Tag: UK

THE CHANCELLOR IN THE IRON MAIDEN

LABOUR’S DILEMMA.

The Chancellor’s economic bondage fetish continues! During the election he bound himself in pledges not to increase income tax, national insurance and VAT by law. Last night at the Mansion House he pledged a new fiscal framework to achieve permanent budget surpluses.

This is a major development in the finances of the nation. In only seven of the last fifty years have governments run a budget surplus. George Osborne is convening the first meeting in 150 years of the commissioners for the reduction of the national debt.

Business is likely to welcome this determination to tackle the national debt but its political implications are profound. Labour has always believed in the need to run deficits during difficult times to boost the economy and support public services. How will they respond to this? If they support it, the prospect of a Labour Party coming to power with ambitious visions for the NHS, housing and social care will be almost impossible. If Labour oppose Osborne, he will say it is evidence Labour are committed to running deficits and never tackling the National Debt currently running at 80% of GDP.

This move shows the Tories are determined to press home their advantage at a time when Labour is engaged in a tepid leadership election to which I will return in later blogs.

EURO HONEYMOON OVER.

It is a good job the Chancellor is able to divert attention from Tory divisions on Europe. I thought the “better off out” brigade now disguised as Conservatives for Britain might have come to have a little more respect for David Cameron after his election victory. Not a bit of it. We are back to the nineties with these Tory backbenchers making impossible demands on banning freedom of movement in the EU so that they can campaign to get Britain out.

MANDELSON ON NORTHERN DEVOLUTION.

Peter Mandelson is hoping to be elected Chancellor of Manchester University shortly and wants that institution to play its part in the Northern Powerhouse.

During the campaign he has made some painful observations about how Labour was completely outflanked on devolution during the last few years.

Labour council leaders across the North were left with no alternative but to go along with the Northern Powerhouse because of a complete absence of an alternative by Labour. They were reluctant to promise to abolish the Local Enterprise Partnerships but their vision of how the North South divide would be narrowed remained opaque. They should have returned to John Prescott’s vision of regional assemblies holding recreated Regional Development Agencies to account. Only this time they should have given them real powers, like Osborne is giving Greater Manchester.

Mandelson says he was hugely frustrated by seeing the Tories seizing the devolution agenda whilst Labour stood back. The former cabinet minister says Labour had the language but not the policies to rebalance the UK economy.

Labour got this wrong but the Tory plan to allow groups of councils to come together, each with a different model isn’t the answer either to the really big question of how England responds to the call for a federal UK.

PUTTING THE BOOTS INTO BUSINESS

MILIBAND AND BUSINESS

Ed Miliband is staking everything on being the people’s champion against vested interests. He may be personally awkward and unable to eat a bacon sandwich but he is convinced that voters will rally to Labour as the party for people who are fed up with the fat cats getting away with it. He may be right and if he can get enough of them to vote, he might win. On the other hand the Tories may succeed in nailing him as a leftie with a downer on enterprise.

It is essential that Miliband breaks out of the torpor that has surrounded his leadership. He can’t change his personal image, he can’t change the fact that the economy is on the mend but he has developed a habit of courageously taking on vested interests.

This began with Rupert Murdoch when revelations about phone tapping first emerged. Next were the energy companies threatened by a price freeze. Now Stefano Pessina of Boots and Tory donor Lord Fink are caught up in Ed’s latest campaign for people to pay their fair share of tax in the UK.

He is definitely on to something here. It is a common complaint that ordinary people on PAYE, well known to Inland Revenue and Customs, are readily fined for being a few days late with their tax forms whilst it seems these fat cats with their money stashed abroad are treated with awe and respect. The approach is justified on the grounds that being nice and polite might get some money back whereas going in hard with court cases will be costly and not productive. Well let’s try it and see whether the bad publicity leads to lots of these tax exiles paying up at the court door.

This matters. We are talking billions of pounds that could be being spent reducing the deficit and saving public services. If Ed Miliband can convince people it won’t be business as usual under him, he might be on to something at last.

KEY NORTHERN SEATS: SOUTHPORT.

Each week between now and the General Election I will be looking at some of the key contests in the Downtown in Business areas of the North West and Leeds.

We start with the battle between the Conservatives and Lib Dems in the genteel streets of Southport. In times past the constituency fluctuated regularly between the two parties. But since 1997 it has been in Lib Dem hands, initially in the shape of the flamboyant Ronnie Fern, but for the last three elections John Pugh has held the seat. Pugh, a school teacher for thirty years was a big contrast to Ronnie Fearn. He has earned a reputation as a good constituency MP recently highlighting the economic problems of resort towns in a Commons debate. Shamefully overlooked for ministerial office in the Coalition, he has distanced himself from some of the government’s policies.

His Tory opponent is supermarket executive and Preston councillor, Damien Moore. He has to overcome a six thousand Lib Dem majority, so the party will have to be in real meltdown for this seat to change hands.

Next week: Rossendale and Darwen.

NORTH WANTS TO REOPEN LONDON RUNWAY DEBATE.

The debate about the future of our northern airports is about to take off as a number of issues come to a head and the incoming government next May is challenged to decide on a new runway at Gatwick or Heathrow

Up North the big player is Manchester. Brimming with confidence as part of an airport group that also owns Stansted, it is seeing Airport City being constructed to massively increase its retail offer and freight handling capacity. It wants more international slots to fill its unused capacity.

Leeds Airport is considering a £38m investment package but road links to the A65 remain an issue. Newcastle now has a daily flight to Dubai but are concerned about the Scottish government potentially reducing Air Passenger Duty.

Elsewhere the picture is less rosy. Blackpool Airport recently closed altogether although there are hopes that it might be re-licensed particularly to service the Morecambe Bay gas industry. Finally there is Liverpool where passenger numbers are falling from 5.3 million in 2011 to 4.2 million in 2013.

When the Davies Commission was set up to decide on the options for maintaining the UK’s role as a major international hub, airports in the North and Midlands pointed out their available capacity to take more international flights. In contrast Heathrow has been full for years.

The option of including Birmingham and Manchester in particular in a dispersed huge hub that would also include Heathrow and Gatwick was dismissed by the chairman Sir Howard Davies. The reasoning was that airlines wanted to fly out of London and if attempts were made to bribe or give them an incentive to go elsewhere then they had other “hub” options around the world. Hubbing is crucial for airlines, finding the airport that can offer the best options for interconnections. The airlines take a global view and therefore the UK is in hub competition with not just Amsterdam and Frankfurt, but Dubai as well.

More recently the Davies Commission rejected Boris Johnson’s idea for a new airport in the Thames estuary which would have cost £90bn.

Final consultation is now under way on the remaining options which are two alternatives at Heathrow and one at Gatwick. Sir Howard Davies has been deliberately told to make his final report just after the General Election as this is a decision politicians don’t want to take. There have been years of prevarication already because whichever decision is taken residents will be up in arms over the noise issue.

It is on the cards that no decision will be taken by the new government. The Blair/Brown government, with working majorities funked a decision. If we have a minority government in May, how likely is it that a decision will be made? The Times reported Sir Howard’s somewhat intemperate reaction when I put this possibility to him recently. It was along the lines of what do you expect me to do? It was the understandable reaction of a man trying to do a very difficult job.

That won’t worry northern airports. Sir Richard Leese,chairman of Core Cities, told me recently that he rejected the hub concept, wanted the whole issue of a new runway in the South East to be put off yet again and wanted Manchester’s case to be considered once again. He pointed out that HS2 would have its own airport station which strengthened the case for Manchester solving the South East runway capacity problem.

TO FRACK OR NOT TO FRACK?

THE ENERGY GAP

Is the extraction of shale gas part of the answer to our looming energy gap, or a potential environmental disaster in our crowded island?

Opposition to fracking is rising as demonstrations from Blackpool in Lancashire to Balcombe in Sussex have shown. The government meanwhile seems determined to press ahead with exploratory licensing despite the fact that we are in the run up to a General Election.

The fracking controversy is coming to a head because Britain is facing an energy gap. Coal is a declining source of energy. Old nuclear power stations are being decommissioned and negotiations with energy companies about the strike price for new plants are lengthy. Fears about nuclear power after the Three Mile Island and Chernobyl incidents left politicians reluctant to invest in new plants around the turn of the century. UK natural gas production has been declining at 8% a year since 2000. Despite government support for renewables, the fact remains that water, wind and bio-energy account for a small percentage of our energy supply.

Then there is Russia. Recent events have increased a desire for the EU and the UK to be less dependent on Vladimir Putin’s gas and coal.

FRACKING

The process of fracking extracts gas from shale rock by pumping a mixture of water, sand and chemicals into fissures one or two miles down. The gas and waste water then flow up to the surface.

The chemicals used are commercially confidential and that has proved controversial with environmentalists.

Estimates vary as to how much shale gas there is under the UK. A recent report commissioned by the Department for Energy and Climate Change suggested that fracking could deliver 25% of the UK’s gas needs by the middle of the next decade. Other experts feel it will take much longer for shale gas to be produced in volume and that cheaper Russian gas will continue to be attractive. Indeed a key question will be the impact of shale gas on household bills.

The American experience looms large. There has been a 75% increase in United States natural gas reserves due to fracking. Gas prices have reduced from $12 to $3 per million British thermal units By 2020 the US will be exporting gas. However whilst states like Pennsylvania have embraced fracking, New York maintains a moratorium. Also when comparing the US with the UK, the major issue of population density must be taken into consideration. Another important difference is that American landowners own the mineral rights beneath their land whereas here they are the property of the Crown.

Currently there is a promise that £100,000 plus 1% of total revenues will be paid to local communities where fracking takes place. The question is will this be enough to buy off residents who fear groundwater contamination, methane leakage and incessant tanker movements on country lanes? The government insists that a tough regulatory regime will be in place and cite the cautious approach Ministers have taken so far. That includes a moratorium on test drilling when it was suggested that natural seismic movements under Blackpool might have been caused by exploratory work.

The conference will be held eight months before the General Election. Some of the most promising shale gas fields are under marginal constituencies in the North and the fracking debate could well become an election issue. Claims for the level of public support for fracking vary widely. An industry commissioned opinion poll claimed recently that opposition was down to 24%. A poll for the Guardian and Nottingham University suggested the nation is split fifty fifty.

However enthusiastic national government is to press on with fracking, it is local councillors who have to give planning permission. Some are questioning their expertise to make such crucial decisions.

On this crowded island fracking pitches local communities and environmentalists against those with responsibility for keeping the lights on.