Barrow & Furness Conservatives - John's blog

On Tuesday 28th October I met with representatives from Infinergy and attended the Furness Wind Farm Resident Liaison Group meeting in Pennington. Infinergy is the company which is responsible for developing the proposed Furness Windfarm. This site is to the west of the Harlock Reservoir and Harlock Hill Wind Farm and not far from the existing Askam and Kirkby Moor wind farms.

There are two main drivers for seeking alternative energy sources. One is climate change and the other is energy security. There are some who believe that climate change is wholly caused by man, and there are others who say it isn’t. I’m of the view, that it is probably likely man is not helping the situation, but, that climate change may be a natural phenomenon also. Regardless of this, it doesn’t do any harm to seek new ways of generating energy that do not involve burning something we have dug up from the ground. Even if you discount climate change completely there is the issue of energy dependency because our North Sea oil and gas fields are becoming exhausted. This means, that because we use gas to generate a large proportion of our energy, we are becoming increasingly dependent on imports. Combating energy dependence, for me, is the major driver for seeking new energy sources.

There are many ways of generating energy which will satisfy the two objectives above. Clean coal, nuclear, tidal, hydro and of course wind. Wind power on the face of it seems a good idea, after all the energy is produced for free by the wind and it’s clean and green. We all know that turbines don’t work all of the time with some reports suggesting that they are only producing energy for 25% of the time. Infinergy say that the efficiency of a modern turbine is such that they will be turning on over 80% of the time producing electricity, and on average will be over 35% efficient. Obviously they will not always be turning at full speed so the output will vary but if this is true it is an improvement on 25%. They further argue that on the days wind farms are producing energy, it means you need to burn less gas and coal and thus overall will reduce your use and dependence on fossil fuels. If you follow this logic it would mean that you would still need to have the same level of conventional power production capability, it’s just that you wouldn’t need to use it all the time, on the days when wind was generating power. I can see this logic but I’m not convinced that constantly turning more power stations on and off to deal with fluctuating wind is either practical or efficient.

One of my worries is that by focusing on wind power, other new forms of energy production get squeezed out. Infinergy say this is not the case and that wind produced electricity attracts the lowest form of ROC’s (Renewable Obligations Certificates) compared to other renewable energy. However, what wind power can’t provide is instant power, for example when there is a power surge during commercial breaks, because the wind may not be blowing at this time. If it is true that only fossil fuels and hydro power can do this, then this poses a question. How do we build new capacity to deal with these power surges and what will this capacity be, if it can’t be wind?

It seems to me that we need more diversification in our energy production. As a matter of urgency we must not increase our dependence on gas, so we should progress nuclear energy immediately to produce at least the same proportion of energy as the existing stations do now, subject to a satisfactory answer to the waste issues. Then we need to consider if wind power is reliable enough to fit into the mix of power generation and how we provide a replacement for the surge generation capability currently provided.

I’m still a sceptic but I’m always prepared to listen to the arguments. The pressing need to find alternative energy sources, for energy security purposes if for no other reasons, means I think we need to look at all options. However, I still have a nagging suspicion that wind just isn’t the most efficient answer and that by focusing on wind power, real breakthroughs in more efficient technologies could be delayed. Added to this are the very real concerns that local residents have who just happen to live in areas which are windy. It’s easy to support wind farms when you live in a city because you don’t have to live with them on your doorstep.

In an interview in the Sunday Times over the last weekend, John Hutton backed proposals for a European Army and he dismissed criticism of this as ‘pathetic’. I say that he should tell this to the British soldiers fighting a war in Afghanistan, who are not getting the support from all of our European allies. In fact, some countries limit what their forces can do to such an extent you have to wonder what help they are offering at all. Europe is also very reluctant to spend the necessary money on defence, a situation that Labour are doing their best to imitate in the UK also, which means that the forces they can deploy are not as useful as would be expected. Do we really want to tie ourselves into such an organisation at the detriment of our links to NATO and the USA?

What Mr Hutton should do is turn his attention to actually making sure our own forces have the necessary equipment to do their jobs now and in the future. He needs to be defending the defence budget against cuts and securing the necessary funds to meet needs. In the interview he also suggested a major programme may be at risk. Can he now assure us that the Carrier programme will go ahead and also that the work in Barrow will be honoured?

For a man who claims to be “not a novice” when it comes running the UK economy, Gordon Brown keeps giving a good example of how not to run an economy. For the last week or so, he has allowed the idea to grow that the Government will significantly boost spending and borrowing to deal with the recession. Perhaps unsurprisingly investors have viewed this claim with suspicion and have been selling sterling in response. Today, Gordon Brown had to explain that he didn’t mean he would allow borrowing to get out of control, but that any additional borrowing would be paid for when the economy improved.

Maybe I’m cynical but Gordon Browns’ failure to control borrowing when times were good is the reason the UK is so unprepared for this recession. I don’t think I’m alone and I wouldn’t be surprised if the markets didn’t trust his promises and the pounds fall continues.

Gordon should have known that his failure to prevent rumours would have this effect on the markets. Then again he has a record of this kind of careless talk. In 1997 he let it be known that he would sell gold and surprise, surprise the price fell, leading to a huge loss in the sale.

Over the last few days you may have heard people talk of an economist called John Maynard Keynes. I studied economics in the 1980’s when the big debate in economics was between Keynesian theory and the critique offered by the neo-classical economists.

Keynes was an economist from the 30’s and 40’s who argued that Governments could, and should, counteract the periodic cyclical downturns in capitalist economies by boosting Government spending. He believed that recessions were caused by a lack of demand, so if the Government increased it’s spending when this happened to maintain demand, then unemployment and severe recession could be avoided. The flip side of this was that when times were good, the Government should save to allow it to spend in recessions. This was the economic orthodoxy, well the spending part at least, followed by successive Governments after the war up until the late 70's. What happened then was that the Government had failed to save in the good times, so when it tried to spend its way out of a recession the country was broke and had to borrow money from the International Monetary Fund (IMF). For those of you with a long memory, all of this happened under a Labour Government and the Labour Chancellor who had to go cap in hand to the IMF was Dennis Healy. It all sounds familiar doesn’t it?

The first thing you have to do is borrow the money to spend. We are already seeing a drop in sterling as capital flees the UK and so there is a real risk that Government could not raise the necessary borrowing. This is what happened in the 70's when the IMF became the bank of last resort.

Say you could borrow the money, well, this has several drawbacks. This debt will need to be paid for in the future so really you are borrowing from the future and expect future taxpayers to pick up the bill. Keynesians argue that as output is boosted the economy will grow sufficiently to pay off the additional borrowing. The evidence of this happening in the past is patchy to say the least. Typically what happens in these demand booms is that spending does increase but output does not rise quickly enough which means you get inflation or a huge balance of payments deficit. In fact what we have seen for the last eleven years bears this out. Borrowing and spending has increased hugely and although the economy has grown, imports have grown faster still. The western world's spending has just fuelled the growth in China and other emerging economies as they have produced goods for our markets. Once again there is a bill to be paid, this time a balance of payments bill.

The simple fact of the matter is that you cannot spend your way out of a recession, if you borrow too much you merely delay the pain for future generations. There is no easy way out of a recession and no magic bullet, Labour have borrowed and spent too much and now we all have to pay the price

Yesterday (13^th October 2008) I was involved in a serious motorbike accident which has left me battered and bruised but thankful that it wasn’t worse.

Whilst travelling along a dual carriage way, a car pulled out in front of me and despite braking, I hit it at about 50mph on the back wing. I was catapulted over the roof of the car and slid down the road, rolling over until I came to a stop. I must have blacked out because I remember braking and seeing this little blue car in front of me, but the next thing I remember is looking at the tarmac in front of my face. My first thought was ‘Oh, I must have hit that car’ and then I wiggled my toes and fingers and thought ‘well at least my arms and legs are still attached to my body’. I became aware there was lady standing over me who was talking on the phone so I rolled over and spoke to her. She said the car had just pulled out in front of me and she had phoned for the ambulance. I was rushed to hospital and had x-rays and scans which confirmed I had no internal damage and it looked like I had been very lucky.

What saved me was wearing the proper protective equipment. My brand new jacket and gloves, that were 2 weeks old, and my helmet showed the effects of sliding down the road but all of the armour plates in the jacket were intact which has taken the impact and saved my life. In fact tonight less than 36 hours later, most of my aches are receding, apart from a few places.

Like many people I have watched the news this week with shock and disbelief. Worldwide stock markets have crashed, bank lending has all but dried up and on Wednesday the Government announced a rescue plan that could cost the taxpayer up to £500bn if it doesn’t work.

At the heart of the problem are debt and the more specifically bad debts. Banks lend and borrow from each other as well as individuals and businesses. Over the last few years lending has grown excessively, in the UK with huge mortgages and other debts, in the USA with sub prime mortgages. The banks now find themselves in the situation that a significant proportion of these loans have defaulted and they cannot get the money back they lent. This means that they cannot meet their obligations to each other and repay inter bank loans. Faced with this problem the banks have stopped lending to each other, as well as to the public by withdrawing mortgage schemes etc, and the price of any remaining lending has risen. As the banks stop lending to each other, their Balance Sheets (the total of their lending to others and cash deposits or ‘Assets’ less their borrowing from others or ‘Liabilities’) deteriorate and their share prices fall which further weakens their position and that is why we are seeing banks going bust.

So what can be done about it? In broad terms we need to reduce debt and also the banks need to raise new capital to restore their Balance Sheets. Reducing debt can be in the form of writing off the debt but also by reclaiming loans. Raising new capital can be by issuing new shares or by getting loans from the Government. If the banks fail then the real economy will suffer with job losses and business failures so it is probably the least worse option to inject taxpayer money into the system to keep the banks solvent. This is why I think its right for the Conservative Party to support the rescue plan whilst representing the taxpayer to ensure that the money is used to restore the banking system not prop up the banks. Once the banks have been stabilised then we should seek to recover the taxpayer loans as soon as possible and put in place safeguards to try and prevent this problem happening again, but to this we need to understand how we got into this mess in the first place

How we got into this mess in the first place will be a debate for the future once the banks have been stabilised but it is worth putting down what I think are the contributing factors and why I think Gordon Brown is culpable in this. As stated before at the heart of the problem is excessive lending, and borrowing, which has now turned bad. However to just blame the bankers is both untrue and ignores the role individuals and Government have played in the debt bonanza we now find ourselves in. Throughout the last 11 years the banks have been allowed to lend on this scale, and people have been allowed to borrow, by a regulatory system that has failed to control it. Gordon Brown was the man in charge during this ‘Age of Irresponsibility’, boasting he had ended boom and bust, changing the measure of inflation which allowed the Bank of England to keep interest rates too low for too long and of course pushing Government borrowing up excessively himself . So we find that instead of saving in the good times, we had record borrowing before this week began. Instead of effective regulations that sought to control the overall level of debt in the economy before it reached the scale it is at now, we had a debt fuelled boom, actively encouraged by the Government, with no one stopping to think what would happen when the easy money ran out.

This is not a failure of capitalism, indeed, what we are seeing is capitalism correcting the excesses, because Government and society wouldn’t. What we are seeing is a failure in a Government who said we could have everything now and we didn’t need to worry about how we would pay for it. The price of living in this fools paradise will now come in the form of a recession, and it will keep coming until we learn to live within our means.

If we are elected we will inherit a battered economy and the public finances in a mess. We will put in place a new Debt Responsibility Mechanism to monitor debt in the whole economy and stop debt fuelled binges occurring again. We will bring the public finances back under control so that Government will live within its means and deliver lower borrowing and taxes over time. We will patiently rebuild our economy so that grows in a sustainable manner and is built on real wealth not borrowing. As George Osborne warned in 2006 ‘an economy built on borrowed money is living on borrowed time’.

Birmingham was a great conference despite the fact I was suffering from a cold the whole time. We announced a number of new policies including a promise to freeze council tax and further details of our education and welfare reform agenda.

One of the things David talked about was character and judgement, and given the reshuffle in the Cabinet yesterday which saw the return of Peter Mandelson you have to wonder if Gordon Brown has any! Peter Mandelson has been in the cabinet twice and resigned twice following scandals, does Gordon Brown really think he deserves yet another chance in the Cabinet?