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In partnership with ERA Foundation: 'To save the environment, first we must save the economy'

Fracking has a key role to play in securing both our energy supply and the nation’s economic well-being. Q&A with Sir Alan Rudge, president, ERA Foundation.

The impact of rising domestic energy bills on the health and well-being of the British people has been extensively documented. What has received less attention is how these same price increases are reducing the nation’s industrial competitiveness.

Rising energy costs are weakening manufacturing output. This in turn is driving both the goods trade deficit and a sharp decline in our status as a global manufacturer, which has slid from fourth largest in the world to ninth over the past 15 years. The long-term viability of energy-intensive industries is at risk.

If the UK is to reverse its fortunes, urgent attention needs to be paid to reducing the cost of energy and to securing supply, says Sir Alan Rudge, President of the ERA Foundation. The foundation has repeatedly highlighted how energy production and security policies need to be overhauled drastically, a key priority being the scrapping of green taxes that were introduced as part of the Climate Change Act 2008 (or, at least, a significant reduction of these tariffs). They have added as much as 28 per cent to industry’s fuel bills, and it is anticipated that increases will escalate over the next few years.

Equally, alternative sources of energy must be secured as coal-powered power stations are closed and the ageing nuclear stock is patched together until an overdue new generation of reactors is built. Many believe the solution lies in windfarms and solar panels. However, these are expensive to build and run (they require significant subsidies), are incapable of producing a reliable baseload source of energy and will not result in rapid decarbonisation. Shale gas, on the other hand, offers a secure and competitively priced supply of energy.

Admittedly, fracking has had a great deal of bad press, including accusations that it is responsible for public health problems, polluted water supplies and significant depletion of water resources. Yet many of these aspersions have been found to be untrue or exaggerated. For instance, contamination of groundwater by fracking fluid is possible, but is very unlikely if proper procedures are followed.

The prediction is that the location of major shale gas reserves will reshape world politics and the associated flow of wealth. No longer will Middle Eastern oil or Russian gas remain tools that have determined the direction of geopolitics over the past forty years. Experts estimate that there are trillions of cubic feet of shale gas lying beneath us – if the UK can exploit this, we can secure our energy supply, improve the sustainability of industry and manufacturing, and reduce our trade deficit.

How would you describe the energy outlook for the UK today?

When looking at our energy needs, you have to start with the economy. The UK has been running a negative balance of trade since the end of the Eighties and it’s been getting worse. There is a deficit in the trade of goods of £100bn a year, the main cause of which is the shrinking of our manufacturing industry from more than 20 per cent of GDP to its current 11 per cent since the mid-Nineties. One of the main factors impacting upon the future of manufacturing industry is the high cost of energy.

In your view, what factors are driving these cost increases?

licies based on the alarmist 2008 Climate Change Act are raising the cost of energy, both to industry and to the general population. As green taxes force the prices up, more manufacturing firms – many of which are foreign-owned and therefore don’t have any special reason to be here – are looking to move out of the UK. Our economy cannot afford this to happen. The point of green taxes is to encourage businesses to operate in a more environmentally friendly way, isn’t it? Global warming alarmism was the reason for the 2008 act and it was an overreaction.

The world has not heated as predicted. The extent to which human activity is contributing to natural climate variability remains uncertain. Meanwhile, we  are not reducing emis-sions. Let’s not forget that while we are closing coal-fired power stations, or converting them to burning more expensive imported woodchips with an increased carbon footprint, China and India are busy building new coal-fired stations that will far outweigh our total contribution to carbon dioxide emissions.

Current policies don’t make sense. There is no advantage in making us poorer. Poor nations can’t save the environment. We have a huge debt due to borrowing and the banking crash, which means we are paying more than £50bn a year in interest. If manufacturing output decreases further, our financial situation will worsen. To save the environment, first we must save the economy. We need to rebalance the economy with manufacturing at its heart.

What measures do you think are needed to reduce these energy costs?

Shale gas offers a huge opportunity. In the US, it has totally transformed their energy situation. Costs have gone down by 40 per cent and they are producing sufficient gas to meet their own needs and to become an energy exporter. This will reduce their dependency on the Middle East, which must have strategic and political significance. In addition, shale gas produces half the carbon-dioxide emissions of coal, leading to a substantial reduction in the national carbon footprint.

What of the concerns that many people have about the dangers of fracking?
If you were in a sinking boat with a large hole in it and someone offered to come along and patch it up, would you turn them down just in case they didn’t make an invisible repair? That sums up the attitude of those opposed to shale gas. They would prefer to sink, it seems.

What of the risk of earthquakes, poisoned air and water, and damage to health?

The Shale Gas Shock by Matt Ridley highlights how much of what is claimed about fracking is not true. Fracking takes place at great depths, typically more than a mile down, and provided it is carried out in a properly controlled way it is less dangerous than any other source of fossil-fuel production – drilling for oil offshore can be a tricky business, for example.

How about the visual impact above ground?

Shale gas installations are about the size of a large garage, and can be disguised to blend in with the local environment. They certainly look nothing like typical industrial sites or power plants. Nor do they require as much space as renewables; one shale gas site can produce the same amount of energy as 47 wind turbines, for example, and the supply is not dependent on the weather.

How cost-effective is it in comparison to renewable fuels such as wind or tidal power?

Wind power is between two and five times more expensive than shale gas. Aside from that, there is the big problem of variability of wind, which the National Grid cannot handle. Tidal power, while it’s probably the most predictable renewable source, would require vast areas of water to be closed off to make it effective, which is not financially or environmentally viable.

Does the UK have the skills – and importantly, the access to finance – to make shale gas a success?

Because we have become a highly indebted nation, spending more than we earn, we don’t have enough wealth to do it ourselves. We will need foreign investment initially, and imported expertise until we have developed our own skills.

If the profits from shale gas will be made by foreign companies, does this mean local communities will miss out?

Where shale gas production has occurred, it has regenerated local economies by creating jobs and using local services. Shale gas has the potential to enrich communities.

What do you think will happen if the UK doesn’t embrace shale gas?

It will be pretty grim. If you look at the recent Davos meeting, there was serious concern about industrial capacity moving from Europe to the US as a result of rising energy costs. If we don’t embrace shale gas there is a very good chance that we’ll frighten away the high-energy-using industries, which will be disastrous for the UK economy.

Are we all doomed?
We’re not doomed. Our generation will get away with it. What we’re doing is passing the debt and the problems on to our children. We need to face up to the facts and take positive action. We’re sitting on several hundred years of gas supply. This is a great opportunity. We shouldn’t be wasting time arguing and whingeing – it’s time to get up and go.

 

Sir Alan Rudge is the president of the ERA Foundation.

 

A year on from the Spending Review, the coalition's soothsayer has emerged to offer another gloomy economic prognosis. Asked by ITV News whether he could promise that there wouldn't be a double-dip recession, Vince Cable replied: "I can't do that.

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Ken Livingstone says publicly what many are saying privately: tomorrow belongs to John McDonnell

The Shadow Chancellor has emerged as a frontrunner should another Labour leadership election happen. 

“It would be John.” Ken Livingstone, one of Jeremy Corbyn’s most vocal allies in the media, has said publicly what many are saying privately: if something does happen to Corbyn, or should he choose to step down, place your bets on John McDonnell. Livingstone, speaking to Russia Today, said that if Corbyn were "pushed under a bus", John McDonnell, the shadow chancellor, would be the preferred candidate to replace him.

Even among the Labour leader’s allies, speculation is rife as to if the Islington North MP will lead the party into the 2020 election. Corbyn would be 71 in 2020 – the oldest candidate for Prime Minister since Clement Attlee lost the 1955 election aged 72.

While Corbyn is said to be enjoying the role at present, he still resents the intrusion of much of the press and dislikes many of the duties of the party leader. McDonnell, however, has impressed even some critics with his increasingly polished TV performances and has wowed a few sceptical donors. One big donor, who was thinking of pulling their money, confided that a one-on-one chat with the shadow chancellor had left them feeling much happier than a similar chat with Ed Miliband.

The issue of the succession is widely discussed on the left. For many, having waited decades to achieve a position of power, pinning their hopes on the health of one man would be unforgivably foolish. One historically-minded trade union official points out that Hugh Gaitskell, at 56, and John Smith, at 55, were 10 and 11 years younger than Corbyn when they died. In 1994, the right was ready and had two natural successors in the shape of Tony Blair and Gordon Brown in place. In 1963, the right was unprepared and lost the leadership to Harold Wilson, from the party's centre. "If something happens, or he just decides to call it a day, [we have to make sure] it will be '94 not '63," they observed.

While McDonnell is just two years younger than Corbyn, his closest ally in politics and a close personal friend, he is seen by some as considerably more vigorous. His increasingly frequent outings on television have seen him emerge as one of the most adept media performers from the Labour left, and he has won internal plaudits for his recent tussles with George Osborne over the tax bill.

The left’s hopes of securing a non-Corbyn candidate on the ballot have been boosted in recent weeks. The parliamentary Labour party’s successful attempt to boot Steve Rotheram off the party’s ruling NEC, while superficially a victory for the party’s Corbynsceptics, revealed that the numbers are still there for a candidate of the left to make the ballot. 30 MPs voted to keep Rotheram in place, with many MPs from the left of the party, including McDonnell, Corbyn, Diane Abbott and John Trickett, abstaining.

The ballot threshold has risen due to a little-noticed rule change, agreed over the summer, to give members of the European Parliament equal rights with members of the Westminster Parliament. However, Labour’s MEPs are more leftwing, on the whole, than the party in Westminster . In addition, party members vote on the order that Labour MEPs appear on the party list, increasing (or decreasing) their chances of being re-elected, making them more likely to be susceptible to an organised campaign to secure a place for a leftwinger on the ballot.

That makes it – in the views of many key players – incredibly likely that the necessary 51 nominations to secure a place on the ballot are well within reach for the left, particularly if by-election selections in Ogmore, where the sitting MP, is standing down to run for the Welsh Assembly, and Sheffield Brightside, where Harry Harpham has died, return candidates from the party’s left.

McDonnell’s rivals on the left of the party are believed to have fallen short for one reason or another. Clive Lewis, who many party activists believe could provide Corbynism without the historical baggage of the man himself, is unlikely to be able to secure the nominations necessary to make the ballot.

Any left candidate’s route to the ballot paper runs through the 2015 intake, who are on the whole more leftwing than their predecessors. But Lewis has alienated many of his potential allies, with his antics in the 2015 intake’s WhatsApp group a sore point for many. “He has brought too much politics into it,” complained one MP who is also on the left of the party. (The group is usually used for blowing off steam and arranging social events.)

Lisa Nandy, who is from the soft left rather than the left of the party, is widely believed to be in the running also, despite her ruling out any leadership ambitions in a recent interview with the New Statesman.However, she would represent a break from the Corbynite approach, albeit a more leftwing one than Dan Jarvis or Hilary Benn.

Local party chairs in no doubt that the shadow chancellor is profiling should another leadership election arise. One constituency chair noted to the New Statesman that: “you could tell who was going for it [last time], because they were desperate to speak [at events]”. Tom Watson, Caroline Flint, Chuka Umunna, Yvette Cooper, Andy Burnham and Liz Kendall all visited local parties across the country in preparation for their election bids in 2015.

Now, speaking to local party activists, four names are mentioned more than any other: Dan Jarvis, currently on the backbenches, but in whom the hopes – and the donations – of many who are disillusioned by the current leadership are invested, Gloria De Piero, who is touring the country as part of the party’s voter registration drive, her close ally Jon Ashworth, and John McDonnell.

Another close ally of Corbyn and McDonnell, who worked closely on the leadership election, is in no doubt that the shadow chancellor is gearing up for a run should the need arise.  “You remember when that nice Mr Watson went touring the country? Well, pay attention to John’s movements.”

As for his chances of success, McDonnell may well be even more popular among members than Corbyn himself. He is regularly at or near the top of LabourList's shadow cabinet rankings, and is frequently praised by members. Should he be able to secure the nominations to get on the ballot, an even bigger victory than that secured by Corbyn in September is not out of the question.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.