Brexit and the waning days of the United Kingdom

[Sheilbh]

Shielbh, Not sure what you're talking about in your edit. The principle of the Rule of Law was established long before the 70s and the institutions which support it were also established long before the 70s.

Central banks, regulators, arm's length bodies running healthcare systems, some European institutions etc. Lots of things that politicians are still "politically" responsible for - they get the blame or credit - but don't actually make decisions/aren't actually responsible.

It's not about the rule of law - but about decision making, remits and responsibility.

Although I think the post-70s order probably entrenched more of those issues going to and being decided by courts (was x regulator acting ultra vires, was this a reasonable decision by a public body etc), which were probably previously areas of a political fight - for example between unions, political parties, business and elected politicians playing a role. I think that probably does re-inforce those market norms by moving them to the world of lawyers and, when taken with cuts to the welfare state, has the effect of reducing access about those types of decisions to people with money and market players.

[crazy canuck]

I agree. I think it's different in the US or Canada, but in Europe our security, climate, economic and moral interests all point in the same direction which is really intensifying the energy transition. I don't think there's a route to that without big state intervention.

I hope Truss uses her idea for covid (or if not that Labour nick it) and basically ring-fence spending on energy transition similar to war debt that will be paid down over a super-long period. Because I think there is a similarity there and I also thinkin the case of energy a war is a huge part of this situation.


But this winter I think it is one or the other - either we pay bills for people, we ration energy or we bail-out the companies to keep prices down. None of those options are cheap. My fear is they'll go for the scheme worked out by energy companies which would effectively bail them out, they keep prices down (but arguably still too high for many), there's government backed loans and long-term repayment by consumers over the next few decades.

Sure, but I don't know what any of that has to do with what you said in your edit.  If anything strong liberal democratic institutions will facilitate the necessary state involvement in energy transition.

[Sheilbh]

Sure, but I don't know what any of that has to do with what you said in your edit.  If anything strong liberal democratic institutions will facilitate the necessary state involvement in energy transition.

I'm not really sure what this or your other post has to do with what I was saying. I'm not sure what you mean.

Separately - prime example of why I think the next election might be a "time for a change" one:
https://twitter.com/PippaCrerar/status/1562833613887926273?s=20&t=2lpktBz9_mwqr6fZxIoYsA

And that's before the huge problems we'll have this winter.

[Josquius]

So. That price rise. That's going to suck enough for me never mind those on minimum wage.
This is real fire up the guillotine stuff.

[Richard Hakluyt]

It is going to have catastrophic effects on the hospitality sector. Their costs are rising so they will have to increase prices, meanwhile the ability of a broad swathe of people to get a family takeaway, have a meal out or a few pints is being lost. Unless the government does something we could lose thousands of pubs 

[Sheilbh]

It is going to have catastrophic effects on the hospitality sector. Their costs are rising so they will have to increase prices, meanwhile the ability of a broad swathe of people to get a family takeaway, have a meal out or a few pints is being lost. Unless the government does something we could lose thousands of pubs 

Yeah - there was an excellent piece in the Guardian on this recently about the challenges for small businesses and there were examples of energy companies refusing to set up accounts for new small businesses, because they're worried about their solvency to pay energy bills.

I think across Europe this is the bit that is most active. The UK approach for individuals has been to give them money and support the consumer, I think the more common approach for individuals in Europe has been price caps (for example France only allowing energy bills to rise 4% this year). So the UK's subsidising the consumer, while most European countries are subsidising the energy sector. But I don't think anyone has done much of anything on the commercial side of things.

We've seen gas-heavy industries shutting down or severely reducing what they're doing across Europe. But there's such a crisis in the price now that it'll affect all businesses like pubs, barber shops etc. We think the high street's in trouble now - I can't imagine how they'll deal with these prices and with a customer base with less disposable income.

I feel that now we're reaching a point where the market isn't functioning and it may be necessary for the state to step in and allocate/ration energy.

[Tamas]

So the UK's subsidising the consumer

What could POSSIBLY go wrong with that approach when inflation is already over 10%

[Josquius]

It is going to have catastrophic effects on the hospitality sector. Their costs are rising so they will have to increase prices, meanwhile the ability of a broad swathe of people to get a family takeaway, have a meal out or a few pints is being lost. Unless the government does something we could lose thousands of pubs 

With the tories clearly not but if we get someone sensible in the aftermath then hopefully it could finally be a trigger to reform business rates and rethink why we have town centres?

[Sheilbh]

What could POSSIBLY go wrong with that approach when inflation is already over 10%

Would it make a difference though?

Whether you're subsidising the consumer or the energy companies (in relation to consumers) the wholesale price of energy is still doing this (Germany example - UK a little lower):


If energy goes from €50-100 MWh to €800 MWh in 18 months there will be inflation. Energy transition will help and is essential - but I'm not sure other state policies or interest rate fiddling will help. The question is how you allocate the cost, who takes the hit and bears the pain.

Having been convinced by Zanza's point on price signals, I've now swung wildly the other way because I don't think the market is sending price signals at the minute beyond extreme distress and not enough energy. So my suspicion is that by the winter we'll have gone from the state allocating the cost and pain to the state allocating energy.

[Tamas]

What could POSSIBLY go wrong with that approach when inflation is already over 10%

Would it make a difference though?

Both approach have their own pitfalls I am sure, but my gut feeling is that artificially repressing the price of energy would make high energy prices cascade less through the economy in an inflationary manner, then if you just let them skyrocket and funneled money to people so they can pay it.

I am well aware from Hungarian examples how price caps can totally get out of control, so I am not saying that's a risk free, sustainable approach, but it feels like the better one when the primary objective (should be) to contain the inflation spiral.

But, as I keep saying, I think the primary objective in the UK is to preserve asset values, not to contain the inflation spiral, so there's that.

[Sheilbh]

Both approach have their own pitfalls I am sure, but my gut feeling is that artificially repressing the price of energy would make high energy prices cascade less through the economy in an inflationary manner, then if you just let them skyrocket and funneled money to people so they can pay it.

I'm not really sure there's that much difference - I think they're basically six of one, half dozen of the other. But as I say my suspicion is that the choice this winter won't be between artificially repressing energy costs or supporting consumers, but who gets energy.

I am well aware from Hungarian examples how price caps can totally get out of control, so I am not saying that's a risk free, sustainable approach, but it feels like the better one when the primary objective (should be) to contain the inflation spiral.

I think price caps can be a way to contain inflation but I think ultimately there's no way out when the energy market is basically breaking down as it is - except for huge investment in energy transition. And frankly a war-time attitude on getting things done and built and operating quickly - at this point I think we need to expand the "green energy industrial complex" in the way we would the military industrial if we were actually the ones fighting Russia because I think it's part of the same.

It is also the nightmare on either side for the Treasury/economists. Price caps are obviously not popular with, basically, liberal economists and as with rent controls I think there is a general consensus that they don't work in the way that's intended, have lots of unpleasant unintended consequences and should only be used in a narrow way/set of circumstances. On the other once governments get into the habit of subsidising energy use it's really difficult to get out of that - it's a huge budget item for most of the developing world (who are now competing with Europe and East Asia for LNG imports) whcih is going to have a big impact. But, from my understanding, again they're seen as something that economists think states should avoid because it's really difficult to get rid of an energy (or food) subsidy once it's in place.

Luckily we've got a crack team on it

Separately GB News did a poll on the leadership and this was the wordcloud for people's unprompted views on Truss (I suspect they should have at least screened for curse words)

[Tamas]

But I expect the GB News crowd (both of them), when faced with the choice between Truss and a centre-left Labour candidate, will grudgingly put their vote next to that blurb of words instead of Starmer.

[Sheilbh]

Oh they're the people who are saying the positive things. Admittedly their audience is about 50-100,000 so about the population of Inverness

Edit: It turns out they commissioned a poll (from a polling council member) which has actually given the worst numbers for the Tories - to the extent that it looks like a really wild outlier but GB News paid for it so they're running with it

I think it's got the Tories on 26% - anything below 30% is catastrophic for either of the big parties.

[PJL]

Honestly I think we might have Boris back as leader before the next election, if Truss/Sunak bombs as PM. Unheard of in modern times but if Trump decides to run again in the US as is likely (also unheard of in recent times), then I fancy Boris doing the same.

Definitely looking as though by sheer accident that Boris left at the right time, and ripe for a stab in the back a la Thatcher myth within the party.

[Tamas]

Strong disagree, Johnson is done.