Paul Tucker attempts to spice up British monetary policy

Negative interest rates are like candy floss to central bankers, it is believed.

In the midst of his testimony to the treasury select committee, Bank of England deputy governor Paul Tucker gave a suggestion that Britain might be considering some unorthodox monetary policy of its own:

I hope we’ll think about whether there are constraints to setting negative interest rates. This would be an extraordinary thing to do and it needs to be thought through very carefully.

Such a move would be unlikely to affect the Bank's base rate. While we still have cash, that rate is pretty firmly stuck at the zero lower bound, because savers will always be able to withdraw savings as cash and horde it that way, safely out of reach of the banks trying to charge interest on their money.

Instead, it would be the rate paid on the Bank's overnight deposits which would be hit. This is the sum the Bank pays to other banks which leave their money with the Bank of England. It's basically the interest rate the Bank charges when it's actually acting like a bank. It can get away with it because, while withdrawing your savings and stuffing them under a pillow may work for you or I, it's less of an option for Halifax or HSBC.

The Financial Times' David Keohane thinks that the statements, which echo suggestions in the minutes of the monetary policy committee released last week, could be an attempt to talk down the value of the pound. Keohane writes:

Throwing around the negative interest rates idea has become very trendy all of a sudden with Draghi, Praet and Constancio weighing in and, we'd argue, using the threat to substitute for policy impotence.

Was Bank of England deputy governor Paul Tucker doing the same thing? Using a jedi-trick to talk down sterling perchance?

Of course, as Keohane points out, if that was the aim, it didn't do a whole lot of good. The effect of Tucker's words is almost lost in the general volatility of the market today:

Maybe the Bank of England is just feeling a little bit jealous of its Japanese counterpart? After all, they're gearing up to do all kinds of cool new things with monetary policy — Foreign bond purchases! Stock exchange targeting! Capital stock nationalisation using the profits of quantitative easing! — while we're stuck with boring old open market policy, where a chart from eight months ago is still accurate.

Continuing the theme of literally illustrating metaphors, this is a picture of some spices. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

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Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.