Archiv für Juli 2010

Green Economy

Freitag, 30. Juli 2010

Chris Huhne, the Energy Secretary, has been pressing his fellow environment ministers to increase the already challenging carbon emissions reduction target of the European Union. However, across Europe countries under severe budget constraints are already cutting back on their expensive carbon reduction programmes or modifying them. The Spanish and German governments for example are reducing their subsidies to solar power by some 30%. In Britain, the governing Coalition has scrapped plans for a third runway at Heathrow airport, supposedly on environmental grounds, but has abolished the Sustainable Development Commission, the official watchdog originally created to oversee the drive to a so-called Green Economy. It seems that the government is also abandoning the previous Labour plan to invest £1 billion raised by the sale of state assets, such as the Channel tunnel link, into a so-called Green Investment Bank and instead use the money to reduce the budget deficit.
To meet the carbon emissions reduction target, major subsidies will be needed to enable the electricity supply industry to switch from fossil fuels (which currently are used to generate some 70% of UK demand) to renewable sources of energy such as solar or wind power. Mr Huhne favours renewable energy but seems to dislike the thought of nuclear generated energy (and its associated toxic waste disposal problem) which at source can be recycled and has stated that there is no money in the budget for nuclear power stations. Currently nuclear power stations provide some 22% of UK demand with renewable energy sources only producing around 5%. The remainder is imported (via a sub-Channel power cable) from France which, for energy security reasons following the oil crisis in the 1970s, produces around 80% of its electricity output from 50 nuclear power stations and around 50% of its total energy needs.
The current generation of nuclear power stations in the UK will be completely phased out by 2020 and 10 sites have been identified for construction of the next generation, which with planning and procurement delays together with a typical 4-5 year construction phase would still not come fully into service until late in the decade. Although a nuclear power station could cost an additional 50% or more of a conventional gas-powered equivalent, the more stable prices and supply sources for the uranium fuel with station operating costs at 10% of total capital, offer major savings compared with the 80% operating costs of the fossil fuel alternative, which in the case of gas is much less predictable in price and sources of supply. The latest, more fuel efficient, nuclear reactors over their design lives are also said to generate only 10% of the waste produced by the entire UK nuclear sector to date.
Given then the non-constant nature of renewable energy supplies e.g. from less predictable wind power (as of 1st August, 2010 there were 264 wind farms in the UK producing nearly 4.5 gigawatt of electricity) and that the McKinsey consulting firm has calculated renewable investments could cost £430 to save one tonne of carbon dioxide compared with the £8 per tonne offered by nuclear the latter, granted an appropriate in-feed tariff to the national grid, should play a major role in meeting the future energy demand of the UK and the carbon emissions reduction target of its green economy.

NHS Reforms

Samstag, 24. Juli 2010

Last week Andrew Lansley, the Health Secretary, published his white paper on reform of the National Health Service (NHS).This sets out a policy framework aimed at abolishing Primary Care Trusts (PCTs), giving General Practitioners (GPs) instead the responsibility for commissioning treatment for their patients. Having thus empowered GPs, the Health Secretary then expects them to proactively respond in making informed decisions without seemingly further guidance from the Department of Health. This could lead to the creation of large US-style, privately owned Health Maintenance Organisations (HMOs) which in practice have driven up costs without correspondingly fair and reasonable improvements in US healthcare.
In fact, over the past two years under a practice-based commissioning initiative under the last Labour government, GPs have already been encouraged, should they so choose, to take control of part of the local health budget. For example in Cumbria last year, six teams of GPs each serving a population of around 100,000 have worked with a shadow budget and, as of last April, have been responsible for 60% of the £800 million health budget. A mutual-benefit partnership between the public and voluntary sector is foreseen (evoking the Big Society of David Cameron?) which, e.g. in the case of their more elderly patients would involve Age UK, collocated at favourable rates with the GP team, bringing practical assistance aimed at keeping them in their own homes and out of hospital (a potential saving of £3000-4000 per non-hospitalised patient).
However, the experience gained from the earlier GP fund-holding experiment of the Conservative government in the 1990s, when it was unfortunately decided not to evaluate the actual results from the beginning, also needs to be taken into account. Although the general public received no information on whether clinical outcomes and patient safety or the cost-effectiveness of care were improved, there were suggestions that patients of such fund-holders were often reported as less satisfied with their NHS services, felt knowledge of their medical history worse than before and the willingness of their GPs to refer them to specialist treatment diminished. GPs seemed more concerned with keeping costs down rather than improving care. The complexities of contracting could also lead to any efficiency improvements being offset by high transaction costs between GPs and hospitals, the former often forced to make decisions without accurate information about the quality of the contracting services on offer. Overall, fund-holding was unable to achieve major and sustainable improvements in their hospital experience as far as the public were concerned e.g. in reducing waiting times, something that the NHS reforms of Labour did achieve and that matters to patients.
In summary, therefore, it would appear better to first test these proposed NHS reforms via a limited number of carefully selected pilot schemes, with their clinical outcomes, efficiency gains and cost effectiveness measured against predetermined but realistic targets, to foster the subsequent development and sharing of best practices.

Federal EU?

Samstag, 17. Juli 2010

Further to the question raised in the previous article (Turkey-Realpolitik?) on the future evolution of the EU, the weekend of May 9-10 when the Greek, Portuguese and Spanish government bond markets and banking systems came to the brink of a Lehman-style meltdown, saw European politicians take a further step towards a full-scale fiscal and political union in defence of the Eurozone.
Ignoring the no-bailout clauses of the Maastricht and Lisbon treaties which specifically forbid EU governments from collaborating fiscally to guarantee each others? debts, they created what is essentially a large federal-type, borrowing programme backed by all the Eurozone governments. This has enabled channelling of the results of excess savings from Northern to Southern Europe which, to prove sustainable longer term, should evolve into a full-scale, federal European budget to enable the poorer, less competitive regions to be permanently supported by the richer ones. This would also require the ECB to act as the lender of last resort in the classic role of a central bank, to provide essentially unlimited back-up to any associated emergency lending programmes arranged by European governments. In the longer term, the public spending and tax policies of the weaker Eurozone economies will have to become more aligned with that of Germany to allow the political outfall of such a fiscal union to become more manageable.
Such a fiscal convergence programme as part of a viable single currency union, backed by a European federal budget, is not likely to be put to wide, popular vote particularly in Germany where taxpayers would presumably be unwilling to vote for their money to support other more profligate Eurozone members. Rather this could happen as a result of normal public apathy and acquiescence, managed through political stealth as part of an inexorable but non-democratic process towards the construction of a federal EU.

Turkey-Realpolitik?

Sonntag, 11. Juli 2010

William Hague the British Foreign Secretary, has spoken of Britain championing Turkish membership of the EU as part of the new foreign policy committed to building relationships with emerging economies, particularly if enjoying robust growth. Contrary to the arguments of politicians in France, Germany and other member states, he considers the EU turning its back on the membership aspirations of the predominantly Muslim Turkey as an immense strategic error.
There is concern in the West that Turkey in response, is turning its back on an unwelcoming Europe and embracing the Islamic world e.g. by voting against sanctions on the nuclear programme of Iran and embracing Hamas, considered by the US and the EU as a terrorist organisation. However, compared with the EU, the economy of Turkey is booming with 11.4% growth in the first quarter of 2010, government debt only at 49% of GDP and strong export business due partly to its closer regional ties with Iran, Syria and Russia.
Mr Hague accepts that Turkey needs to improve in areas such as human rights, competition and media freedom to support its case for EU membership but there is potential for a major increase in trade flows, currently £8.6 billion a year between the two countries. Turkey is also a key Nato ally strategically placed between Europe and Asia with channels of communication different from the West. It would also appear that with the West in financial recession, Turkey is looking towards the East to explore opportunities and exert influence with its new financial power.
The British policy towards Turkey, therefore, seems a very pragmatic piece of realpolitik which again calls into question the future evolution of the EU into a common trading bloc or free market of neighbouring nation states, a single political union based on a common Christian heritage or something in between.

Emergency Budget

Montag, 5. Juli 2010

Michael Webster has provided his comments on the budget of George Osborne and these can be found in the index column on the right under Pages/Study Groups/Emergency Budget .