Energy Market Chaos

Copyright Philippa Roberts 2012

There are so many things that were wrong with David Cameron's announcement yesterday during PMQs that all energy companies will be forced, through legislation, to put all consumers on the lowest tariff, that it is difficult to know where to start.  FT has a good article on it, but I think there are three key things that are wrong.

Firstly, is the fact that it seemed to take everyone by surprise, including the Energy Department.

Secondly, is the fact that this is so ill-thought out in terms of the impact on the lowest tariff, as I've blogged about before here.  In a market with a single product and legislation that means you have to offer everyone the lowest tariff, it is going to be hard to argue for more than one tariff.  Without further legislation to then cap this tariff, there is no logical reason why a profit-driven company wouldn't make sure that the new 'lowest' tariff is higher than the current lowest tariff.  The consumers lose.

But my third issue with the announcement is the fact that is seems to fly in the face of a belief in free markets and competition.  The central tenet of the competition argument is that consumer choice improves service levels and reduces cost as we all move providers based on rational decision-making and full information about what is available.  Exactly a year ago there was an Energy Summit at Number 10, when the main energy companies, the Big Six, where upbraided. A review of competition in the energy market has found many faults, including poor supplier behaviour.  Yet, according to Which? the average household is paying 13% more than a year ago for its energy bills.  There is plenty of evidence that the market isn't working well, and that Government action so far hasn't changed that.

However, the announcement yesterday flies in the face of everything one would expect from this Government, by essentially killing competition in the energy market.

The strange thing about this is not just how confusing it is from an ideological point of view, but also how confusing it is in practical terms.  Poor Ed Davey, the Energy Minister was making a speech yesterday where he said:

"The coalition is absolutely committed to getting these reforms right, through legislation and through the signals we send.  We have listened to investors and today have set out further measures to provide the certainty they need to make decisions.."

At a time when the economy could be growing, investor uncertainty comes from a Government that doesn't have  a coherent plan.  Legislating against competition when you say you believe in it, and are pushing it in other areas such as water, just doesn't make sense.  No wonder everyone is struggling to explain what it all means today.  Think it deserves the same picture as the last blog - dark clouds on the horizon!

Return to the 70s

Stormy weather ahead? Copyright Philippa Roberts 2012

There's a short article in the FT today, suggesting that stagflation could be rearing its ugly head.  I've always thought it was an ugly word for an unpleasant situation - one where growth is low or non-existent, but prices are rising.

It's worth remembering that the Bank of England has a remit to keep inflation at or below 2%.  It has now missed this target for the whole of the last two years.  Figures this week show that inflation has fallen and are seen as a good news story, but it still runs at 2.2%.  And this is at a time when the economy is shrinking.  

The OBR has also published its latest data today, which shows that growth was recovering well in June 2010.  But that it isn't now.  Thanks to @faisalislam for his useful annotation of the key diagrams on twitter this morning.  As he's tweeted today, he's not making a political point, just demonstrating where the recovery ground to a halt.

That said, I also read somewhere (can't remember where now to link to it) that we are currently more optimistic about our situations than at any other point since 2007.  Apparently 29% (if I've remembered that right) of us think our financial situation will improve in the next 12 months!

I feel very lucky to be running a business that is growing at the moment, but am horribly aware of how quickly that positive cashflow can disappear.  I'd like to recruit, but don't want to take someone on if I can't be sure I can still employ them in 12 months time.  Getting rid of their employment rights in exchange for a share in the company isn't going to help either! A break from National Insurance payments might though.

In the meantime, let's hope that inflation does slow down and recovery does reappear.  The 70s were a fairly grim time, for lots of reasons, let's hope stagflation isn't the thing from that decade that comes back in fashion.

Should We Be More Like China?

All is not what it seems.  Copyright Philippa Roberts 2012

David Cameron in his speech to Conservative Party Conference today talked about China.  I got the impression that he was asking whether the British economy should be more like China, which is
"creating a new economy the size of Greece every three months".

Now, putting that claim aside (at least until Tim Harford or FactCheck come back and tell us if it's true or not), is the Chinese economy one we should be aspiring to?

Last year, China's GDP was 9.3%.  This looks really impressive, especially when compared to our growth rate of 0.8% in 2011 (OBR figure in March 2012 forecast).

In fact, only in the last week the IMF has revised its growth figure for the UK downwards, from 0.2% to -0.4%.  It was only three months ago that it was saying 0.2% growth was possible this year - now it's saying the economy will continue to shrink.  The 0.2% growth prediction was clearly more realistic than the Office for Budget Responsibility, which predicted 0.8% for 2012 in November 2011, and stuck by its guns in March this year, also saying that:

"We still expect the economy to avoid a technical recession with positive growth in the first quarter of 2012."

Obviously now, after three consecutive quarters of the economy shrinking, that doesn't look like a good call, but as JK Galbraith famously said:

"The only function of economic forecasting is to make astrology look respectable."

That's a slight distraction.  As I was saying, copying China looks like a good idea, if you just take a snapshot of growth figures.  However, as I've mentioned before China is slowing.  Growth this year is predicted to fall to 7.7% and it looks like the July to September quarter will be the 7th in a row when growth has slowed.  Some commentators have been writing about the property boom in China, including this in the FT.  This property boom has come on the back of cheap credit and the now-expected property bubble sounds remarkably like the model that has just got us into our current mess.

The UK has a mature economy.  We industrialised over 200 years ago.  Many would argue that our economy was declining from the turn of the last century, but that this was disguised by two world wars.  Our average growth rates will never now be the same as those currently seen by China.  To make comparisons between growth in countries in Europe and China is to ignore the different economic histories, and makes no sense.

So I don't think we should aspire to grow like China.  We could aspire to green our economy at the rate China is greening theirs, invest in renewables with the same seriousness, but their model is not one which will fit us.  I'm still waiting for the vision of what our economy, a sustainable economy, will look like.

What Money Can't Buy

Michael Sandel Sept 12, Labour Party Conference

Really enjoyed the talk by Michael Sandel from Harvard yesterday.  Funnily enough I was relistening to his Reith lectures the other week.  I'm a particular fan of the idea that we don't always want to be consumers, we do actually want to be citizens as well.

His idea that we are now living in a market society, not just a market economy, is particularly pertinent these days, especially when it comes to issues like trust that I have blogged about before.  Valuing things only when they have a price tag attached does not reflect the values that we all have.  CEO salaries no longer reflect the value that they bring to the job.  Price no longer tells us something about the real value of an item, all it tells us is how the 'item' wants to be valued.  

Pay as You Throw?

I know it's really geeky to take photos of bins while I'm on holiday but I can admit to doing this occasionally because I know for a fact that I am not the only one!

So for all you bin geeks out there, check this out. Below ground storage in Ljubljana town centre. Swipe card for residual and Organics. Free to open for dry recycling. Am assuming this means that if you don't pay for your residual at the moment, you soonwill.

Facebook Friends and Trust

I know I keep banging on about trust at the moment, but Facebook has shown us recently why people are losing faith in the idea of a free market.

When Facebook shares were floated, they were bought by small investors and fans of Facebook at $38 a share.  It wasn't only small investors, George Soros bought some too.  However last week saw the end of the 'local-in' period for the early investors, such as Goldman Sachs.  As they rushed to cash in their gains, Facebook's share price fell to less than half of what we were originally told it was worth.  Told by people like Goldman Sachs.

It doesn't matter if this was rigged or not.  It's a high profile float where those who were on the inside make lots of money, and those who take their advice and listen to the hype, don't.  At least in the short term.  I personally have an issue with free marketeers who say that capitalism is the only answer.  It may be, I don't know, but the market isn't free and we shouldn't pretend otherwise.

Transparency and the Electricity Market

A belated comment about electricity markets, which I suddenly realised when I was reading the FT magazine recently.  Tim Harford wrote a piece in the Undercover Economist called 'Don't Judge a Book By Its Cover Price'.  The article was about amazon and computer pricing models, but he mentioned the problems of price transparency.

As JLF Bertrand pointed out in the nineteenth century, is two companies are offering an identical product and have transparent pricing, then rational customers will just go to the one that is the cheapest. This will lead to a race to the bottom in terms of pricing, until the price is at, or just above the cost of production.  This surely highlights a reason why electricity pricing is far from transparent.  The more complicated each company makes its products, the harder it is for customers to compare, and then move to the competition.

Bertrand's argument was too simple, however.  While a cartel would be illegal, imagine if the competing companies understand this model and find a way to raise prices between themselves, or just never start the price competition in the first place.  In fact, it would be entirely irrational to start undercutting your competitor, as you know where it ends - zero profit for everyone.

Which makes me wonder which way electricity prices are heading.

The Price of Sport

Last night I watched a Women's Semi-final football match in Wembley. As someone who's really caught Olympic fever,even from the Midlands, I was excited just to be there.

The Columbian-American sitting next to me commented on the missed opportunity of the empty seats, and there were great swathes of them. He said how he and fellow American tourists had said how much they would love to buy these leftover tickets on the day and just how much they would be willing to pay for them. Afterall, as he said, we're here now, what's a few extra hundred pounds?

Despite these small set backs, I've been incredibly impressed so far. London isn't quite as busy as I expected. However the volunteers are amazingly helpful and friendly- the best sort of ambassadors you could hope for. And on top of all that, we are winning medals. So what about the legacy? (hard to say without coming over all twenty twelve).

In 2002, 25% of young people were doing at least 2 hours of sport a week. By 2010, that figure was 90%. Since then the School Sport Survey has been scrapped, Sports Partnerships have been scrapped and Michael Gove has approved the sell-off of 21 out of 22 schools playing fields (since 1998 schools have to get government permission). So the legacy picture looks not so bright. The changes that have happened over the last couple of years are exactly the reasons the Australian press is currently giving for its poor performance since its home games and 4th position in the medal table.

I've blogged about trust a great deal this year. Currently our elite athletes get only a few percent of their funding from commercial sponsorship. Most comes from the National Lottery and the rest from government. As the coalition continues its austerity drive, maybe the commercial players need to be stepping in and filling the gap, so we don't lose the momentum. Now is the time to capitalise on our successes. I can't see the government stepping up. Let's hope someone else does.

Time Called on London Finance

I've read an interesting article in Time Magazine this week, that essentially blames the London culture for the issues that are appearing in the financial sector at the moment.


I thought this was interesting, because it raises some points I discussed in a previous blog, about trust.  We hear much about the importance of the financial sector to this country's economy, which justifies the state's active role over the last couple of years.  Time points out that in the boom years up to 2007, British based financial institutions accounted for more than half of the generation of global funds.  In other words, these institutions provided the largest part of the world's liquidity.


At the same time, London is the major hub for foreign exchange, with over a third of the world's turnover in this market.  So it is no surprise that the rest of the world watches London closely, and that issues of integrity and trust start alarm bells ringing elsewhere.


The focus in this country started around the salaries of the top bankers when the companies they ran were clearly not performing well.  Bob Diamond has earned more than $150million since 2005 from Barclays.  While that raised questions about individual integrity, we now are starting to see evidence of more widespread manipulation of the markets.


Today we saw that Barclays first half performance was better than expected, but that profits are being pulled down by the fines; £290m for manipulating Libor, £450m put aside for mis-selling interest rate hedge products to SMEs and a new investigation by the FSA into 4 senior staff members.


Time Magazine quotes Democratic Audit as saying that British Institutions are "especially fragile" when compared to other EU and OECD countries.  In fact, its Audit of the United Kingdom (Wilks-Heeg, S., Blick, A., and Crone, S. (2012) How Democratic is the UK? The 2012 Audit, Liverpool: Democratic Audit.) concludes that:


"these findings strongly reaffirm what is perhaps the most important of our five overarching theme: that representative democracy as we know it is in long-term decline. Key representative institutions, most notably parliament, are fatally undermined if they are perceived to be riddled with corruption and if policy decisions are seen to be taken 'behind closed doors’ between ministers and lobby groups. "


So while the Time Magazine article may be laying the blame squarely at the door of London and its culture in the city, the important issue it raises is again one of trust.  

Responsible Capitalism-who do we trust?

Copyright Philippa Roberts 2012

It's been a grim week already on the economic news front, as we bounce from the Libor rate fixing scandal to resignations and fines in the face of wrong-doing.  Just a quick look at this week's headlines in the FT shows Bob Diamond leaving Barclays, GSK fined $3billion by the US authorities and an ex-Glencore staff member being sued for fixing the price of cotton.


I've just been listening to George Osbourne on the Today programme and was interested to hear him say that the regulators failed and 'this causes the current crisis' (that's not an exact quote btw).  I find this comment quite astonishing as it implies that we all need someone watching over us otherwise we'll be dishonest.  Obviously that's nonsense, but the role of the regulators is important.


We are in a period of significant change at the moment.  Our institutions, and our trust in them, is part of the glue that holds society together.  David Brooks talks in The Social Animal about how institutions pass on knowledge, and norms of behaviour, and are subject to incremental change over decades and generations.  However, at the moment, trust in key institutions is low.  We have been rocked by the Parliamentary expenses scandal, the media's phone hacking, the police taking cash for information and now the banks fixing rates that ultimately impact my, and your, mortgage.


I think we will look back on this period as being significant because these institutions are important, not only for what they do, but also for providing the checks and balances on each other.  At the moment, with scandal after scandal, it is difficult to see who should be trusted to play that role.  There has to be change, because the economy will never recover unless we have trust and confidence in the country's ability to make sure the game isn't rigged.  Why would I, as a small business owner, go to a bank right now if I needed capital?  Especially when I hear from my peers that it isn't lending.  Why would I be going through tender processes for new work if I think there is an old boy network in place and the winners will be the same companies as usual?


Confidence is key.  I'm a positive person, so think that the change will happen and that it will set us on a slightly different and better course.  I also think that at some point the sun will come out this summer, so don't put money on anything I say!  The important thing is that with so much uncertainty it is difficult to have positive growth plans; better to sit tight and wait and see what happens next.  We need our institutions to be strong and trustworthy. If we don't think that we all have an equal chance of making it (in however we define 'it') then why bother trying?

Pay - What are you worth?

There's fair pay round here somewhere. Copyright Philippa Roberts 2012

I just started flicking through Merryn Somerset Webb's book on personal finance for women (dreadful cover - looks like a chick lit novel and how I hate that genre!).  The first chapter looks like it deals with getting paid what you are worth and it quotes an interesting piece of research from Linda Babcock, a professor at Carnegie Mellon University in the USA.  She noticed that students were graduating with similar qualifications and going into similar jobs, but the women were starting on salaries that were 7% lower than the starting salaries of her male students.  It turned out that the women accepted the salary they were offered when offered a job.  The male students negotiated any offered starting salary upwards. 


The startling thing is the difference over a lifetime.  A man who starts on a salary 5% higher than a woman and then has exactly the same percentage pay rise for the rest of their working lives will earn £285,000 more over 30 years.


Now, this has obviously made me wonder if I am earning what I am worth.  I know for many years that I wasn't, as when peers told me their day rates (often in a pub late at night) they were charging considerably more than me.  I know that I didn't, in my first 'proper' job after university and working in a call centre.  The man who had done the job before me was paid more for it than I was, but that was in the 90s and I didn't realise there was anything I could do about it.


I know that in my last salaried position (about 6 years ago) I had the same sort of qualifications (two degrees), a similar amount of experience (we had both had practical jobs in a waste company) and was the same age as a male peer in the senior management team.  I had more staff responsibilities, but he earned more.  When I questioned this, I was told he had been there longer than me and would kick off if I got paid the same as him.  Both of these were true, but I am not sure if that was a valid reason for the disparity.


Now I didn't intend this to be a blog about sexism, but thought I'd give an example of unequal pay and now realise that it happened in two out of the three companies I worked for.  So I will now be checking at the board meeting next week whether I am earning the same as my fellow (male) non-exec.  I intended to write about inequality in pay and how some people get away with what they do.


The FT this week has written about the growing shareholder rebellion at Xstrata, where the company is claiming that it needs to pay it's senior management £173million to keep them as the company merges with Glencore.  I thought the Telegraph described the situation well when it said that the job of executives is the same as the jobs of the rest of the workforce - 'to produce a good return for the owners."  "It is as if the butler of a great house took the lion's share of the revenues from the estate while issuing the poor earl, who owns it, a little pocket money."


Whether this is an analogy that rings true with many Telegraph readers, I don't know, but I liked the way they put it.  In a year when a quarter of the FTSE 100 CEOs had a 41% pay increase and the rest of the population received just 1%, it does beg the question.  Are any of us being paid what we are worth?

Policy Paralysis?

World economy - stuck fast, going nowhere.Copyright, Philippa Roberts 2012.

I saw a fascinating article online at the FT this morning - fascinating in part because of the comments section - about the lack of confidence in policy makers going into the G20 Forum today in Mexico.


If you think the news is grim when you here about the ongoing recession here in the UK, or the European debt and currency crises, it all starts looking even worse when you look at the figures coming out of the rest of the world, especially the BRICs.


Merryn Somerset Webb recently wrote about why China is a bad place to invest in right now, listing 17 reasons.  The FT article points also to the slowdown in other large developing economies and the fact that US growth could be slowing.


The FT/Brookings Institution Tiger Index of world economic conditions is showing that the recovery is stalling, because of a lack of confidence in the policy makers ability to get their economies growing again.


But if we look at the range of options; we have seen technocratic governments in Greece and Italy.  Since the start of the crisis in 2008, the left has lost General Elections in the UK, Portugal and Spain, the right in the US, France and Denmark.  There will be another election in the Netherlands in September as the austerity measures could not be agreed by the ruling 'coalition' parties and in Belgium, records were broken in 2011 when it took 541 days to form a government.


All of this could point to a lack of anyone having a solution.  Or it could point to the fact that the public do not believe their politicians and the solutions they have been given thus far.  In 2008, many spoke of the fact that this could be the start of a no growth decade, rather like the one experience by Japan in the 90s.  So far, 4 years in, it looks like this is going to be the case.  But many of the policies that are being suggested and the structural reforms that are needed will take longer than an electoral cycle.  Some of these decisions will be the sort that Sir Humphrey would tell his Minister are 'brave'.  Some, and these is where I thought some of the comments were interesting, will question how on earth we stimulate demand when real incomes have fallen so much, and if that's the case, should we be stimulating consumer demand at all?


The policy reaction over the last 4 years has been fire-fighting, because the fires have been springing up all over the place and the priority must be to put them out.  I think though that there is still a lack of a coherent vision about what a different economic future will look like.  Until we have that, and know where we are headed, then the lack of confidence in policy makers will continue.

Glas Half Full

River Lugg, Herefordshire. Copyright Philippa Roberts

Glas Cymru, the not-for-profit parent company of Welsh Water has announced a massive spending programme for the next three years, which it says will create 1,500 jobs.  Chris Jones from the company says it is able to do this in part because of its not-for-profit model in an article in this week's Guardian.


Welsh Water's press release says that not only is this £100 million more than they originally planned to spend, but that 50% of it will be spent with local companies.  This is exactly the sort of investment I've talked about in a previous blog here, that I think we need to get the economy going.  It's productive investment, rather than speculative investment and it's interesting that Glas Cymru think this is possible because of their unusual ownership structure.  They are the only water company that is a not-for-profit and not state owned.


Obviously at this point I should declare an interest and say that not only do I live in Herefordshire and so am a Welsh Water customer, but I am also a member of Glas Cymru.  I feel proud to be part of such an innovative company and the reason why I became a member was because of this ownership structure.  (All of which doesn't mean that I think privatisation of the water companies was a good idea in the first place.)


Personal involvement aside, I think you'll agree that this is refreshingly good news when so much else is bad at the moment.  Only time will tell if it's going to be money well spent, but I think it's exactly what we need to do right now.

Podcast: Changing the Way We Think About Cars- Forever

Copyright Philippa Roberts 2012 Riversimple's car will be a whole lot more efficient than this

A discussion with Hugo Spowers from Riversimple about the hydrogen fuel-cell powered car of the future.  But you can't buy it!


Start: Who, or what are Riversimple?
5min: What is a hydrogen fuel cell and how does a hydrogen fuel cell car work?
9min: Mass decompounding explained
10min: The car company that doesn't sell cars
12min: Car materials - carbon fibre versus steel
15min: Business risks
17 min: End of life vehicles (ELV) - disassembly and recycling cars
19min: Open source design
23min: Company structure and innovative governance

Underemployed?

ONS May 2012

I keep hearing commentators on the radio talking about our 'weak growth' and am getting fed up shouting back at them.  For it was only last month that the ONS figures showed the current recession is slightly worse that we thought, with GDP shrinking by 0.3%.  That's shrinking, not weakly growing, a distinction that seems to be lost on too many broadcasters at the moment.




So while we wait for the Government's Plan A.5 (it can't be B because that would imply that Plan A wouldn't have worked), involving some investment apparently (which is what they said all along but we might have missed that bit), I thought a quick look at employment data would be interesting.




Again, thanks to the ONS, especially their youtube channel.  I thought that there would be a limited market for this, but it does have over 500 subscribers so I am clearly wrong and I can happily recommend it.




The unemployment rate is currently 8.2% and has fallen slightly recently, with employment increasing by 105k based on figures in May 2012.  However there was a 13k reduction in full time jobs and the entire rise in employment resulted from an increase in part-time jobs.


Now we are lucky in the UK to have a minimum wage, so those in work 'should' be able to keep above the poverty line.  In the fact the number of people at risk of poverty and in poverty, when defined as having less than 60% of median national household disposal income, has fallen since the recession started in 2008.  However this is because of the dramatic fall in the median household income, not because of any improvement in the circumstances of those who have less than £9000 income a year in their households. 


Poverty levels aside, the percentage of people in part-time work who want full-time work is increasing, suggesting that people are taking whatever job they can find, regardless of hours.  In fact, one of the unusual characteristics of this recession has been the fact that unemployment hasn't skyrocketed in the way it has in past recessions.  Tied to this, there hasn't been the large increases in home repossessions we saw in the recessions of the early 1990s.  If we are 'all in it together' at all, it appears that people are working better with their employers and, much as I hate to say this, banks with their customers, to find more flexible ways to cope.


But coping may be all that some families are doing.  Going back to the poverty figures briefly, the two age groups most at risk are those aged 18-24 and the over 65s.  This can be seen in the table at the top of this blog.  Across most of Europe, women are far more at risk than men, perhaps linked to the fact that they are far more likely to be in part-time work.


The ability to work and earn enough money to support yourself is really a basic human need.  Early in the recession I heard a commentator on the radio talking about structural unemployment in the USA; they said that it was too low and should be a higher figure.  I found this shocking at the time, to think that you could increase the percent of 'structurally unemployed' and with a couple of strokes on a keyboard wipe out the hope of any decent future for hundreds of thousands of people.  


It's important to remember that behind every employment statistic is a person; and that every part-time job may be a person moving closer to poverty.  

Futuristic car, futuristic company

Had a great morning interviewing one of the founders of Riversimple.  It's the most inspirational company and one that caught my interest a few years ago because of its open source car design.

The company itself aspires to change personal transport, and so has created a hydrogen fuel cell car; no battery, no combustion engine.  Amazing what you can do when you start with a blank page and a problem - i.e. how to make transport sustainable.  When you compare this with the normal approach of  tweaking what you already have, you can understand why both their proposition and their business model is so exciting and, I think, demonstrates so well what I am talking about when I speak about collaborative capitalism.

More to follow.  I'll edit the podcast this week so you can hear all about it for yourselves!

Austerity versus Investment - the double dip answer

ONS GDP and the Labour Market - 2012 Q1 - April GDP update

Last week the ONS released the official statistics that show we are once again in recession.  As the table I've copied here, and the explanation summary that goes with this table state:

"..total output has declined by 0.5 % over the last two quarters.  The economy has not expanded at all over the last year.  Since 2010 Q3, when the economy had grown for five consecutive quarters following the 2008-09 recession, real GDP has contracted by a total of 0.2%."

Now as a Keynesian, I unashamedly will see this as an example of how the austerity package isn't working, especially when compared to the current performance of say, the USA.  However I believe it also demonstrates the importance of one of the key characteristics of collaborative capitalism - long-term sustainable investment.


When I talk about sustainable investment, I am of course talking about triple bottom line investment, but with the environment as perhaps the most important of the three factors.  The last Government invested heavily in our social infrastructure - in rebuilding schools and hospitals in particular.  What I believe is now needed is an investment in our environmental infrastructure, if we are to be truly competitive and have an economy that has a chance of being successful over the next few decades.


At the CIWM Midlands AGM last week, Martin Brocklehurst gave a great presentation about the importance of resource security and how that is currently driving the EU environmental agenda.  It is an argument I have mentioned before; one being made by the Green Alliance and the Ellen MacArthur Foundation in this country.  But it is one that our policy makers talk less about.  If we want to 'rebalance' the economy then we need to make sure that our manufacturers have a secure and price-stable source of the resources they need.  And the thing we know about most of these resources, if they are raw materials? That despite the dismissal of the limits to growth arguments, they will run out (in an economic, if not a real sense).  


Right now, China produces over 90% of the world's heavy rare earth metals which are used in mobile phones, computer screens and hybrid car technologies.  Until quite recently US demand was met by its domestic supply, now that demand is met by China.  This oft-cited example is a snapshot of potential future resource security issues, but there are many more examples on our doorstep.  In the waste and resources sector we collect valuable materials for recycling, and then send them abroad for processing, while domestic companies struggle to find the same clean materials as feedstocks for their processes.


Environmental investment would be investment in these areas.  We must support the infrastructure that will allow us to keep these valuable resources and materials in the UK, beingprocessed here and made available for manufacturing.  This is how we will support business and job growth in the future.


It's not just waste and resources infrastructure that needs the investment.  In environmental investment I also include energy, water and transport.  We have benefitted hugely from the Victorian legacy of infrastructure built to last and benefit future generations, not just this week's shareholders.  This is the type of investment that should be at the heart of Government policy right now.  It's a key part of Collaborative Capitalism and a should be top of George Osbourne's to-do list.

£250m Weekly Waste Fund Workshops

Busy travelling the country at the moment, facilitating some workshops on behalf of the LGA.  We've been to London and Manchester and have the following dates booked in:


Tuesday 17 April - Birmingham
Wednesday 18 April - Newcastle
Thursday 19 April - London.


The aim of the workshops is to give local authorities guidance and support for the Weekly Waste Fund application, and a clearer idea about the fund and how assessments can be made.  Supporting partners include Local Partnerships, WRAP, iESE and of course, DCLG and the LGA.


Responses so far have been positive and I think the sessions have been really constructive.  If you want to find out more, or are looking for support with your application, please do get in touch.

'Competition' in the Water Industry

This is a procrastination blog.  Because I should be doing something else right now that is more important, but I have had a couple of conversations this week about competition and then saw an LSE blog about competition in the water industry.

The LSE blog gave the recent Water White paper an amber light for competition because it says that retail competition for businesses is currently limited based on how much water you use, so the potential market is only 2,200 customers.  What it doesn't mention is that Ofwat, in its review of Competition in the Water and Sewerage Industries: Part II, states:

"- the WSL regime, which allows about 2,200 customers who are likely to use at least 50ML of water a year to switch supplier.


These forms of competition are useful, but very limited.  The WSL regime is the principle framework for allowing customers to choose their water supplier.  It was introduced in December 2005, but to date has not been successful in enabling any customer to switch their supplier."

Now, it could be that the WSL regime is ineffective or cumbersome and that is why competition has not resulted in any customers changing supplier.  Or it could be that water is water wherever you buy it, and that competition has limited appeal.

The more I talk to people in the industry, the more I feel that something huge and strategic, like the physical infrastructure of the water network, should be owned by the state.  Perhaps like Network Rail, or the National Grid.  Competition will mean asking companies to compete when they are all selling an identical product, but with very different infrastructure costs.  As the Government subsidy to South West Water has shown, it costs more if you have hundreds of miles of coastline and bathing water to clean-up and protect, than if you are landlocked, like Severn Trent and Thames.  So you have different infrastructure costs, which have to be maintained in a highly regulated industry, but you are going to be competing - on price and service levels?

Considering the furore over recent months about the lack of transparency in the consumer electricity markets, I find the Water White Paper and its ideas for competition myopic.  In a world with the possibility of increased drought and, at the same time, increased flooding incidents, you are introducing competition to a strategic monopolistic industry who's main infrastructure was built by the Victorians?  It doesn't make sense to me.

Back to the original quote above - competition has existed, albeit in a limited area, since 2005.  It hasn't worked.  Is the solution right now really more competition?

Moving the goalposts - again!

At the beginning of this week DECC published its timetable for implementing the RHI or Renewable Heat Incentive.  It's a great incentive because it works in the same way as Feed-in Tariffs and ROCS - it pays you to produce, and hopefully use, renewable heat.

And yet, in the same ways as they dramatically changed Feed-in Tariffs at short notice, the Government have now announced a delay of the second phase of RHI till 2013.  The disappointment within the renewables industry is palpable.  The Solar Trade Association, ABDA (the anaerobic digestion industry body) and the Renewables Energy Association have called the changes "premature", "unhelpful" and a "source of huge frustration".

The sting in the tail, however, is the small part of the announcement that stated the Government is proposing a policy of "cost control".  In other ways, it is keeping the door open to do what it did with FITs, dropping the level of incentive at short notice.

While the talk this week has been about panic buying petrol, pies and postage stamps, the serious issue is the lack of growth in the economy.  There is little plan for growth and absolutely no plan for sustainable growth.  This change, once again, to existing schemes continues to undermine the fledgling green industries that should be at the centre of our economic strategy.  People will not invest when the future is so uncertain.  A depressing time for all of us working in this area.

Podcast: The Co-op Approach to Solar

Copyright Ben Whittle 2012 Leominster's Solar PV

This podcast discusses what you need to do to get a community-owned solar PV project up and running.  Ben Whittle and Philippa Roberts talk about the issues faced in Leominster, Herefordshire.


Start: How Ben became involved
3min: Why a solar co-op?
6min: Who else is involved and why?
9min: How to set up a solar co-op
13min: Changes to the Feed in Tariff (FIT)
18min: Getting PV on the roof and the support from Good Energy
20 min: The future of community renewables.

Can Community Solar Survive?

Copyright Ben Whittle 2012

I recently interviewed Ben Whittle, a founding Director of the Leominster Community Solar Co-op.  This Herefordshire based community project aimed to put a large solar PV array on the local sports centre; owned and funded by people who lived in the area.  Unfortunately, the launch event happened a matter of days before the Government's first 'review' of the Feed-in tariff.

While the solar industry has seen strong growth in recent years, and should be considered a success story, it is under threat from a lack of faith in the investment environment.  Regular and unexpected changes to any subsidiary will always cause uncertainty, and make it harder for projects to get off the ground.  I personally know projects that were cancelled as a result.



So did the Leominster project make it?  Listen to the interview and find out!

Can Technology Save Us?

Interesting article from the TED Conference showing the contrasting views of Paul Guilding and Peter Diamandis.  While Paul argues that our obsession with economic growth is overloading the planet's capacity to support us, Peter believes that technology will save us.

It's an argument that has been going on for some time, and one I've written about before in an earlier blog.  It's hard to defend growth when you hear about the environmental limits, but harder still to not defend it in this time of austerity.

I think the conversation would be more fruitful if we were trying to figure out what sustainable 'growth' could look like.  It's probably true that we are measuring the wrong things, but GDP is going to be the indicator of choice for some time yet.  So while that is the case, now is the time to be looking at the new business models that will change the world.  There are ways to improve living standards that don't involve consuming more.  There are collaborative businesses that do this, whatever there legal status.  I'm tracking some of these down to find out how and why they do what they do, and will be writing about them here.  If you know of any, or you are one, please get in touch. I'll bring the biscuits when I come and visit.

Collaborative Capitalism - The Detail Behind the Soundbites?

"It’s the economy, stupid"

The centre-ground that is occupied successfully by any political party is the one that focusses on economic stability.  If a party cannot be trusted to be a safe pair of hands when managing the economy, then it has no credibility.

But since the last time we had this conversation twenty-odd years ago, things have changed.  Pay inequality has grown, as salary rises at the top vastly outstrip the increases in the middle and bottom.  Familiar companies that were considered national institutions have disappeared, gobbled up by private equity and larger corporations, without account being taken for their importance as national symbols of success and collaborative capitalism.  Building a business or a service, and creating value is not considered as interesting as the quick win of trading and the X Factor of takeovers.  Suddenly 'moral' capitalism is back battling against 'crony capitalism'. However I don't believe these  soundbites are anything but a reaction to what is happening.  There is very little detail on what a better future might look like.

Which is where collaborative capitalism comes in.  It has a long history in the co-operative movement and the Quaker-founded businesses of the eighteenth and nineteenth centuries: in the paternalistic industries from the turn of last century and the social enterprises of the last 50 years.  The time has surely come for a “less degenerate capitalism”.

Collaborative capitalism is based on the principle of working together.  It means a long-term approach to business and the economy.  It means productive investment: in skills for workers, in creating products that last, and buildings that are efficient.  It means working to the triple bottom line, where sustainability (in the Brundtland sense of the word) means considering the social, the environmental as well as the financial consequences of what you do.  It means support for SMEs and businesses that are embedded, and invest, in their communities.  Collaborative capitalism is innovative, because it pays attention to the viewpoints of many, not just the people with the largest share.  It is open-source, crowd-sourced and crowd-financed.  It is networked.

And it is happening. It’s happening with RiverSimple’s open-source car designs, with crowd-financed films like the Age of Stupid, with 38 degrees’ campaigns and in workspaces like The Hub.
The examples above of collaborative capitalism have happened in spite of, not because of, government.  However, there is a case for the state and it is one we should be arguing.

Government should provide the safety net for when things go wrong.  When entrepreneurs remortgage their homes, or invest their savings for projects they believe in, then there is an argument that this level of risk deserves a  different level of reward.  Taxes can be used to incentivise the long term holding of investments over the short-term trading for quick profit.  If we care about the environment, we need to have the conversation about whether ultimately resources should be taxed, rather than labour.  Government procurement should drive innovative change, not orders abroad.

Government is a partnership.  We must weed out the disingenuous arguments from the right that we’re all in it together when the economy is actually going backwards.  We need to show where growth can come from – collaborative capitalism is part of the solution.