Tuesday, 16 February 2021
Green New Deal and nuclear politics
On Monday, the London-based Conservative think tank Centre for Policy Studies published new 27-page long pamphlet- titled the ‘Northern Big Bang’ - jointly with the Northern Research Group of MPs. (“PM must repay the North’s faith by unleashing a new ‘Northern Big Bang’, built around private investment,” 15 February 2021 https://www.cps.org.uk/media/press-releases/q/date/2021/02/15/pm-must-repay-the-north-s-faith-by-unleashing-a-new-nor/) The publicity material sets out the report’s aims and conclusions thus: • The North of England was once the powerhouse of the British economy, but today it has some of the least productive areas in Europe. • Ministers need to match the radical spirit of those in the North who voted Brexit in 2016 and Tory in 2019, and repay their faith, by making it home to a modern ‘Northern Big Bang’. • This means making the North irresistibly attractive to private investment – both global and domestic – through new investment incentives, planning reforms and other pro-growth measures. • These measures could unleash tens of billions of pounds worth of private sector investment to create high-quality jobs in high-productivity industries, for example in green technology, making the North the natural home for the Green Industrial Revolution. Billions of pounds of private sector investment could be unlocked in the North of England and create an economic Big Bang for the region, argues a new report from the Centre for Policy Studies and Northern Research Group of MPs. In recent decades, the report argues, London and the South East have monopolised investment, talent and attention. At present the Northern economy, measured by Gross Value Added per capita, is three quarters the size of England's average. The primary authors, Jake Berry MP, Chair of the Northern Research Group of MPs, and Nick King, CPS Research Fellow and former Government advisor, call on the Prime Minister to mirror the radicalism of Thatcher’s Big Bang in the 80s, and reward the voters who lent him their vote and contributed to the Conservative majority in 2019. ‘A Northern Big Bang’sets out a series of recommendations on how to “stimulate private sector investment and create a globally recognised, economic powerhouse in the North of England.” The aim would be to replicate the impact of the 1980s Big Bang, which unlocked billions of pounds of investment in London and the South East, but with a set of measures which reflect the North’s existing strengths and future potential. The report calls for a new Initial Investment Incentive – a cash payment to attract new investments and global capital to the region. This could be focused explicitly on green growth and meeting Net Zero, for example by incentivising investment into new gigafactories which would help spur a Green Industrial Revolution. Other recommendations include leveraging UK Infrastructure Bank investments to unlock private sector investment where possible, creating a new Northern Infrastructure Bond aimed at attracting global investors, and introducing full expensing for businesses nationwide, or at least allowing all capital expenditure by Northern businesses to be written-off for two years. The paper also calls for automatic approval for planning applications which create more than 100 permanent new jobs in the region when they have not been determined within two months, and an optional, alternative, fast-track planning process for investors planning to plough £20 million into the local economy, or whose investment will unlock over 250 jobs. To ensure local decision-making remains at the heart of this regeneration project, Berry and King are advocating for the creation of a new Growth Board for the North, to help steer investment, and a Northern Recovery Bond, to encourage local investment in local economic growth. The report recognises that such measures could also be applied nationwide, or in other regions that have fallen behind, but argues that the North is especially well positioned to benefit from them. Berry and King argue that the Government should aim to unleash a torrent of investment into the Northern economy, to deliver the productivity gains, economic growth and higher wages that are so desperately needed. Jake Berry MP, Chairman of the Northern Research Group, said: “At the last election millions of Northern voters broke with tradition by voting for the Conservative Party, in many cases for the first time. The Prime Minister needs to recognise that they did so not only to deliver Brexit, but to voice the systemic disadvantages felt in many communities that were tired of being neglected in favour of London and the South East. “The measures we have put forward will help the Prime Minister and this Government to ‘level up’ the economy and help make the North build back better as one of the most investable places in modern times." Nick King, Research Fellow at the CPS, said: "This Government has taken positive steps to deliver more public investment in infrastructure, but what the North needs is the scale of investment – and dynamism – that only the private sector can bring. "There is a huge amount of domestic and global capital ready to be invested. Our recommendations are designed to make the North of England one of the most investable places on the planet and to unleash this capital through a Northern Big Bang." About the Authors Jake Berry has been the Conservative MP for the Lancashire seat of Rossendale & Darwen since 2010, a role he combines with leading the Northern Research Group in Parliament. After serving in a number of junior Government roles, Jake was promoted to Northern Powerhouse Minister in 2017. A close ally and friend of Boris Johnson, he worked with him on his leadership campaign, during which Jake authored the ‘Renaissance of the Regions’ policy paper that became the Government’s levelling up policy agenda. The Prime Minister made Jake ‘Minister for The Northern Powerhouse and Local Growth’ in his first Cabinet. In his Ministerial roles he introduced radical changes to level up, including devolution deals with new metro mayors, as well as designing and delivering the new Towns Fund and Future High Streets Funds, bringing £3.6bn of direct investment into the regions. He also led on policies to encourage local growth and improve Northern infrastructure, with the aim of closing the North/South divide. [The Northern Research Group is a pressure group of dozens of Conservative MPs, including David Davis, Esther McVey, David Jones and David Mundell.] Nick King is a Research Fellow at the Centre for Policy Studies, a role he combines with running his own strategy consultancy, Henham Strategy. He hails from Lancaster. Nick was a Special Adviser in Government between 2012 and 2018, working for two Secretaries of State in three different Departments – the Department for Culture, Media and Sport, the Department for Business, Innovation and Skills and the Department for Communities and Local Government. In each of these, he worked on policies to encourage local growth and economic rebalancing, including devolution, infrastructure investment, the launch of the Northern Powerhouse and the Midlands Engine (with which he still works), the creation of metropolitan mayors, distribution of the Local Growth Fund and the establishment of various Enterprise Zones. (Acknowledgements: Special thanks to Lloyds Banking Group for their generous support of this report.) Here are some selected extracts from the report, highlighting its proposals for green industrial investment. Interestingly, despite there being several nuclear sites in the North of England, they do not propose investment in nuclear. “There is a particular opportunity to make the North the home of the Green Industrial Revolution which the Prime Minister, Boris Johnson, has called for. The innovation and technology which will allow us to achieve our Net Zero ambitions need to be inculcated somewhere, and the North of the England is the most obvious place, given its manufacturing strengths and industrial pedigree. These efforts, and the measures we put forward, will help the Prime Minister and this Government to level up the economy. These ideas are meant to help make the North one of the most investable places on the planet. Our recommendations include updating pension scheme rules to encourage more investment into Northern infrastructure; allowing the writing-off of all capital expenditure; creating a new Initial Investment Incentive to help spur a Green Industrial Revolution; making major planning decisions in weeks not years; & creating a new Northern Infrastructure Bond aimed at global investors.. The North of England has always been home to a spirit of restless radicalism. It was this radicalism that saw people vote for Brexit in their millions. And it was this radicalism which, a little over a year ago, saw a swathe of Northern constituencies vote Conservative for the first time in a generation. They felt let down by a political Establishment, and a Labour Party, which had taken them for granted for too long – and done too little to improve their lives. In November, the Government announced the creation of a new Office for Investment, headed by Lord Grimstone, to attract foreign capital to Britain.13 Yet the Treasury – perhaps due to the distractions of the pandemic – has yet to fully outline how it intends to unlock private sector investment in the name of the levelling up agenda. The time has come to set out such an agenda. Today, with the signing of a free trade agreement with the European Union, our post-Brexit future is a more certain one. And the widespread rollout of various Covid-19 vaccines, means we are all looking forward to a brighter 2021. It is therefore time to make good on the promise to level up the economy – and to produce a Northern Big Bang focused on investment. The UK is in an enviable position when it comes to the assets held, and managed, by pension funds and the wider asset management industry. It is consistently one of the most favoured countries in the world when it comes to attracting Foreign Direct Investment. The challenge is to get this investment deployed, at scale, into the North and those other parts of the country which need levelling up. This is particularly important given the impact that spending on infrastructure can have, delivering a greater return per pound spent than almost any other form of fiscal stimulus or other public spending. We therefore recommend three steps to unlock a deluge of investment into Northern infrastructure: 1. A requirement that all projects funded by the new UK Infrastructure Bank operate on a ‘private sector unlock’ investment basis where possible 2. The creation of a new Northern Infrastructure Bond, issued by the Government and aimed at global investors 3. Updating rules around UK pension schemes, particularly Defined Contribution schemes, and developing approaches to make investment into Northern infrastructure more commonplace Some might question the need for a specific Northern Infrastructure Bond, given that the Government can borrow money and direct it towards such spending in any case. But its value comes from its specificity of purpose: in much the same way as the recently announced ‘green gilts’ have to be spent on environmental projects, this Bond would be focused entirely on the North and its infrastructure. In 2018 gross capital formation made up 17.4% of UK GDP compared to 24.3% in Japan, 23.9% in France, 21.8% in Germany and 21% in the United States (in expanding Asian economies such as India and South Korea it is above 30% and in China above 40%). In the OECD only Greece has a lower level of investment as a percentage of its economy.18 Of course, the tax treatment of capital expenditure can only explain part of this divergence. But it is unlikely to be a coincidence that the Tax Attractiveness Index, compiled by the Institute for Taxation and Accounting at LMU Munich, ranks the UK 98th out of 100 on its depreciation regime for fixed assets.19 The US-based Tax Foundation, similarly, ranks the UK 33rd out of 36 in terms of its capital allowances, with average cost recovery of 57.1% compared to an OECD average of 68.6%. Foreign Direct Investment has long been a success story for the UK, but the uncertainty following our vote to leave the European Union, compounded by the recent impact of the Covid-19 pandemic, has reduced capital inflows. The Initial Investment Incentive – or ‘the Triple I’ – should be available to any business making a material new investment in the North and would offer a Government-funded incentive of 10 per cent of the capital costs of new investments to reduce risk and increase potential profitability margins. The Triple I should have a ceiling – perhaps offering a maximum of £25 million per investment – and would need a floor investment level of, say, £20 million to ensure it is targeted at the most significant of investments. We would recommend that the Triple I was put in place for the next five years to incentivise investment spend as soon as possible. If this proposal were to be limited to certain parts of the economy, we would suggest it should be focused on delivering Net Zero and green growth – helping ensure the North of England is in the vanguard of taking forward the Green Industrial Revolution which this Government has made clear its determination to bring about. The recent publications of the Government’s 10 Point Plan,23 its Energy White Paper24 and the Treasury’s Net Zero Review interim report25 each signal the direction for Government policy in this regard, and act as staging posts in the journey to COP 26 specifically and to Net Zero more generally. But our efforts to lead the way on green issues and to build the green jobs and industries of the future need to be rooted in place as much as in policy. Just as the 1980s Big Bang helped the City become a global leader in finance, and billions of pounds in research spending helped create the globally leading life sciences cluster around Cambridge, a concerted effort can now put the North of England at the heart of our Green Industrial Revolution. Because many of the companies and industries which will help deliver Net Zero will be new, they can be incubated in a new place. These companies can benefit from networking benefits and agglomeration effects like those which exist in any other sector – but for that to happen they need to be rooted in a place. Those clusters of development and excellence should find a natural home in the North of England. It seems to us, capitalising on the research strengths of its universities, the manufacturing base which already exists there and various other pre-existing factors, it would be an obvious place to develop, for example, the gigafactories which are so important to the future of the UK automotive industry and the hydrogen technologies which can help unlock our future green growth. The North led the world during the Industrial Revolution, cradling the innovation, attracting the investment and implementing the approaches which would lead to widespread growth, jobs and opportunities. It can also lead the way on the transition to Net Zero – developing the innovation and technology needed whilst being propelled by the private sectr investment which is so clearly necessary. This can create a new economy, which will be able to take advantage of the North’s relative advantages – more affordable land, its industrial heritage, and the investment incentives of the sort outlined in this report – and which can compete in global markets for talent and capital for decades to come. It is all well and good offering to create the conditions for investment, but if the activity which that investment seeks to unlock is stymied from the outset then it will come to nothing. That is why the UK’s sclerotic and ineffective planning system deserves further attention. The inherent issues within the planning system have been recognised by this Government. Its recent planning reforms are an important attempt to address some of those issues. Despite the disappointing suggestion that there will be moves away from the more radical parts of the paper, the Government’s intention to introduce a new zonal system, with large tracts of land designated for ‘growth’, is likely to unlock new development and commercial opportunities right across the country. But we remain concerned that the local planning system will remain open to delay, exaggerated politicking and a prevailing sense of NIMBY-ism, including around important industrial developments. Speaking to those who have tried to get permission for schemes off the ground, there is astonishment at how long it takes to start building foundations in the UK compared to other countries, in particular because decisions are often made by low-level council bodies which prioritise peace and quiet over the economic needs of the wider area. It is true that there is a separate regime for ‘Nationally Significant Infrastructure Projects’ (NSIPs) in England and Wales. But its application is limited, as it is set up to consider infrastructure projects relating to energy, transport, water or waste. Moreover, a rudimentary glance at the website outlining projects being taken through the NSIP regime shows that many of the applications take well over a year to determine. This is despite the fact that one of the fundamental purposes of the regime is to ‘streamline the decision-making process for major infrastructure projects’. The flaws in the system were recognised by the Government’s recent ‘National Infrastructure Strategy’ which said that ‘the NSIP regime… is currently not being implemented as effectively as possible, leading to slower delivery times and more uncertainty. On the weekend, the Sunday Times published a 12-page broadsheet supplement on Sustainable Investment, under the Raconteur imprimateur.(www.raconteur.net) One article was on the new Biden administration’s likely approach to green energy investment .(“Does Biden’s presidency signal a shift in the green finance landscape?” 14 February 2021; https://www.raconteur.net/finance/investing/does-biden-signal-a-green-light-for-green-finance/) The article, by Alasdair Lane, reported “.. domestically, the president has a fight on his hands. ‘The system is polarised in America. There are people who still don’t accept that climate change is real,’ explained Heather Slavkin Corzo, head of US policy, United Nations Principles for Responsible Investment. ‘I’m afraid there will be people who question the need to move the US economy in a more sustainable direction. But we can’t allow those questions to stifle progress.’ Biden seems highly unlikely to include the full radical Green New Deal package in his early spending plans. He is joined in his caution over the GND by digital business guru, the multi-billionaire Bill Gates, founder of Microsoft, in his new book, “How to Avoid a Climate Disaster”, (Allen Lane/Penguin) published on 16 February. Gates secured much pre-publication publicity for his new tome, including an interview in the Guardian Weekend Magazine, which wrote “Of the Green New Deal, the proposal backed by Alexandria Ocasio-Cortez [the Congresswoman who has promoted the merits of the GND in the US] that raises the goal of carbon neutrality in a decade, he is flatly dismissive, with Gates telling the interviewer. “Well, it’s a fairytale. It’s like saying vaccines don’t work – that’s a form of science denialism. Why peddle fantasies to people?” Gates also opined: “I’m not a survivalist.” Instead his version of survivalism is to fund innovation, the reporter noted. “I’m putting money into carbon capture and nuclear fission” Gates told her. (Bill Gates: ‘Carbon neutrality in a decade is a fairytale. Why peddle fantasies?’, Guardian, 13 February 2021; https://www.theguardian.com/technology/2021/feb/15/bill-gates-carbon-neutrality-in-a-decade-is-a-fairytale-why-peddle-fantasies) Indeed, his book is laced with positive, if inaccurate, mentions of nuclear power. For example, he asserts on page 84, in a section on “Making Carbon-Free Electricity”, uns der a sub-section titled ‘ Nuclear Fission’ he writes: “”Here’s the one sentence case for nuclear power: It’s the only carbon-free energy sources that can reliably deliver power day and night, through every season..” Later on page 190, he repeats the fake fact, asserting “Nuclear is the only carbon-free energy source we can use almost anywhere. It is worrying that Gates can be so poorly informed he can believe such demonstable fake information, and repeat is, using it as a cornerstone for his pro-nuclear arguments. His editors at Allen Lane surely should have told him when he presented draft text that this information is incorrect, and should be removed. Gates should have known the following: Nuclear power will not provide any useful dent in curbing harmful emissions, when the carbon footprint of its full uranium ‘fuel chain’ is considered- from uranium mining, milling, enrichment ( which is highly energy intensive), fuel fabrication, irradiation, radioactive waste conditioning, storage, packaging to final disposal. Recent analysis by Mark Jacobson, professor of civil and environmental engineering at Stanford University, in a detailed study “Review of solutions to global warming, air pollution, and energy security (https://web.stanford.edu/group/efmh/jacobson/Articles/I/ReviewSolGW09.pdf) demonstrates nuclear power's CO2 emissions are between 10 to 18 times greater than those from renewable energy technologies. Gates should read it pronto. Gates is not an energy specialist (evidently), but clearly cares hugely about the global threat of climate change. He is, however, an enormously wealthy philanthropist, and says in his new book (on pages 8-9 ) “I put several hundred million dollars into starting a company [ TerraPower] to design a next-generation nuclear plant that would generate clean electricity.” Beforehand, he says, he “met with experts” (unnamed). Clearly the wrong ones. For a man who must have the contact phone numbers of presidents and premiers on speed dial, it is a pity this commendable venture into solutions to the climate change challenge, is so poorly founded. On Gates’ Breakthrough Energy web site, he says that he has assembled “analysts, experts and advocates working to advance smart public policy.” On nuclear, Gates’ approach is just dumb!