we could dispense with that temporary tax – namely income tax.
After 200 years, the politicians could actually keep their word – although I am not sure that my definition of temporary would cover 200 years; perhaps I should try!