I can strongly recommend the following event:

Held each spring at Manchester Central (GMex), the Greenbuild Expo this year is on the 8th & 9th May 2013, and it is the sustainable building and refurbishment event for the professional.

It’s free to attend, of specific interest may be the Green marketing sessions or some of the sessions relating to energy savings for businesses. There are also sessions on smart buildings, materials, methods, insulation, renewables and of course the Green Deal and ECO debates and presentations addressing fuel poverty and concentrating on large scale schemes like Warm Up North and the very soon to be announced Manchester City Council and AGMA programme (the 2nd largest in the UK!).

There are still limited spaces available should you be interested in exhibiting, but if not I hope you can take the time out to visit and perhaps consider being part of it in 2014.

Visit http://www.greenbuildexpo.co.uk to register for free or for more information.

(No conflict of interest)

The report today by Lord Stern and the think tank Carbon Tracker shows that over 66% of oil owned by stock market companies will have to stay in the ground if governments are to achieve their plans to limit climate change to a 2C increase in average temperatures. The report calls this situation a Carbon Bubble because these oil assets are therefore at risk of being over-valued if they have to remain in the ground forever.

Alternatively, there is a view that oil and coal are too good to burn. The rich mix of hydrocarbons in crude oil varies from place to place, and like coal it can provide a strong stream of raw materials for a range of valuable materials from plastics to pharmaceuticals. We can even imagine a hydrocarbon refining process powered by renewable energy sources such as solar power.

However, for this new economic model to work we need to reduce the demand for energy sourced by burning carbon. A carbon tax would have the effect of pushing production towards higher value-added processes as well as providing a new revenue source for the transition to sustainable production and consumption. We can imagine and create a better use of sustainable plastics than the current overproduction of water bottles.

Link:
http://m.guardian.co.uk/environment/2013/apr/19/carbon-bubble-financial-crash-crisis

Yes we are, according to John Kay, Oxford economics professor, FT journalist for 17 years and government advisor where he led the Kay Review in 2012 on equity markets.

He takes the view that the financial world has not yet learnt the lessons from the 2007/8 global crisis and is still in denial. He claims that the Value At Risk model, discredited by some, is still being used to make high-risk investments and that senior economists in the major banks still believe in their models.

These senior economists comfort themselves by saying that the global financial crisis was an extreme event within the model, whereas Kay argues that it was outside the model and points to its limitations.

Kay has been criticised for being stronger on diagnosis than solutions. However, he does point out the benefits of moving towards smaller banks, towards longer-term investment decisions rather than quarterly earnings, and with improvements in how we regulate financial markets.

But perhaps his most interesting analysis is that economists need to change their culture and become open to learning from other disciplines. The example he gives is how the legal profession deal with probability – they require a convincing narrative as well as itemised facts.

In his book, The Art of Thinking Clearly, Rolf Dobelli (2013, p204) reports on a study by two researchers, Hirschleifer and Shumway on 26 stock exchanges between 1982 and 1997.

“They found a correlation that reads much like a farmer’s adage: if the sun is shining in the morning, the stock exchange will rise during the day. Not always, but often.”

It is good to remember that there are limits to the uses of a spreadsheet econometric model and that ‘animal spirits’ still need to be factored in and controlled.

Links:
http://www.theactuary.com/features/2013/04/the-mild-mannered-prophet-of-doom/
The Art of Thinking Clearly, Rolf Dobelli, translated from German by Nicky Griffin. 2013. London: Hodder & Stoughton, Spectre.

In the week in which Margaret Thatcher dies, some are asking if it is too soon to think about the political legacy of Thatcherism 1979 – 1990.

The Financial Times front page coverage (9 April) ended with the unanswered question of whether current crises have their foundations in the Thatcherite 1980s, such as:
1. council house sales (housing crisis),
2. big bang in the city of London (banking crisis),
3. privatisation of utilities (energy crisis),
4. deindustrialisation (manufacturing crisis).

Added to which could be the deregulation of buses outside of London, the poor maintenance of state schools and hospitals, and the general limitations placed on local government all as legacies which still leave us with work to be done.

There are then the political party legacies: New Labour (1993-2010) and where next for the Labour Party; Conservatives and how long the scars of their ousting of Thatcher (1990) will continue to poison and divide it; and the Liberal Democrats, UKIP and the Green Party in trying to reach voters outside their core supporters through a sustained popular or populist movement.

There is a respectable argument that Thatcherism is best understood as a form of Maoism, in that it was a cultural revolution, anti-intellectual, anti-establishment and focused around a strong leader, a personality who can relate directly with ‘the masses’ as if unconnected with their government. However, there is a price to pay afterwards. I remember hearing a retired school headteacher who said that the best way to leave and hand over to the next leader was “if the water simply closed over your head”.

This humility and wisdom in a leader is unfortunately rare, but perhaps the best measure of a time of rule is the quality of the times afterwards.

Much ink has been rightly used to write about the Bedroom Tax and cuts to welfare, but worse is around the corner.

Full credit to the Financial Times in its front page coverage in both its UK and US editions today (link below) where the FT reports on the results of the analysis of welfare cuts it commissioned from Sheffield Hallam University. In short, the impact in poor areas across the north of England will be up to FIVE times worse than in richer areas in the south.

Analysis has shown that the Bedroom Tax will take around £500 million from poorer families during the term of the coalition government, but more insidious still is the recent change in linking benefits down to the CPI lower rate of inflation instead of the more accurate and generous RPI. This change will cut around £11 billion from poorer families in the same term of office of the coalition government.

What the FT front page report today shows is where those families live from who will lose that £11 billion. For example, Blackpool’s local economy will lose £914 for every working age adult living there, whereas Cambridge will lose £247.

And this follows the spacial modelling that the CLES think-tank in Manchester did on the impact of the Bedroom Tax at neighbourhood level, which showed similarly what we knew instinctively, that the poorest places will bear the heaviest loss.

The response by the coalition government to this FT article today is that “our welfare reforms … will help people back to work”.

But how will this happen when unemployment is so high and the local economies of the places where poor people mostly live will get even less income?

Link:
@FinancialTimes: Front page of the Financial Times UK Thursday, April 11 http://t.co/eDTDpmmHnB

There is much current UK debate about making ‘work pay’, and I and others have commented on the lack of ethics if that means lowering benefits rather than raising wages. And part of this trend in lowering benefits has been to propose that payments in future should be linked to the person’s previous National Insurance contributions.

OK, but then why are we abolishing SERPS (the Second Earnings Related Pension Scheme)? The name has been changed over the years, but SERPS did what it said on the tin. It was also very progressive, using contributions from the ‘best 30’ years which helped women who had had career breaks.

The recent ‘improvements’ in the state pension arrangements have answered the problem of the disincentive where some people were losing some of their state pension because they have savings.

However, the money for this change has been taken by phasing out the state second pension, the current name for SERPS. So in the future, a benefit related to contributions is to be abolished. It really would be better to be planing these things more consistently.

The new Governor of the Bank of Japan, Haruhiko Kuroda, has announced $1.4 trillion of quantitative easing over the next two years. The FT reports (Japan starts monetary revolution, 5 April) that the BoJ will double Japan’s money supply in an effort to end decades of deflation, and that Barclays estimate this will be a 1% growth in GDP each month for this year followed by 1.1% monthly growth in 2014.

This bold move by the BoJ will certainly cause a reconsideration of strategy by both the Bank of England and the European Central Bank, both of whom recently announced no changes in their QE policies.

The UK Treasury will also show an interest, but perversely for a different reason. John Kay has written (Politicians bow to pressures to bend data, 13 March) about the growing tendency by the UK government to be very selective and misleading in its use of economic data, and to be fair he points the finger at previous governments too. Recently the UK government made its borrowing figures look better by counting as government income the extra interest payments that the BoE are receiving following its QE measures, while not counting the QE amount itself as increased public sector debt.

So the more QE is pumped into the UK, the better the government’s deficit will look on paper.

But can any increase in money supply be directed at jobs and sustainable growth, or is it doomed to be blown on asset price inflation and another bubble crisis? The USA approach to QE has changed recently to focus on employment levels as well as on inflation, and there have been discussions in the UK that the new Governor at the BoE this summer will somehow try to follow suit, with some early moves in that direction already started. Certainly the BoJ have accepted that inflation is better than deflation, and a modest growth in inflation in the UK, if accompanied by growth in the jobs market, might encourage personal savers to start spending more again at a time when UK personal savings are at their highest level since 2004.

The experience in the UK to date has been that QE has helped some large firms build up very strong cash reserves, but their finance directors have been mostly sitting on their hands waiting to see how the economy will develop; and small and medium firms have been denied almost any bank credit other than high-interest overdrafts and credit cards. The need now is for QE to reach smaller firms and not just the corporate head offices.

Link: http://www.johnkay.com/2013/03/13/politicians-bow-to-pressures-to-bend-data

There is a proposal to cap any bonuses paid by EU based banks next year to senior executives. This bonus cap will apply to EU based banks worldwide, and for any non-EU based banks to all their offices within the EU. Bonuses will be limited to the annual salary amount or to double the salary figure if shareholders agree.

In a report in today’s FT, (US banks put City on bonus cap watch, 2 April) it is reported that some US banks and institutions are considering moving their Europe, Middle East and Africa operations outside of the EU from London to Dubai or similar cities to be outside of the reach of the new bonus cap law. No-one is quoted, but JPMorgan, Goldman Sachs, Bank of America and Citigroup all get a mention as big employers in the City of London.

The UK chancellor George Osbourne is lobbying Brussels to exempt these US companies from the EU bonus limit. However, it might be worth looking at this in the cold light of day to ask the economic question whether such a bonus cap exemption would be good or bad for the UK?

On the one side we are told that these US banks and financial institutions are big employers in the City of London and that there would be fewer UK jobs if these firms relocated to the Middle East or South Africa to run their European operations from a distance.

But perhaps there is another argument, that excessive bonuses are bad for the UK because they distort the economy. These bonuses, and their associated very high senior salaries, have grown massively in the last 20 years in central London to the extent that they now distort the national economy and hold back sustainable growth. The relatively small number of very high net worth individuals in central London has distorted the property market as well as the retail and hospitality sectors. These distortions cause micro local benefits (“few winners”) but macro dis-benefits to the rest of the UK (“many losers”) in terms of inefficient use of resources due to significant and unsustainable overheating. Further, these extreme income inequalities of themselves can cause bad social and economic outcomes, as argued in the book The Spirit Level by Richard Wilkinson and Kate Pickett in 2009. Finally, is it a credible business proposition that tens of thousands of loyal staff and their families would be relocated to Dubai so that a few senior executives could get to keep their extreme bonuses, and all done with no adverse effect on these businesses when they have to start making investment decisions about people, organisations and places that are now four thousand miles away.

If we are serious about rebalancing the UK economy then the greed of a few must be limited to protect the jobs of the many.

The recent crisis in Cyprus, which started with the banks and is now spreading to the whole economy, perhaps holds lessons for other EU countries as well.

Firstly, the sense of solidarity within the EU ‘project’ has been undermined. The bonds between small and larger states, and between northern and southern states have been severely weakened. The animosity to Germany and the Netherlands is palpable. Cypriots might also wonder if Britain, the colonial power up to 1960, perhaps should have been a more active friend and not just watched from its bases. The behaviour of Greek banks in off-loading their difficulties into Cyprus was also felt to be hostile.

Secondly, the ‘troika’ of major economic institutions, here the IMF and the ECB and the European Commission, did not give out a strong sense of control, purpose and frankly competence in the handling of the crisis. This was most evident in the initial negotiations where people with less that €100,000 in their bank accounts would have lost money. Technically the international bank guarantee for smaller balances was not being dishonoured because the lost funds were to be taken as a tax. Technically. But public trust and confidence in bank guarantees has been undermined.

Thirdly, banks are not as safe as they were. In 2008 the major economies moved heaven and earth to save the banks from their errors. The impact in the national debt of the USA, UK and elsewhere is still profound and years away from being resolved, and there is significant public anger at the banks and politicians. But now in 2013 the message to banks in crisis is, there are no more business-as-usual bailouts and instead expect closures, redundancies, and bond and shareholders to take a loss.

Finally there is a lesson in economic development in smaller countries. Cyprus has been publicly reprimanded for taking bank deposits from Russia and elsewhere, and for building up the financial services sector of its economy. This sector has now been almost destroyed and Cyprus’ economy will be devastated for years to come. But how different was it to Frankfurt or London? Some commentators have drawn attention to the number of Russian millionaires living in London, buying properties and investing in owning newspapers and football clubs, settling their legal disputes in English courts. The difference between the City of London and the island of Cyprus does not stand up to close examination.

Which brings us back to the first point, the weakened sense of solidarity. I am sure the officials in Cyprus did a clear-headed calculation that staying in the euro zone was the less-worse option when they considered reverting to the Cypriot Pound, probably for bailout reasons. But I am equally sure that if ever that calculation changes in favour of a local currency they will be out in a flash. Now there is no residual sentiment at all for keeping the euro, and sentiment matters greatly in economics.

The Welfare Reform package by the UK coalition government is estimated to reduce the income of the poorest people in society by £18 billion. With the income guarantees provided to elderly people, these cuts will fall hardest on people of working age and their families. These cuts are through a combination of changes: the new ‘bedroom tax’, the changes to Council Tax benefit, the changes to Disability Living Allowance, and the changes to the Social Fund. Driven by a policy of cutting public spending, all these changes take money from those least able to make a sacrifice. Looking further ahead, there will be the Universal Credit changes which aim to combine all benefits and taxes in one monthly payment, but administrative chaos is widely predicted with poor people bearing the real cost of living as best they can for days or weeks at a time with no money. Rights to Legal Aid advice and representation are also being withdrawn. Polly Toynbee in The Guardian summarises these changes well.

Therefore, what might be the best progressive and humanitarian responses to this rising crisis?

Looking back, the best response a few years ago was usually to run a welfare rights and take-up campaign. Many people would gain because they had not been receiving their full entitlement, and an active advice sector could co-ordinate appeals so that the envelope of eligibility was increased. This strategy still has merit, but the forces against it now are much stronger and harsher than before.

More recently, there was a shift in strategy away from take-up towards making work pay. The progressive argument was that people were living in families where unemployment was becoming inter-generational and that instead it was better for people’s health as well as financially for as many people as possible to be working instead. Through measures such as the new minimum wage and working tax credits there was a concerted economic effort to end the poverty trap of benefits and show people that ‘work pays’.

Currently we seem to be in a state of flux, at a point of change. There are still some progressive discussions about reducing dependency and increasing access to jobs rather than to benefits. However, the combination of rising unemployment, reduced levels of tax credits, real-terms reductions in the minimum wage and a casualisation of the labour market have profoundly changed the economic realities of many poor people’s lives.

Therefore dependency might just make a lot of sense at the moment to poor people, if not also to public authorities. It has already been said that 2012 was the year of the food bank. There is also a wider context of growing income inequality in the UK, with increases in higher pay racing ahead of far smaller movements in low pay.

Perhaps the most recent response here is still workable, namely the living wage campaign. This puts pressure on larger employers in particular to pay a decent wage rather than a minimum wage, with perhaps its strongest impact in London. However for a living wage strategy to work it requires more jobs.

Clearly one response to the rising crisis of welfare reform is to campaign for the cuts to be reversed, and though it would have been far better for the cuts never to have been implemented, there are still campaign opportunities which civil society and sections of Parliament can bring to bear on the government to overturn the changes as quickly as possible.

But beyond these necessary reverses, we need to reform the Welfare Reform strategies as well. Work can provide people with meaning, dignity, respect and health. But increasingly in our current ‘flexible’ economy many people’s experience of work, such as long hours, low pay, insecurity and low level harassment is anything but dignified or enabling, and creating more jobs and at a living wage is only part of the solution. We cannot reform welfare without reforming employment.