There is no good argument for subsidising Tata at Port Talbot

The begging bowls are out again:

Indian conglomerate Tata Group has threatened to shut Port Talbot steel works unless it is given a £1.5bn government lifeline to help reduce carbon emissions.

No, and no again, and Hell No.

This is not just because of our well known hatred of looting the populace by picking losers. There’s a technical point here which makes the very idea ludicrous.

Steel making is considered one of the hardest industries to decarbonise and the plant requires huge investment in order to switch to either electricity or hydrogen to make the metal, using green power. As it stands, Port Talbot uses natural gas and coal to smelt steel which is used in the UK’s car making industry and construction, among other industries. Losing the plant would threaten the viability of those businesses.

The plant makes virgin, or primary, steel - ore to metal. This is important.

Under decarbonisation plants, Port Talbot's two blast furnaces would be closed and replaced with electric arc furnaces which use recycled steel, reported the FT. This would end so-called primary steel capability at the plant where steel is made from iron. It added that Tata is seeking half the £3bn costs of converting the mill from the government.

Thre are certain steels you might not want to make from scrap in an electric arc furnace. Or even some that you cannot.

So, we’ve that technical reason that we want the blast furnaces to continue so that the car steel (say) continues to be made locally. That’s the argument in favour of the subsidy.

But when they get the subsidy they’re going to use it to close the blast furnaces and install electric arc (the hydrogen part is to do to direct reduction of iron ore pellet which, well, maybe but that’s unlikely) instead. Which is the very technology which can’t make those steels which can only be made from virgin metal.

That is, the subsidy wipes out the very technology and reason for the subsidy. We gotta have virgin steel so give us £1.5 billion to not make virgin steel? Couldn’t they manage something at least a tad more convincing than that?

To repeat. The argument in favour of the subsidy is that there are certain steels which cannot be made from electric arc furnaces. The subsidy is to install electric arc furnaces, which cannot make the steels which are the justification for the subsidy.

Tosh.

That even before we get to the fact that the UK has plenty of electric arc furnace capacity, they don’t cost £3 billion either. The subsidy wouldn’t even provide something we’ve not already got.

We know we really shouldn’t say such things these days but if we were in charge the next time these characters came around begging we’d be found discussing whether 3 or 4 seconds constitutes a sporting head start while polishing our shotguns. Come along gentlemen, at least make your justification for other peoples’ money believable. We’re not even in the steel business and we can see through this.

Goodbye, ASI!

I didn't quite know what to expect as I walked through the office doors for the first time not as an attendee of an event, but as someone now expected to work for and contribute to the esteemed Adam Smith Institute. For several years previous I had heard talks given and read papers written by those employed there, but I had not imagined that I would one day, albeit all too temporarily, have my own desk there.

The phrase ‘thrown in at the deep end’ does not really make sense at the ASI, because that is the only end there is. I was immediately set to work helping research upcoming papers, trusted to review, copy-edit and help write others, and most dauntingly, research and write my own. I was thrilled to have the opportunity to be supported in putting to paper ideas about which I feel very strongly. 

These included an article on proposed smoking legislation, attacking the fundamentally wrong core ideas behind government paternalism; and a briefing document to inform MPs about the consequences of agricultural subsidies and the opportunities available to us through their removal. 

No two days were the same; my time included being invited to a day of talks given at a prominent sixth form, meetings with other think tanks, and even a literal front row seat to witness Liz Truss announce her leadership campaign.

I was able to constantly learn by word and by example from the kind and talented staff who warmly welcomed and expertly guided me. The ASI has proven that an amusing work environment and a serious influence are by no means mutually exclusive. In all, I am firmly of the opinion that my time here has had a marked influence on my abilities, my outlook and my desire to continue with what the ASI stands for: sound people and sound ideas.

Contra Khan and the myth of the rational smoker

Sources this week revealed that the Government’s upcoming white paper on health disparities (likely based heavily on the recently published Khan review) has been delayed until the new Conservative Party leader is chosen. 

Amid leadership debates and desires for a revitalised direction for the country, we have been presented with the perfect opportunity to put a stop to what has been a defining feature of the past decade in politics: a doggedly persistent walk down the road to paternalism. One of the most indicative features of this marked shift is the now infamous Khan review. While the review contains some positive suggestions and highlights the troubling lack of awareness of smoking alternatives, the rest is replete with poorly substantiated research leading to condescending recommendations.

The review acknowledges declining smoking rates which are currently on track to hit 6.3% by 2030, just 1.3 percentage points higher than the government's Smokefree goal. Yet it fails to discuss whether its interventions are really necessary to encourage such marginal shifts in behaviour. The recommended measures might appear more reasonable if smoking rates had remained unperturbed by the rise of safer alternatives and changes in attitudes, but this is not the case. 

The review also relies on the argument of protecting the public purse; that eradicating smoking will free hospital beds, reduce waiting times and save billions. In fact, in the absence of smoking, the public purse would be hit with an annual bill of almost £20 billion from increased spending on pensions, healthcare, other benefits and foregone tobacco duty. There would be savings of course, but at roughly £5 billion, a rather sizable deficit would remain.

The essential question ignored by this report is whether or not we think adults are capable of deciding to smoke, irrelevant of whether it is harmful. John Stuart Mill eloquently explained that "If a person possesses any tolerable amount of common sense and experience, his own mode of laying out his existence is the best, not because it is the best in itself, but because it is his own mode."

As a society we have agreed that we should allow the practice of some activities which we deem unethical, dangerous or otherwise negative. Few people think open water swimming, adultery or drinking should be illegal. Evidently, personal danger, immorality or the existence of negative externalities are not sufficient criteria for outright prohibition. This therefore begs the question: are there any criteria besides public opinion and political expediency? As John Humphreys observed, those in authority can simply take the helm and bravely "ban things and treat us as children who are not sufficiently mature to assess risk for ourselves".

We do not want, nor should we want to live in a risk-free society, unencumbered by temptations and decisions. Perhaps so long as adults are informed and derive some form of enjoyment from smoking, the optimal number of smokers is not zero. And they are indeed informed. For decades surveys have found that practically everyone knows that smoking is harmful, and that we even overestimate certain risks, such as that of lung cancer. 

But surely addiction precludes rational participation in dangerous activities? Perhaps at some level. But when only 40% of smokers actually plan on quitting in the next year, and 10% in the next three months, the objection is somewhat tenuous. There may well be some degree of addiction where being so addicted removes one's ability to rationally make decisions, but it seems extraordinary to suggest this level is reached while the majority of smokers are happy to continue smoking for at least the foreseeable future. What Dr Khan may think of as the myth of the rational smoker, may not be such a myth at all.

The fundamental flaws in government paternalism aside, here are the headline sections from the report:

Stopping the start

Most recommendations in this section involve making it impossible, inconvenient or expensive to legally buy tobacco. The most extreme suggests raising the age of sale of tobacco by one year, every year. Given that most smokers started before the age of 18, it is clear that in this case as with many historical prohibitions, illegality is not a sufficient criterion for cessation. The age of 18 is also an extremely important one; it is the age at which we can buy alcohol, vote, and get married or join the army without our parents’ permission. To raise the age of smoking would be to assert that adults who are capable of making these other incredibly important decisions are not intellectually capable of deciding to smoke. 

Given that illicit cigarettes are cheap and easily accessible, Dr Khan’s call to significantly increase tobacco duty would only exacerbate the illegal cigarette trade, as demonstrated by a study (which included the UK) that found that a €1 increase in tax per pack increases illicit market share by between 5 and 12%.  

The review’s praise of mandated packaging and advertising bans are unsurprising but disappointing, given the breadth of research showing that plain packaging has no effect on actual usage. In most cases, advertising affects brand preference rather than uptake of new activities. Despite Khan’s expressed concern for underage smokers, the argument for allowing Stop Smoking Services to provide them with vapes to aid them in quitting smoking is not mentioned in the report, while mandating an on-screen warning while tobacco products are visible in films is.

He also recommends banning companies from giving out vapes for free, yet provides evidence that "free vapes significantly increased demand for stop smoking services, particularly in the most deprived quintiles”. This insistence on government-run programmes and unwillingness to allow the private sector to contribute is baffling.

The report also comments that snus is far less harmful than smoked tobacco, and mentions Norway, where it has all but replaced tobacco smoking in young adults. Surprisingly (or perhaps unsurprisingly) Dr Khan comes to the conclusion that he has not been persuaded that it adds additional value, and should not be a priority for the government's legislative time.

Quit for good

Happily the report then takes an optimistic turn, and highlights the safer alternatives to cigarettes. Dr Khan discusses public misinformation about vaping and lack of awareness of other nascent alternatives such as nicotine pouches. Whilst he suggests a mass media campaign to correct these issues, simply replacing the current health warnings and images on cigarettes with ones concerned with alternatives would be a far more cost effective and targeted way of disseminating this information.

System change

The review continues with suggestions of how the NHS needs to do better at helping those who want to quit do so, especially in the area of mothers who smoke, given the alarming statistic that one third of teenage mothers smoke during pregnancy. The financial incentive schemes mentioned in the report deliver good value outcomes in reductions in antenatal and postnatal complications. Disappointingly, they are rarely used.

Dr Khan does however continue to assume that all smokers wish to quit, and advocates implementing targets which, as demonstrated by this review, are likely to lead to ill-advised and unnecessarily restrictive policies. 

While the review suggests organisational improvements that should certainly be adopted in order to help those wanting to quit, and rightly highlights the issue of misinformation concerning smoking alternatives, many recommendations either ignore the case for individual responsibility or ignore research on the impacts of his suggested policies. Right now we have been given the opportunity to show the new Conservative leader that conservative values cannot be squared with this neo-puritanism; that they must lead the slow climb back up the slippery slope; that something must change.

Mr. Chakrabortty rather misses the point here

There are those who think that government should be more involved in the planning and development of the economy. The wisdom, perhaps, of those attuned to social returns beating the grasping nature of the capitalists - or some such construction.

Aditya Chakrabortty tells us of events in Manchester:

The report says that nine sites were sold to the sheikh at a fraction of their value, and well below what other plots nearby fetched (the council says it used independent experts using standard valuations, although it won’t give any more details). They were on leases lasting 999 years, well beyond the norm. And the fund shifted what had been public assets to companies registered in Jersey.

That walk along the water from New Islington into Ancoats now passes blocks of privatised land owned in an offshore tax haven, which yields millions upon millions for a key member of the wealthy elite running a surveillance state halfway across the globe. One of the greatest cities in the world has sold itself to a senior figure in a brutal autocracy – and not even for a good price.

Chakrabortty goes on to suggest that the council would have done better to do it itself, rather than selling these assets to the capitalists. Which is indeed one way of reading it, we agree.

We also take the opposite view. This is proof that politicians, with that eye to the social values, not financial, aren’t in fact very good at matters economic. In fact, they’re terrible at it.

Which is why we don’t use government to do that economic planning and development - not if we’re sensible about it. On the grounds that government just isn’t good at planning and development. The proof being these complaints about what happens when government tries it.

The purest piffle about aviation and climate change

We’ve touched, recently, on the subject of aviation and climate change emissions. There’s now someone in The Guardian spouting the purest piffle on the subject:

Britain is boiling – and the government wants to dramatically expand UK aviation

Leo Murray

Its ‘jet zero’ strategy relies on the invention of pie in the sky technologies to tackle dangerous airline emissions

The first point is about scale. Currently aviation is some 2% of emissions. The UK’s share of that is about the same as that of global GDP. 2% or so, around and about. Us all going to Benidorm is perhaps 0.04% of the global problem. This is a rounding error. Even if we accept that in the future aviation might become 20% of all emissions that’s because all other emissions decline by 90%. Making the effects of the residual, again, a rounding error.

Aviation simply isn’t an important part of the problem, however much weight we might want to put on there being a problem in the first place.

This doesn’t stop people like Mr. Murray aiming to ration flights so that we all gain less of what we desire. Presumably to provide some sort of bansturbation pleasure from doing so. As one of us put it a couple of decades back in The Times:

One candidate is the verb “to bansturbate” (origin, Harry Haddock, who blogs at nationofshopkeepers.wordpress.com). The word – a fusion of “ban” and the term for self-abuse – refers to both the public abuse of the rights of the citizenry as things that some people simply disapprove of are made illegal, and the near-sexual frisson of pleasure gained by those who pass such laws.

But while such sumptuary laws might give that sexual frisson to some - and who are we to argue with how some gain their jollies these days? - the real problem is that it’s based upon gross, gross, ignorance:

Then there’s so-called “sustainable aviation fuels” or SAFs. These are usually nothing of the sort – because burning huge amounts of biomass or waste is also extremely detrimental to the climate. The “jet zero” strategy also relies heavily on greenhouse gas removals to balance the books. This concept would allow airlines and airports to continue polluting for decades, putting off real action to cut emissions now with the hope that unicorns will arrive some day to suck those millions of extra tonnes of pollution out of the sky and store it underground.

The truth is there is only one method for reducing aviation emissions that we know works, but the government refuses to do it: reduce the number of flights.

No. We already know how to make sustainable aviation fuels. Not already know, people (our example here is Shell but they’re not the only people) are already doing it. If you’ve got green hydrogen, which renewables and electrolysis can easily - if not as yet all that cheaply - provide, then the chemistry of moving up to synthetic jet fuel is not just simple it’s been known for a century.

The Stern Review tells us not to try to plan, in any detail, our response or solution to climate change. This is wrapped up in the usual economic strictures about the paucity of information available to the planners, the inefficiency of central direction as compared to market forces and so on.

What is actually meant is that we don’t want planning because we’ll end up with plans of the most perfect piffle as a result of the gross ignorance of the planners.

Mr. Murray, the door is over there. Don’t let it tap your tushie on the way out.

Madam, this is the argument in favour of tax cuts

We do realise that the IPPR is well to the left of us. Vastly more statist, prodnose and interfering. But is it really too much to ask that they actually understand the arguments?

Perhaps most importantly, permanently cutting taxes has consequences – and would require a scaling back of the state.

Yes, that’s right, that is the argument in favour of tax cuts. That it would mean that the state must become smaller. It is possible to run the argument the other way, we should shrink the state in order to be able to have tax cuts. Which is attractive as an argument but it is not in fact the full pith and pit of the logic.

Liberty is when we get to do what we want. The limit to this is the damage our doing so might do to the rights and abilities of others to do the same. JS Mill is hardly a new entrant in these definitional stakes.

So, the liberal society is one in which that liberty, that freedom, is maximised. Government is indeed necessary - we are not anarcho-capitalists - but should be limited to only those things which both must be done and can only be done by government. All else is, as one constitutional document from another place puts it, to be left to the people.

Scaling back the state to accommodate tax cuts is not a problem in the slightest. Cutting taxes so that the state has to shrink is the actual argument in favour of removing the state from our wallets in the first place.

Nobody knows anything

We’re not convinced that this is the whole of the truth, the entirety, but let’s go with this as a working assumption:

Venture capitalists are clueless – the likes of Klarna and Uber prove it

As values crash, it's becoming clear that many VC firms simply got lucky once and have coasted ever since

Having the clueless spraying around societal resources doesn’t sound like all that good an idea if we’re honest about it. It would also seem to be a verification of William Goldman’s line, “Nobody knows anything.” Which also leads to the follow up “not one person in the entire motion picture field knows for a certainty what’s going to work”.

We are willing to agree, entirely, with that second version of the point. Also, to believe it about the wider society and economy. Varied people might have some ideas of what might happen, try to position themselves to take advantage of it, but no one is certain about what will work.

But if having the VCs spraying those resources around isn’t entirely optimal then of course this suggests that some different method will do better. Which is where those economic planners make their entry. If we use the very bright people - those Rolls Royce minds - who populate the Civil Service (and, to be even more ludicrous, the less RR minds that constitute politics) to decide upon what everyone else must do then resources won’t get wasted, will they?

Except, of course, the entire point of planning is that there will only be the one way that anything gets done. But we’ve all just agreed that no one knows what will work. So deciding upon just the one way takes us further away from other discovery of any of the ways that might work. For we’ve concentrated the decision down onto the one single method which is no more - or to be fair, less - likely to work than any other.

The VCs directing matters from Mayfair isn’t, we’re aware, all that appealing. There are those who would prefer the Civil Service to be doing it just down the road in Whitehall.

But the actual point here is that VCs is plural, meaning many experiments, “the” Civil Service is singular, meaning just the one essay at an attempt. And in the fog of ignorance which system is more likely to luck into something that works? The one with multiple attempts of course.

Or, as has been pointed out more formally before, markets are the way in which we experiment to find out what works, something that planning doesn’t do nor even allow.

All of this long before we consider whether today’s Civil Service or politics does in fact contain the Rolls Royce minds of our generation where finance does not. We ourselves know large numbers of people in both of those sectors, we’d need more than just a certain amount of convincing of that contention.

Sadly, John McDonnell appears not to know what poverty is

One of the little difficulties possible is that if a weird, or odd, definition of something is used then folk might forget what that definition is. Thus they end up spouting nonsense because they use numbers as defined but forgetting why the definition used militates against their proposed policies. This has just happened to John McDonnell on the subject of poverty:

There are 14.5 million people in poverty in Britain, including 4.3 million children. Two-thirds of those children are in a household where someone is in work. If you are in work, even if your company is booming, you have little say over whether you will benefit from its profits. If your landlord increases your rent or threatens eviction, or if your mortgage company fails to pass on interest rate cuts, you are largely powerless.

The prices of the basic goods you need to live on are set by a small group of multinational companies that between them carve up the market and set the prices to profiteer. So it’s a statement of the obvious that poverty is caused by the combination of low incomes and high living costs faced by many British people. But what brought this about?

That is, we’re afraid, abject nonsense. Not because it disses our favoured neoliberalism, nor because it’s against our beloved markets. But because it doesn’t understand the definition of poverty being used.

Which is living in a household on less than 60% of median household income, adjusted for size, after housing costs. This measure of poverty is one of relative poverty - having less than others. Carving up markets, profiteering, have nothing to do with this whatsoever. This is about the distribution of incomes, not the prices of goods and services.

Think on it - if every income in Britain doubled tomorrow then the poverty level would be exactly the same as it is today but living costs would be remarkably more affordable. If every income halved then inequality in income distribution would be exactly as it is today and therefore so would poverty - while living costs would have become remarkably less affordable.

The poverty level claimed is all entirely nothing to do with high living costs at all. Because of that original definition of poverty being used - one of inequality, not absolute standards of living.

The problem with forgetting - if ever even known in the first place - the definitions created to show how appalling the modern world has become is that by forgetting one misses what has in fact been defined. Therefore any proposals to fix the problem fail given the lack of knowledge of what has originally been defined.

Or, you know. GIGO. Garbage In, Garbage Out.

McDonnell’s original statistic is about inequality of incomes, his subsequent burbling is about the absolute level of prices. These are entirely different things. He’s therefore wrong because he’s forgotten how his original numbers were compiled and defined.

Net zero doesn't mean that aviation needs to be zero

There’s an horrendous logical mistake being made over climate change and emissions. Ah, yes, we might say several but just stick with this one for the moment. Take this net zero idea as a goal - no, just assume that to begin with and let us then explore.

We then get told that individual sectors, or actors, or activities, must then become non-emittive. Which isn’t the point of net zero at all, rather, society as a whole should create no net emissions.

This does matter:

Where are we with emissions? The IBA consultancy ran a webinar last week looking at just that question. Since 2018 the average amount of CO2 produced per seat flown has fallen by nearly 6 per cent. But total emissions are due to increase, thanks to commercial aviation’s steady growth. Next year we are forecast to be back roughly where we were before the pandemic struck, with 900 million tonnes of CO2 produced by airline fleets. After running through the various new technologies available, IBA concludes: “There is no readily available technology to radically decarbonise aviation.”

The industry has a goal of reaching net-zero emissions by 2050.

But the industry shouldn’t be trying to reach net zero - it’s the whole society which has that aim. The entire point of the “net” part of the phrase is that there will be emissions, somewhere in some corner of the economy, and that those will be outweighed by negative emissions elsewhere. This does - logically and obviously - mean that we’re fine with there being positive emissions somewhere, in some corner of the economy.

Net zero doesn’t mean that all activities must be non-emittive, it means, by definition, exactly the opposite.

Now we have our suspicion - and it’s no more than that - that the way aviation will work out is cheap solar to electrolysis, green hydrogen through Fischer Tropf to jet fuel. That would be a zero gross emissions process.

But we do still insist upon this basic logic. The very fact that the rallying cry is “net zero” emissions includes, as a logical certainty, that we’re fine with certain activities creating emissions. Simply because if we weren’t then the cry would be “zero” emissions, not “net zero”.

Zero emissions having a certain problem to it, as with humans and other mammals continuing to breathe.

But why do we want to entice people out of their cars?

Something we don’t understand:

After two years of Covid-driven decline in public transport use and increasing automobile traffic globally, what can governments do to entice people out of their cars?

Why would we want to do this?

Yes, of course, we understand the climate change argument about emissions. We grasp the one about urban pollution from tailpipes too. We’re not sure we wholly agree with either argument but we do grasp what they are. We’re also absolutely certain that folk like autonomous transport, that which allows the ability to travel from anywhere to anywhere, anywhen.

So, assuming we can solve those two claimed pollution problems then why would we want to get people out of cars?

And society does at least claim to have a method of solving those two pollution problems, electric vehicles. Which is where we get confused. If we’ve already got that solution which we’re paying billions upon tens of billions to put into effect then why is there also this push to solve that problem already solved at such expense?

Of course, no one would possibly be using climate change, or urban pollution, as some excuse to remake society in some collective direction. It would be absurd to place the entire mobility of society in the hands of public sector unions, of course it would, unless there was no other possible solution to our problems.

So, given that no one would hide their motives, nor deliver us into economic bondage, in that manner just why would we want to tease people out of their cars? We’ve already solved the problem with EVs.

What is it that we’re not grasping here? If EVs don’t solve the problem then why are we bothering, if they do then why do anything else?