The amazingly stupid way the government subsidises renewables

We’ve been complaining about this for a number of years now. In fact, we’ve been complaining about it ever since Ed Miliband lit upon this policy. The manner in which the government subsidises renewable energy projects is, quite frankly, insane:

Two offshore and 15 onshore wind farms have won subsidy contracts in the Government’s first competitive green energy auction, significantly undercutting the prices that have been handed to other projects.

The results of the auction suggest consumers may be paying hundreds of millions of pounds a year too much on their energy bills because ministers previously allocated subsidies without competition, providing much higher returns to investors, critics said.

More generous subsidy schemes should now be reined in and excess subsidies clawed back, they added.

In total on Thursday ministers gave the go-ahead to 27 green energy projects, with estimated lifetime subsidy costs totalling £4bn.

Energy companies were forced to bid against each other in “reverse auctions” with the cheapest proposed projects in each category being awarded subsidies.

There’s part of the insanity. For a decade and more they have not been insisting upon competitive bids. Instead, they’ve drawn up standards for certain technologies and then agreed a level of subsidy. That’s madness.

But sadly, it gets worse. They are offering different levels of subsidy for different technologies. As we’ve long said that’s where it tips over into insanity.

Start from where the government actually is: climate change is happening, we’re causing it and we’ve got to do something about it. That something obviously being reducing emissions by having renewable power supplies. So, what’s the best way of doing this? A series of committees deciding who gets to be the lucky recipient of a cheque? Different amounts of subsidy for different ways of achieving the same aim, reducing emissions by x tonnes?

No, of course not. The correct way to do it is to set just the one price (perhaps a subsidy, perhaps a carbon tax) and then see which technology can best achieve that goal, that reduction in emissions. If, for example, solar can meet the target better than wind then wind should have no subsidy and solar all of it. If onshore wind is better than offshore then no subsidy to offshore, all to onshore.

For we don’t in fact want to have just competition among providers of one technology. We want to have competition among all providers of all potential technologies so as to find out which one solves the problem best.

Whatever one thinks about climate change itself the way that the government has been splashing around our money is simply mad. Yes, under both Labour and the Coalition.

Zero hours contracts, mini-jobs, they’re both ways of solving the same problem

Outrage in all the usual quarters as the number of zero hours contracts is reported to have expanded again:

Nearly 700,000 people are on zero-hours contracts in their main job – a rise of more than 100,000 on a year ago – according to new official figures.

The rise is likely to trigger renewed debate over the widespread use of contracts that offer no guarantee of hours and only those benefits guaranteed by law, such as holiday pay.

Part of this increase is simply that ONS is getting better at counting these jobs, part is a genuine expansion. But there’s a terrible confusion in those same quarters about what this all means:

Let’s not be sour. The bounceback in jobs during the current recovery has been staggering – exceeding all predictions. During the depths of the slump too, although things were dreadful, the UK shed far fewer posts than any of the macroeconomic models suggested. Whereas in the past there had been something close to a one-for-one proportional relation between lost jobs and lost output, for every three percentage points of GDP that disappeared after 2008, only 1% of jobs went up in smoke.

But let’s not be blinkered either. If there is reason to be cheerful in the quantity of jobs in a famously flexible labour market, there is reason to be fearful when it comes to the quality. Underemployment, perma-temping and the recasting of low-grade staffers as “self-employed” hires shorn of all rights were striking features of working life in the recession, and all trends that have been stubbornly slow to reverse in the recovery. That much is reaffirmed every month when the official labour market statistics appear. Nothing, however, sums up the pall of insecurity that has befallen so much of the workforce like zero-hours contracts.

What’s missing in there is the word “because”. We did not have the usual rise in unemployment as GDP fell “because” we had more people on these zero hour contracts. The same is true of Germany, where they have “mini-jobs“. And the opposite is true of places like France where they don’t have this sort of labour market flexibility.

It should be obvious that the bottom end of the labour market is going to be pretty insecure and badly paid. That’s why it’s the bottom end of the labour market. And there’s two things we can do about it.

We can ban low pay and job insecurity. Other countries do do that and we could too. The result would be that we have more unemployment, as those places that do ban such things have.

We could simply accept that the bottom end of the labour market is going to be badly paid and insecure and have lower unemployment as a result.

It is, clearly, a choice. But those are the binary options. We cannot insist on better pay and more security and also have those 3 or 4% of the workforce working. That’s just not one of the options available to us. Those jobs that are being done simply aren’t worth very much. Therefore people won’t pay very much to get them done. Whether that cost is in the actual wages or in the overhead of having to provide security. Low paid and insecure employment or unemployment: which will you pick?

And we should note something else as well. When given the choice for themselves hundreds of thousands do choose those zero hours contracts, those mini-jobs, instead of unemployment. Meaning, to the people who are doing them, that they prefer that option. And we really shouldn’t go around banning something that people are, by the choice they themselves make, preferring, should we?

Better to reverse QE than raise interest rates

That is, of course, a chart of the American, rather than UK, money supply. But much the same has happened to our own money supply under the same QE program. And it’s also telling us that it would be better to reverse QE than it would be to raise interest rates. So the idea that that debt could just be cancelled doesn’t fly we’re afraid.

We all know that at some point we’re going to have decent economic growth again, unemployment will fall to a minimum (that frictional unemployment that reflects people changing jobs, not involuntary unemployment) and that then inflation will start to rise again. We all also know, because Milton Friedman told us so, that inflation is always a monetary phenomenon. And, finally, we all also know that base money creation is more inflationary than credit creation: or boosting M1 leads to more inflation than the same boosting of M4 would cause.

It’s putting those all together that tells us that we should reverse QE. Think through the future: so, we get out of this liquidity trap, this zero lower bound. The velocity of money returns to something like normal. At which point we’ve got two choices as to how to reduce the accompanying inflation. One is to raise interest rates, the standard response. But that works on M4, it slows credit creation. We could also reduce that money supply by reducing M1: reversing QE. And as above, we think that shrinking M1 would have more effect on reducing inflation than reducing M4 would.

Another way of saying the same thing is that the amount we’d have to raise interest rates to choke off inflation will be higher if we don’t reverse QE than if we do. And this will be true for decades to come as we gradually get back to the right sort of relationship in size between M1 and M4. Or, not reversing QE means that we have to accept more economic pain to reduce inflation than if we reverse QE. For decades.

Which rather puts the kibosh on that idea so trendy over on hte left. Which is that as one part of the government owns the debt of the government we could just cancel that debt and reduce the debt burden. But doing that permanently increases that base money supply and thus permanently increases the interest rates we’ll need to slay inflation in the future.

So, reverse QE before raising interest rates.

This is vile, a stain upon our society

There are those who think that we here at the ASI are simply concerned with economics, or the economy. This is not so: we are really about liberty and freedom, it’s just that we apply those concepts to matters economic as well as to sexual, legal and all the other realms of life. At which point we draw attention to this, something that is entirely vile, a stain upon our society:

But what sort of rule of law allows an innocent person to be locked up for many years and then denied any compensation for their wrongful imprisonment?

Outside the summit jamboree, for which a ticket would cost you £1,750, were some people who could have given the delegates a slightly less rosy picture of Britain’s supposed superiority. They included those who had been wrongly convicted but who have been denied any redress under the ruling introduced last year, which virtually says that it is not enough to be innocent – in most cases you have to find the real culprit of the crime for which you were convicted before you can be compensated.

Among those challenging the new regulation is Victor Nealon, a former postman, who was convicted of attempted rape in 1996. He served 17 years, 10 years longer than his recommended tariff, because he continued to protest his innocence. In 2013, after fresh DNA evidence taken from the clothes of the victim pointed to “an unknown male” as responsible for the crime, Nealon was freed with just £46 in his pocket to try to rebuild his life. The Ministry of Justice now declines to compensate him because, under the new rules, his innocence has to be proved “beyond reasonable doubt”.

Another man who feels equally bemused by this is Barry George, whose conviction for the murder of Jill Dando in 1999 was quashed in 2007. The police file on who was the real murderer in this case remains open, but George has never received compensation for his time behind bars.

These rules started to change back in 2006. About which was said this:

CHARLES CLARKE’S announcement that he is limiting the compensation available to those wrongfully imprisoned has been met with the hoots of derision it deserves. What is more important to work out is why the Home Secretary made such a lunatic decision in the first place.
The proffered reason, to save £5 million a year, is simply beyond satire. The Government, in its infinite wisdom, annually disposes of about £500 billion of the nation’s production: denying those innocents unjustly banged up will save some 0.001 per cent of public expenditure. Just to provide some context, the £5 million saving is less than the £5.7 million spent in 2003 on subsidising the swill bins at the Houses of Parliament. No, it can’t be about the money.
The mark of a liberal society is that more care and attention is paid to those innocents wrongly found guilty, than to the guilty who escape justice. Any criminal justice system designed and run by fallible human beings will make mistakes. The important thing is how we react when a miscarriage of justice occurs. Shamefully, under the Home Secretary’s proposals those who find their guilty verdict overturned at their first appeal will have no right to compensation. For others compensation will be capped at £500,000.
But let’s remember this. It takes from 20 months to two years to get a first appeal against a conviction heard: long enough for those convicted to lose careers and jobs, marriages and houses. Yes, there always will be those who unjustly enjoy Her Majesty’s hospitality, and whatever compensation we offer in a monetary form will not be enough to fill the gap of years of liberty denied, lives wasted, opportunities lost and families sundered.
But do we really expect those afflicted by the mistakes of the state apparatus simply to shrug and smile it off as just one of life’s unfortunate things? Can the Home Secretary not see that it is our solemn duty to those wrongfully convicted that we both apologise and make amends as best we can?

Whatever the motivations for this decision they do not change the fact that it is a disgrace. Just as mother always said: you make a mistake, you apologise, make what amends you can and promise not to do it again. When the State makes a mistake and steals someone’s liberty it is indeed our duty, to compensate those wronged. Whether the Home Secretary is ignorant of this moral fact, or simply wishes to ignore it for other reasons, it is appalling. Shame on you, Mr Clarke, shame on you.

We have not changed our view. This is a vileness that must be eradicated from Britain.

Now that we’ve extended marriage to all let’s not make it compulsory

Recent years have seen significant changes in marriage: it’s now essentially available to all potential pair couplings of whatever gender definition one wants to use. That doesn’t therefore mean that it should become compulsory though. And yet that is roughly what is being proposed:

In 2007, the Law Commission recommended reforming the laws that apply to cohabitants if they separate but no legislation followed. There are nearly 6 million unmarried people living together, many under the illusion that they have the same rights as married couples if they separate.

Resolution is calling for a legal framework of rights and responsibilities for unmarried, cohabiting couples to provide some legal protection and secure fairer outcomes at the time of a couple’s separation or on the death of one partner.

To which our answer is no. For we are believers in choice.

Believers in choice over who you might mingle genitalia with, as we always have been. And also choice over who you might share accommodation with. And even choice as to the economic arrangements that you might want to make surrounding who you mingle or share with. That choice is there in the law as it stands. One is entirely at liberty to live with someone without making formal economic arrangements. One is also able to take up that contract of marriage, something well defined in law. This current suggestion is that that first choice should no longer be available. And as a reduction in choice we’re therefore against it.

There is the point of any children that might come from a relationship but their rights and the responsibilities of the parents are already well defined in law.

Essentially the proposal is to introduce common law marriage as a legal position. And English law (except in very odd circumstances involving being in foreign) simply has never recognised it. For the plain and simple reason that if yout want the protections of the contract of marriage then go and get married. Now that all can do so it really isn’t the time to make it compulsory.