Winding Us All Up

After being trailed over the preceding weeks so much, there was little that was actually new to report when Osborne made his Autumn Statement last week. Most reporting was on the jousting of the Osborne/Balls protagonists in delivering/rubbishing it. (A more measured analysis was in the Financial Times.) But the sad death of “President of the World” Nelson Mandela following hard on it has only served to divert and so further restrict public debate.

Which is not good because the vagaries of this recession force Osborne out of an annual budget cycle into out-of-phase adjustments—this one apparently to proclaim the economy is ‘doing better’ at 1.4% growth. Not to be too much of a balloon-burster but ‘doing better’ and ‘not doing so badly’ are both positive signs that should not be confused with each other.

But the OBR are questioning whether growth is being driven by consumer spending; others question the absence of export-led growth following a period of effective currency devaluation. Some see this as Ed Balls’ focus on the “cost of living” is paying off. But only schadenfreude revellers could derive satisfaction from growth of 1.4% actually consists of 1.2% due to consumer spending and none due to business investment.

The ugly interpretation of this is another housing price bubble amid falling living standards across the UK. So, while Osborne claimed credit for putting his squeeze on welfare spend and the benefit cap centre stage, this also Labour into contortions of their own on state pensions and the so called ‘ triple lock’. Actually neither should be proud how the UK tax system appears to be targeted at the poorest 10%.

Amount of Wages Taken in Taxes by Decile 2011

Amount of Gross Earnings Taken in Taxes by Decile

But energy costs and support for renewables were the real zingers in this statement. Scottish Renewables have said: “the sharper than expected cut to onshore wind (strike price) will present a real challenge to developers, and could well mean that some projects don’t go ahead, slowing down progress towards our 2020 renewables and climate change targets.

Put another way, increasing uncertainty in the offshore sector will not be calmed by an increase of £5 /MWh from £135 to £140/MWh. This also puts any hopes for any renewables revolution out in the Islands at death’s door—already acknowledged by Energy Minister Ewing. They will need substantial financial support to survive.

The Scottish government has set challenging targets for Scottish Renewables and continue to strong-arm a rash of inefficient little turbines that contribute peanuts to self-sufficiency into sensitive rural areas. Onshore wind is still the most competitive source of renewable electricity but we are exhausting suitable sites for wind farms of economic scale and minimal intrusion.

The last of the six big shoes has dropped when E.On announced an average price rise of 3.7% for dual fuel customers, claiming this takes account of the changes to the green and social levies. This will still add £48 to the average bill in the new year, which is bad enough for individual households.

But, more ominously, this all puts the UK government on a collision course with the Scottish Government’s long-stated policy of becoming 100% green in energy generation. That strategy depends not just on existing wind but on massive offshore farms planned like Neart na Gaoithe which are essential to fill in generating segments still provided by nuclear and coal.

The alternative is for rapid development of both wave and tide technology but that, in turn, depends on massive development subsidies from either existing (thin) initiatives from Westminster or an equivalent amount from Holyrood which, given existing constraints under devolution they are simply not permitted to fund.

Is it Machiavellian or just realistic to wonder if Osborne is doing this on the threshold of the year of the Referendum just to wind the Scots up?

Renewable Capacity Built and Projected (source: Audit Scotland Sept 2013)

Renewable Capacity Built and Projected (source: Audit Scotland Sept 2013)

About davidsberry

Local councillor, tour guide and database designer. Keen on wildlife, history, boats and music. Stood for the Scottish Parliament 2011; lost by 151 votes.
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