The Government is deliberately bankrupting Thames Water. So, you know, stop doing that

Apparently Thames Water requires more capital. Well, we believe in capitalism so why not, if that’s what it needs? Because the government is deliberately, with malice aforethought, preventing Thames Water from raising more capital.

Of course, it’s possible that the government doesn’t realise this, is instead snookered by its own bureaucracy. If it’s that second then the solution is easy. Simply stop preventing the raising of new capital by putting the bureaucracy back in its kennel and we’re done. If this is all purposeful then that’s something else - one aspect of which would be as with constructive dismissal in employment law. The pain and grief of the compensation payments to those robbed, by policy, of their investments would be large.

The papers are full of the story, Telegraph, Guardian and so on. It’s the FT which gives the crucial clue.

First, OFWAT:

Ofwat has today announced new powers that will enable it to stop the payment of dividends if they would risk the company’s financial resilience, and take enforcement action against water companies that don’t link dividend payments to performance.

The change will require company boards to take account of their performance – for customers and the environment – when deciding whether to make dividend payments. It will also require companies to maintain a higher level of overall financial health.

Then the FT:

The big problem for Thames Water was a rule that from April 2025, regulated opcos couldn’t pay dividends if their credit rating is Baa2(opens a new window)/BBB(opens a new window) with a negative outlook. Since Moody’s has the Thames Water holdco at Baa2 with a stable outlook,

OfWat has deliberately and specifically changed the rules. Thames Water cannot pay dividends - even if it is profitable, it cannot pay dividends. But Thames Water requires more capital, so we are told. Who would put capital into a company that cannot pay a dividend? Even if profitable?

Which brings us to the Telegraph report:

The Ontario Municipal Employees Retirement System, which owns a 32pc stake in Thames, is said to be reluctant to inject fresh capital into the business after a series of poor investments in the UK.

City sources said they were aware that another of Thames’s nine predominantly overseas investors was yesterday also still yet to decide whether to pump in money to save the company, which has 15 million customers.

Hope remains that a deal can yet be done, however. The Universities Superannuation Scheme (USS), Britain’s biggest pension fund and Thames Water’s only UK shareholder, is supportive of injecting fresh money into the business, senior sources added.

Why would foreigners put more capital into Thames Water if the government is deliberately, with that malice aforethought, preventing them from gaining dividends from their investments? Or, of course, government preventing them because government doesn’t understand what its own bureaucracy is doing.

Government, though those changes to the rules at OfWat, has caused this problem. The solution is not for government to make further mistakes, it’s to undo the one already made. If a return can be made on more capital put in then more capital will be put in - the problem of not having enough capital will be solved.

It really is all incredibly simple if only we can get over that near impossible hurdle - of getting government to admit to a mistake which needs to be reversed.

Rising water bills - well done to Feargal Sharkey, Surfers Against Sewage

The Times suggests that water bills are going to have to rise, substantially:

Water companies are drawing up plans to increase household bills by up to 40 per cent to pay for the cost of tackling the sewage crisis and the consequences of climate change.

In a move that has alarmed ministers, England’s privatised utilities said that they needed the extra money to meet strict pollution targets.

We’d just like to say well done here, well done to Feargal Sharkey and Surfers Against Sewage. They, and others (Hello! to Mr. Monbiot), have been shouting that the rivers and oceans should be cleaner than they are. Well, maybe they should be.

But every benefit comes at a cost. It is not possible to have two entirely separate water drainage systems, one for sewage and the other for storm run off, without there being some expense associated with having two separate water drainage systems. That expense seems to be 40% on water bills.

No, there is no way out of this - there’re only us chickens here to pay those bills. It doesn’t matter whether it’s government or capitalists who fund the upgrades. Either the capitalists do and they make a return, the government does and it does, or government does then charges us the cost in our tax bills. The cost of that upgrade to the system is a few hundred pounds a year, forever, on every household bill for water, whether it appears directly on the water bill or not.

It’s even possible to suggest that perhaps we don’t in fact want to clean up the rivers. Sure there’s a joy in wild swimming in the river at Hebden Bridge. But perhaps 25 million households will baulk at each paying £250 a year for that to be possible - Hebdenites might need to use a swimming pool instead.

We could even call into evidence that standard economic observation, the difference between expressed and revealed preferences. Plenty of people will say they’d like cleaner rivers. But if they’ll not pay for it then they don’t really mean it, do they?

And again, we do insist that this is nothing, at all, to do with who owns, operates or funds the water system. If Britain wants cleaner rivers then Britain will have to pay for cleaner rivers.

The rises are due to be announced next year and could result in annual bills increasing from an average of about £450 to £680,

Hey, maybe people do want to pay this much. We do tend to doubt it though.

The larger point here being that there’s an optimal amount of pollution and it isn’t none. What that optimum is depends upon how much it costs to not have it as compared to how much people are willing to pay to not have it. That’s just how reality works. Sorry about that but there it is. Stuff costs money so, how much are you willing to pay to get what you say you want?

Cornish Lithium and the failure to understand capitalism

Cornish Lithium is a plucky little attempt to extract lithium - that new “white gold” for EV batteries - from the geothermal waters underneath Cornwall. With our weird metals hat on yes, there’s lithium under them thar’ hills, yes it can be extracted. Whether it can be done economically, well, that’s going to be the interesting bit.

At which point we’d like to mutter something about how the country’s got a much greater problem than local lithium for local people. For the three major papers that we might hope would understand at least something about business and the economy seem not to. The FT, The Times, The Telegraph. They’re all bleating about how Cornish is giving off an alarm signal, that it might go bust!

Err, yes, this is how capitalism works. In order to do some new thing, in order to try to do some new thing, it’s necessary to have a big pile of money. Capital. Which is gained from other people - the capitalists. When you’re trying to sort out some new method of extracting lithium you might burn through £50 million - £100 million! - of that capital, that other peoples’ money.

The aim, of course, is that at the end there will be lithium which can be sold to provide a return to the capitalists.

However, at this stage of this game the process, the organisation, simply eats capital. Which it needs to gain a constant supply of. For no one funds a project to completion, it’s always funded to stages. Is there lithium in the water, can it be extracted, can we get licences to do so and so on - each is a funding stage. For failure at the earlier stage means there’s no point in bothering to fund later ones.

Every junior miner (that is, one not producing yet) is, by definition, in danger of going bust if the next chunk of capital doesn’t turn up. Always has been, always will be because that’s the way the system works, that’s capitalism.

And as we say if we’ve the three major broadsheets (no one expects The Guardian to understand this sort of stuff) can’t even recognise capitalism in action then we’d suggest that we’ve something of a societal problem. You know, given that we are, at least nominally, still a capitalist society?

Sorry, these Broken Plate people are insane, no, really, they are

As we’ve pointed out before, the very idea behind the Broken Plate idea is, umm, broken. To the point that we’d have to conclude that actual adults seriously proposing this as a method of measurement have lost the plot to the point of requiring some of that care in the community stuff. From the PR email for today’s report:

“More healthy foods are over twice as expensive per calorie as less healthy foods”

They are attempting to measure the costs of food by calorie count. They also claim that veggies or salads - say lettuce - are “healthy” foods and that potatoes and or rice are not. Which is how they gain their result that healthy foods are more expensive - per calorie, recall - than unhealthy.

This is insane. Or, as we could also put it, knock our old Granny down with a wet feather. There really was a reason why she placed a balanced meal in front of us. A wodge of calories from some stodge - potatoes, bread, rice, whatever to be recipe and culturally conformant - and some meat, possibly soya, peas, eggs, for the protein and then some veggies or salad to give us the vitamins and micronutrients. Granny also knew that you didn’t get your calories from the lettuce, nor the protein or the vitamins from the tatties. The idea was that the plateful fed across all those major nutrients by also including components from across the food groups.

These people, now, today, are measuring the cost of lettuce by the calorie content. No, really, that is what they’re doing.

At which point we really should be doing some analysis as to who is displaying the insanity. Sure, there are always those wearing tin foil caps somewhere out there. But a healthy society manages to ignore - or tender mercifully to - them instead of taking their claims as a useful basis for government policy.

These people are measuring the price of lettuce by the calorie content. Are they mad for saying it or us for listening?

A little prediction about what's to happen next here

This amuses:

A string of offshore wind projects meant to power Britain are in jeopardy after the global race to net zero sent costs soaring, casting doubt over the industry’s future as a cheap source of energy.

A surge in supply chain costs has pushed up the price of wind turbines, while increases in global interest rates have raised refinancing costs substantially.

Ah, so that terribly cheap wind power isn’t, in fact, cheap. The reason why is obvious and no, it’s not supply chains. It’s the price of money.

The vast majority of wind farm costs are upfront. Capital costs that is, which are then paid back over the operating lifetime. To be crude about it, the cashflow from the last 18 months (or whatever) of the 15 year installation is the profit, everything that comes before it is just paying back the capital plus interest. When interest rates rise that 18 months becomes 12 and 6 and negative 12 and so on.

The basic financial economics is exactly the same for solar - the costs are near entirely upfront meaning that interest rate changes hugely change the viability of an installation.

This just is so. Therefore we’re going to see shrieking that something must be done. We’ve actually already seen it being floated, the idea that there should be some special - lower - interest rate for green projects. No, there shouldn't be, for we’re already including all those externality costs of fossil fuels in the other things - carbon permits, etc - that we’re doing. To then insist upon lower interest rates is double counting - or double subsidy.

But there will be those calls, we guarantee it. It is after this that we make our prediction. For that basic fiscal set up is also shared by nuclear. High upfront costs, low running costs, the real determinant of the cost of the entire project being the interest rate applied. So, logically, if we are to have a special low interest rate for wind and solar then we should for nuclear. And we will not.

Which is the prediction - we will be told we must have low interest rates for 15 year wind projects, for 20 year solar and not for 50 year nuclear. And that is how we will know they are lying.

Vaping and the peak of the Snowdon Curve

We have pointed out before that there is that corollary to the Laffer Curve, the Snowdon Curve. It is possible for regulation to be so strict that it makes the problem worse, not better. It’s therefore necessary to make sure that the regulation of even things that we all agree need to be regulated is at that sweet spot, the Goldilocks point.

Our original example of the Snowdon Curve was about vaping:

Millions of illegal and potentially harmful vapes have been seized by trading standards in the last three years, data shows, with experts warning this is the “tip of the iceberg” and a “tsunami” of products is flooding into the UK.

Freedom of information requests to 125 local authorities revealed that more than two and a half million illicit e-cigarettes were collected since the beginning of 2020.

If people think it’s worth smuggling vapes in then clearly we are regulating enough that people think it worth smuggling. So, what are we regulating?

The e-cigarettes are not-compliant with UK legal regulations and could have higher nicotine concentration levels, contain banned ingredients or have oversized tanks for nicotine liquid. Previous analysis found illicit vapes to contain high levels of lead, nickel and chromium.

Umm, why don’t we not regulate tank size, nicotine concentration? So that the only incentive to smuggle is to be able to claim a higher lead, nickel or chromium level? Which, and call us picky here if you like, we tend to think isn’t one of those things that would be a great selling point.

That is, if we’re getting smuggling in volume then we’re over that peak of the Snowdon Curve. Reducing regulation would thus make us safer - and since being safer is rather the point of the regulation then why don’t we do that?

In which we do celebrity with Meghan and Harry

Tho’ we do insist that we’re just using celebrity with Meghan and Harry to illustrate a point about Gell Mann Amnesia. That last being that when we read a newspaper artcile on a subject we really know about we oft find that it’s really not right at all. But said experts will then turn the page and go on to believe the entirety of the next article upon which they think they are being informed by the journalist rather than knowing they’re being misinformed.

At which point:

The Duke and Duchess of Sussex’s attempt to patent Archetypes was rejected by US officials in the latest setback to hit their podcast business.

Well, no, even that pair aren’t stupid enough to try to patent the name of a podcast series. Given that they are capable of walking and breathing at the same time they really can’t be that daft.

But the British press seems to think they are. There’s that above from the Telegraph, from LBC, The Mail, Daily Express, The Royal Observer (?!) and so on. It’s necessary to turn to the Hindustan Times to get the truth of the matter:

Trademark application for exclusive right for their podcast name “Archetypes” was denied by the U.S. patent and trademark office.

A podcast name would be a trademark, not a patent, even though both are delivered - or not as the case may be - by the US Patent and Trademark Office, USPTO.

Given that it’s most of the UK press that has got this wrong we’d very strongly suggest that the mistake is actually in a Press Association piece from which everyone’s drawing their story.

We could just say this is an example of what Granny always said - you don’t want to go believing what’s written in the paper. But we’d want to be a bit more emphatic than that we think. If they’re like this on something so simple then how much are they getting wrong on complicated things like inflation, climate change, resources, political plans and all the rest?

Quite, if they’re not getting it right on things we know about then why are we trusting them to inform us on things we don’t, as Mr. Gell Mann pointed out.

It's about migration more or less

Jack Twyman is an intern at the ASI.

Take a look at any national newspaper and, as an alien from outer space, you’d be forgiven for thinking that the United Kingdom was under siege by an aggressive foe. 

Constant news headlines decry the government to “Send in the army to halt migrant invasion”, adding “Rescue boats? I’d use gunships to stop migrants”. The Express is desperate saying “We can’t stop migrant chaos”, and that “Migrants take all new jobs in Britain.”

It comes as no surprise to say that is not remotely the case. In 2022, the Office for National Statistics (ONS) recorded the highest ever net migration to the UK at 606,000 people. The ONS also recorded the 45,746 people who arrived illegally. Of those, 25,119 would be allowed to stay in the UK as refugees. Accounting for this, illegal arrivals accounted for just under 8 per cent of the total of net migration. In 2023, as of 13th June,  there have been 9,062 illegal arrivals so far.  

So what is leading the current UK government to assert that passing one of its five main targets is to pass new laws to stop small boats, and ensuring the swift detainment and removal of illegal entrants? 

Looking at opinion polls, the picture distorts further. An IPOS UK poll from March 2023 found that only 19 per cent of the public have passing new l was to stop small boats crossings as one of their top four priorities. Easing the cost of living, 67 per cent, reducing NHS waiting lists, 50 per cent, growing the economy, 36 per cent, halving inflation, 31 per cent, all out pace in importance for the public. 

Additionally, a Poll by the Law Society of England and Wales of 1,954 people in March 2022 found that almost two thirds of people said refugees who arrive in the UK illegally should have the same rights as those who come legally. 

However, it is still clear that a great deal of voters care deeply about the issue. Since government rhetoric has increased, and the Rwanda policy became more likely, trust in the Conservatives on asylum and immigration increased to 1 in 3 in March, up since February. POLITICO found that among 2019 Tory voters, 41 per cent see illegal migration routes are a priority. 

‘Why are my hard-earned taxes, in a time of rising inflation and economic uncertainty, being used to put migrants up in 4 star hotels?’ voters argue. Rishi Sunak is so convinced that he claimed “stopping the boats is not just my priority, it’s the people’s priority.”

The government of course has the resources and funds available to continue allocating efforts into sustaining the refugees, but the impasse of claim processing has exacerbated the issue further. Data from The Migration Observatory at the University of Oxford shows that decisions had already failed to keep pace with applications before the huge increase in claims in 2021 and 2022. This gap has only widened further, with outstanding cases awaiting final decision at the end of 2022 at 132,000 asylum applications.

So there is a real issue is in processing, where slow rates have created a backlog that has created a situation where asylum processing centres are overwhelmed and overfilled. The government now spends on average £4,300 per asylum seeker per month in private-provided housing for refugees, equivalent to a £6.2m daily cost of housing asylum seekers in hotels.

Last year, the UK spent £3.7 billion, or 29% of its aid budget, supporting refugees within the UK, drawing criticism from aid groups, international NGOs and domestic politicians alike. Surely there must be a better way? The obvious choice would be to train more civil servants to process the claims, but this is costly, currently inefficient, and would be a lengthy process.

I propose that we procure private firms as processors, paying them per asylum claim processed. This outsourcing and privatisation will create a healthier competition and increase diligence and duty of care as the claim assessor stands to lose more than if they were in a non-commercial, government position. It will also avoid the currently concerning plans to house refugees in former military bases and so-called “rudimentary accommodation” in the words of Immigration Minister Rober Jenrick. Private firms are proven to respond quicker to market demands, and there will surely be a host of providers created overnight if this scheme was put forward. 

But there is still more to be done. We must ask ourselves the question why we currently prohibit asylum seekers from working whilst their claim is being processed? In an era of high job vacancies, should these migrants not be seen as an opportunity, or gift for the country? A proactive approach would see these migrants start contributing from the offset, giving the government the opportunity to recuperate some of the funds used to support them, and allowing the migrants to bring benefit to the economy. 

I would also propose allowing asylum seeker applications to be made in embassies abroad. Sure, there are foreseeable issues with this proposal in countries where there are a high number of prospective applications, but allowing application in France or other similar countries will prevent the need to dagerous journeys to be made overseas, and the subsequent strain on the emergency services responding the the dire humanitarian results. I am not alone in this proposal as in fact 68 per cent respondents for an Ipsos  poll of the UK public support this proposal. 

Ultimately, I am sureI align with the vast majority of my fellow countryfolk in not sharing Jenrick’s belief  that Asylum seekers who arrive in the UK by crossing the Channel in small boats “cannibalise” communities.  Certainly he is correct that the continued uncontrolled situation threatens “the compassion that marks out the British people.” Yet claiming that the protestors outside migrant hotels are a “warning to be heeded, not a phenomenon to be managed” is at best a reach. The Daily Express Editor Gary Jones recently claimed that after concerted effort by Stop Funding Hate was a signficiant factor in rethinking editorial direction around sensitive topics like the Channel migrants.

This serves as a reminder how the public can exercise non-political rights to enact change and achieve a voice irrespective on whether elected representatives are in agreement. Sure, the UK is in danger of neglecting necessary action on the issue, however this is not equivalent with a mutli-million pound deal to ship arrivals to Rwanda and elsewhere, nor pay huge sums to house migrants in hotels, or former military bases. With a pragmatic approach that reaches out of government and into enterprise the situation can be more effectively dealt with, and far faster that without. Election ploy or not, securing the stability of UK society must be a priority.

What joy! We have to crush the NFU for Gaia

The Guardian tells us of a new World Bank report. Which states that there are vast subsidies going to fossil fuels and farming which really must stop, right now. Not doing so will lead to Gaia boiling and of course none of us want that. Which does indeed mean that we all get to go crush the National Farmers’ Union. Which is, we can all agree, such wonderful fun.

Vast fossil fuel and farming subsidies causing ‘environmental havoc’

Sounds very bad indeed.

The “toxic” subsidies total at least $7.25tn a year, according to a major new report from the bank. The explicit subsidies – money spent by governments – account for about $1.25tn a year, or more than $2m a minute. Most of these are harmful, the bank says.

Now there’s a little twist here. Explicit means actual money paid out. Concerning fossil fuels in the rich world this near never happens. This is the subsidy of oil and or gas in places like Russia, Iran (the two largest) and certain other middle and lower income countries. We don’t do that so we don’t have to stop.

The indirect fossil fuel subsidies are a bit more difficult. Because the calculation is that everything should be paying VAT and also fossil fuels should be paying a full carbon tax. Any level of tax less than this is an indirect subsidy. We don’t do much of that - the UK is one of the very few places that does, by this calculation, already tax petrol and diesel enough to cover those. True, there’s red diesel for farmers and trains, so those would have to go. The special lower VAT rate for domestic fuels, that’s got to go to meet this World Bank standard. But that’s what they are talking about here and in this sense the UK is really doing very well indeed. Fix red diesel and VAT and we’d be fully conformant in fact. And, you know, since we want to save Gaia, why don’t we do those last two things?

Farming though, farming is a different thing. We do have that National Farmers’ Union demanding, as with the National Union of Miners of decades ago, that farming (mining) is special and there should be vast, gargantuan, subsidies to those who drive Range Rovers across their own fields on our behalf. The World Bank is telling us that this is not so.

In fact, the World Bank is telling us that we’ve got to stop subsidising farming at all. We should go the full New Zealand and just let them work as with any other business. Those who add value stay in business, those who don’t, don’t.

There can also be no arguing with this for of course we are all to do absolutely everything in order to save the planet. This is the science you know, the only way to save humanity from a fiery, boiling, death.

So there it is. In order to save Gaia we’ve got to crush the NFU. We baggsie the right to be first to tell them too.

Lordy be this is an appalling piece of poltroonery

The Guardian tells us that austerity has meant that we’re seeing the stunting of British children again:

Children raised under UK austerity shorter than European peers, study finds

Average height of boys and girls aged five has slipped due to poor diet and NHS cuts, experts say

The average height of British children has risen slightly.

British children who grew up during the years of austerity are shorter than their peers in Bulgaria, Montenegro and Lithuania, a study has found.

In 1985, British boys and girls ranked 69 out of 200 countries for average height aged five. At the time they were on average 111.4cm and 111cm tall respectively.

Now, British boys are 102nd and girls 96th, with the average five-year-old boy measuring 112.5cm and the average girl, 111.7cm. In Bulgaria, the average height for a five-year-old boy is 121cm and a girl, 118cm.

See? That’s a rise in height. Not a fall, a rise, in the height of British children.

And now the poltroonery.

Experts have said a poor national diet and cuts to the NHS are to blame.

What, cuts to the NHS make kids grow taller? Really?

said Henry Dimbleby, the former government food adviser

Well, at least we have been given the usual sign that the rest of this is nonsense.

The actual paper is here. And so to the truly interesting part:

But they have also pointed out that height is a strong indicator of general living conditions, including illness and infection, stress, poverty and sleep quality.

“They have fallen by 30 places, which is pretty startling,” said Prof Tim Cole, an expert in child growth rates at the Great Ormond Street Institute of Child Health, University College London. “The question is, why?”

OK, so British children aren’t shorter, they’re taller. But if we rank kiddies by country then British children have fallen 30 places in such a ranking. A ranking of 200 countries by the way.

So, what has happened? The most glorious thing, the greatest reduction in absolute poverty in the history of our entire species. This past 40 and 50 years has indeed been exactly that, as idiot socialism died off and free market capitalism roamed the globe. Meaning that children in formerly poor countries are now in places not so poor. Those children are also now, as ours have for a century, getting three squares and some milk a day and are now growing up big and tall. As the actual paper in Nature points out. And laments isn’t happening in those areas like sub-Saharan Africa where this joy is not, as yet, happening.

Globalisation means kids formerly so poor they were stunned from hunger grow up tall now. And this gets turned into a whine about the NHS? Poltroons, there’s no other explanation for it.

Except Dimbleby, of course. No one’s going to accuse him of understanding this enough to twist it.