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What would a Labour-SNP deal mean for energy policy?

If the SNP do hold the balance of power, it will be energy policy where it has the biggest consequences.

Tucked away in the innards of the Scottish National Party’s General Election manifesto are a few phrases about energy and climate change policy that might turn out to have profound implications for both Scotland and the rest of the UK.

“The additional investment we seek should include investment in our energy infrastructure so we can continue to maximise renewables generation, in particular offshore” is one.

“We will support lower energy bills for consumers by pushing for the Energy Company Obligation to be funded through general taxation and not as a levy on energy bills” is another.

Perhaps the most profound is “We will use our influence at Westminster to ensure the UK matches, and supports, Scotland’s ambitious commitments to carbon reduction.” 

The potential significance of these phrases will only come to be realised firstly if the election results in a Miliband premiership supported by the SNP, and secondly if the SNP seriously follows through on these components of the manifesto.

If it does, we will end up in 2020 with a UK profoundly transformed – where energy efficiency is improved in both domestic and industrial applications, and where the march to an electricity network based on renewable energy is re-invigorated rather than stalled.

 

Logic for change

 

To understand why the SNP has put these strands in its manifesto and how they might play out, we need a little context.

Pre-referendum, the SNP’s main pitch relating to energy was that an independent Scotland could base its future economy on North Sea oil and gas.

The economics looked dodgy even then. But given the recent slump in the international price of oil and gas – and given indications that the price might fall much lower still if Iran returns to the international fold – this strategy increasingly looks akin to putting your life savings on a hobbled skewbald in the 3.35 at Musselburgh.

Amid all the rumpus surrounding North Sea oil and gas, fracking and wind farms, it’s easy to miss the really profound fact that in the electricity system, Scotland is already nearly a fossil fuel-free nation.

The only significant coal-fired power station, at Longannet, is due to close next year. That will leave just one major gas-fired station, at Peterhead – sustained by a National Grid contract to supply backup power – and a few much smaller coal and gas stations in remoter locations. 

It is equally clear that no new nuclear reactors will be countenanced north of the border.

Which leaves renewables as by far the dominant supplier of electricity. 

They already providing nearly half of Scotland’s power, and are set to generate 100% of consumption by 2020 or shortly thereafter. Beyond that, adding more renewables means being able to sell more and more electricity to the Sassenachs – which looks a far more reliable source of revenue right now than oil and gas.

But current policies would slow renewables progress in the next couple of years. Electricity market reform has reduced funding from Westminster, and prevented Holyrood from offering top-up subsidies. And on support beyond 2020, investors are offered nary a clue.

Hence the SNP manifesto pledge to seek “additional investment” that will enable Scotland to “continue to maximise renewables generation”. Plus, of course,maximising renewables companies, jobs and supply chain.

 

Efficient transformation

 

Cutting energy waste should obviously be the first move in any programme to reduce emissions – not least because it also reduces bills and improves energy security.  

But you wouldn’t guess that from looking at policies enacted by the Coalition. The Green Deal has been, according to its former champion Greg Barker, a “big mistake”. And the Committee on Climate Change, the government’s statutory advisor, says euphemistically that progress in the commercial sector has been “limited”.

Improving energy efficiency by insulating homes also reduces fuel poverty, which is about four times more prevalent in Scotland than in the UK as a whole.

So for the SNP, accelerating energy efficiency improvements has a political appeal in addition to being achievable policy.

There are many ways it could be done. Labour is pledging a major initiative that could improve five million homes – and the SNP’s idea of funding the ECO scheme, which helps some of the poorest households, from taxation rather than energy bills seems entirely congruent.

 

Climate of ambition

 

The most eye-catching – and least anticipated – of the SNP’s pledges is to put the UK’s carbon reduction commitments on a par with Scotland’s.

In the long run, there’s no difference between them; but in the short-term, the difference is profound. Rather than cutting carbon emissions by 34% from 1990 levels by 2020, the UK would adopt the current Scottish target of 42%.

Securing this as a new target during 2015 would deliver a huge boost to prospects of securing a global climate change agreement at December’s summit in Paris, nudging the UK ahead of Germany in carbon-cutting commitments and single-handedly delivering a golden British dollop of unanticipated ambition to the UN negotiations.

However, meeting it would require a step-change in commitment to decarbonisation programmes in many sectors, not just energy. And it would require delivery in just a single Parliamentary term.

Which is why it is the most profound of these three SNP asks – and the one at which Labour would be most likely to baulk.

The electoral dice have of course yet to roll, and Nicola Sturgeon’s troops may end up holding no more power than the Pirate Party. 

But if they do, and if they are serious about this agenda, the UK is set for a major transformation – and Labour for some hard questions.

 

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.