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Shareholders are Revolting

May 2012

Last week saw significant numbers of shareholders flexing their muscles and reject executive pay agreements at Aviva, Trinity Mirror and the UK’s biggest car dealership Pendragon. So is shareholder activism the new political campaign and what’s it like to be a revolting shareholder? Melanie Smallman found out recently.

Back in the 1990s, I was one of many people who acquired shares when the Woolwich building society was demutualised. Disgusted at the very thought of becoming a shareholder, I put the paperwork away and forgot about it for 20 years. Then the credit crunch happened. Knowing I was right to vote against demutualization all those years ago gave me no comfort. But suddenly remembering that those Woolwich shares were now Barclays shares, therefore giving me a right to turn up at the Barclays AGM and express my disgust at their carry-on cheered me up no end.

My plan was to put a resolution to the AGM. So, in February 2011 I called the Barclays shareholders hotline. “I’d like to put a resolution to the AGM please,” “I don’t think that’s possible” came the reply, “ anyway, there’s no need to come to the AGM – the board’s recommendations will be supported automatically.” Hmm. In February 2012, I finally discovered that I needed 5% of the shareholding to support a resolution. Sadly, despite a Twitter appeal for more supporters, my 288 shares weren’t going to get me onto the agenda for this year. But it wasn’t over – I could still turn up and ask a question/stake the ground out for my attack in 2013.

So on an exceedingly wet Friday at the end of April, I turned up at the Royal Festival Hall, venue for the Barclays AGM, ready for some shareholder action. I had expected a room full of stuffy pinstripe suits, but the audience packing out the auditorium didn’t look that different to the crowd at Co-operative Party Conference – ordinary people, reflecting a range of ages, ethnicities and backgrounds who happily booed Chief Executive Bob Diamond, as if he was a pantomime baddie.

The questions came thick and fast for an hour and a half. And while I was very disappointed not to be called to ask mine (I was questioner 35 out of 28), most of the issues that mattered to me were raised by others: Why were bonuses being paid in a year when performance was down? Can we bring bankers executive pay more in line with normal professions? Why were there so few women in senior positions? Will Barclays pull out of food speculation? Sadly, the answers did little to reassure me that the Board had understood the shareholders anger. But if nothing else, Barclays Chief Executive Bob Diamond had to endure 90 mins of facetime with some of his paymasters and critics. While I’m still not convinced that he deserves his multi-million pound salary, he nonetheless handled the comments and questions with the kind of sincerity, patience and humility that many politicians would envy.

At the end of the meeting, I was one of the 27% of shareholders who voted against the executives’ obscene pay package. I was disappointed that we didn’t manage to overturn the board’s decision and make more of a fuss – indeed the biggest scrap of the day seemed to have been over the short supply of M&S lunch bags being handed out to departing shareholders. But reading about subsequent shareholder rebellions, and hearing commentators argue that it all started with the Barclays 27%, I’m beginning to wonder if my 288 shares are my latest political campaign tool rather than just poor compensation for the loss of a building society. I’m certainly planning to be back at for the 2013 AGM, hopefully this time asking a question if not moving a resolution. But I might even be ready to diversity my shareholder portfolio and become a shareholder activist in other ethically questionable companies, furthering the issues that mutuals and coops understand so well.

Author note: My 288 shares paid me a dividend of £16.70 this year, an amount which I have donated to the World Development Movement who (amongst other things) campaign to stop banks speculating on food prices. More information at www.wdm.org.uk

Could ‘the merchants of debt’ help science?


Melanie Smallman writes in this week’s (15 February 2012) Research Fortnight:

View from the top:  In Mammon we trust – could bank bonuses benefit research? 

Science minister David Willetts announced at the beginning of 2012 that the government wanted to build a new class of universities focused on science, technology and postgraduate training, as part of its commitment to boosting growth in the UK economy. But the announce- ment was coupled with a warning that there would be no extra public funding to make this happen.

“We will be looking to private finance and perhaps sponsorship from some of the businesses that are keen to recruit more British graduates,” he said, citing the recent competition to build a new graduate school on Roosevelt Island in New York as an example of how things could work here.

At a time when universities are seeing budgets squeezed, businesses are cutting costs and UK gradu- ates are joining the dole queue, you could be forgiven for wondering whether Willetts is being a little over- optimistic about industry’s willingness to help him out. Indeed, some science-policy academics have gone as far as to dismiss the proposals as ‘fanciful’, pointing out that industry has its own research labs, which it will invest in if there’s money to spend.

However, Willetts’ idea might not be completely mad. Although the government’s funding hopes were directed elsewhere, there is one UK industry that has an interest in gaining intelligence about research and innovation, with access to the scale of cash needed to set up a research institute, and it has a desperate need to demonstrate that it performs a social good: the bank- ing industry.

The amounts paid in bonuses to bankers have caused outrage frequently over the last few weeks. But significant possibilities are opened up if you take a cooler-headed look at the scale of money being handed out. For instance, Barclays boss Bob Diamond is report- ed to have taken home £60 million in performance-related pay in the years around the credit crunch—that could run the National Institute for Medical Research very comfortably for more than two years. Similarly, the total bonus pot of £2 billion that Barclays was reported to have handed out in 2010 was twice the size of the annual budget for Cern. And this is just one bank being compared with ambitious examples of international-level, Nobel prize win- ning research institutes in competitive fields. Focused in the right way, just a proportion of the industry’s bonus pot could create an institution that is capable of making a significant impact—and still leave city bosses richer than most of us can ever dream of.

But why should we expect super-rich individuals or institutions to pay for research when they could just spend it on fast cars and big houses? For a start, there is the argument of enlightened self-interest. The world of high finance and investment isn’t that far removed from the laboratory bench anymore. Besides the numerous hi-tech funds that rely upon technical information about new developments and innovation in order to value and trade their stocks, the brightest and best maths and science PhDs have been poached by the city for many years—so much so that the Royal Institution even runs an exclusive club for them so that they can keep in touch with their former fields. Bringing together city finance and scientific insight into one institution could create an interesting new model of knowledge production, investment approaches and career opportunities.

Second, although it has fallen out of fashion in the last century, there is a long history of the private profits of industry funding basic—and not just applied or trans- lational—research. Just think about the Wellcome Trust, which was created to administer the fortunes amassed from the invention of the tablet, and now funds £600m of university research each year. Or the Howard Hughes Institute in the US, again funded from the legacy of a business magnate and spending $852m (£538m) a year. Why not the bankers in the 21st century?

Perhaps most importantly of all, however, is the repu tational benefit that would come from doing something good with the money that many citizens believe was ill- begotten. The story goes that Alfred Nobel changed his will to create the Nobel prize from the fortune he made from the invention of dynamite when he read his prematurely published obituary, headlined “The Merchant of Death is dead”. He wanted to be remembered differently.

Instead of the government’s announcement being an over-optimistic idea from a minister grabbing at straws then, perhaps this is a chance for ‘the merchants of debt’—the city bosses who oversaw the credit crunch—to be remembered for something else too.

View of the Budget: ‘Safeguard’ offers no safety for science


I wrote an article in last week’s Research Fortnight, arguing that today’s ‘Budget for Growth’ needs more than warm words about science if it’s to truly deliver economic growth.  Here it is for those who aren’t RF subscribers:

Research Fortnight 16 March 2011

View of the Budget

The ‘safeguarded’ science budget provides no safety at all

British Chancellor George Osborne has promised that next week’s budget announcement will be “the most pro-growth in a generation”.  With GDP dropping by 0.6% in the last 3 months of 2010 and the British Retail Consortium revising their growth predictions for 2011 downwards, this promise couldn’t come at a better time.  Given the Government’s current focus on deficit reduction, it will be tempting to talk about low-cost measures to remove barriers and red tape.  But returning to growth has to be part of reducing the deficit and takes more than a government in low gear. Next week’s budget needs to reveal a turbo-charged strategy for growth, pointing all aspects of government policy towards growth for years to come.  Vitally, that must include R&D and higher education policy.

The essential role of R&D and the UK’s world leading universities in driving growth has been well argued over the past few years – not least by the government in explaining why ‘safeguarding’ the science budget in last year’s comprehensive spending review was important.  Although a very rosy picture has been painted of the ‘safeguarded’ science budget, it looks increasingly less pro-growth as details of the total science spend across government emerge. At standstill, with no inflationary increases, the safeguarded science budget is subject to real-term cuts.  Applying the Office for Budget Responsibility’s inflation forecasts, this means a loss of £1.15bn by 2014/15. But public science spend also includes departmental R&D, capital, R&D tax credits, Regional Development Agency R&D funding and the Technology Strategy Board.  These amount to an additional 50% of science spend in UK, none of which have been safeguarded.  On capital alone, applying inflation to the figures announced late last year, by 2014-15, investment in infrastructure will be about 46% less than this year.  Taking all of this into account, the final outcome is likely to be between 14% and 25% cuts to UK science funding.  Unless the forthcoming budget announcement reverses this and delivers at least a genuinely standstill budget for science in the UK, far from being a budget for growth, or even a safeguarded budget, this level of support will be pushing the UK science back to the dark days of investment starved facilities we last saw in the 1980s and early 1990s.

This will have far-reaching and long-term impacts on growth here in the UK.  Significantly it will also hold back any plans the government may have to encourage growth of the private sector. Because while there’s wide agreement that the new jobs we need must come from the private sector, there is no evidence showing that the less the state does the more businesses will do.  On the contrary in fact – wwithdrawing public funding is likely to result in a similar shrinking of private investment. Research Councils UK (RCUK) have calculatedthat every £1 cut annually from science spending will result in a £10 drop in GDP, because of the economic contribution and private sector leverage made by publicly funded science in the UK.

But creating the right conditions for private investment and growth isn’t just about public finances.  Academic thinking around models of knowledge production and science systems is also showing how the sources of knowledge production – the basis of profit making companies in the future – is becoming more dispersed and networked. Whereas knowledge used to be produced primarily in Universities and industrial labs, it is now just as likely to take place in hi-tech spin-offs, think tanks and small consultancies. The old pipeline model of technology transfer, where knowledge is pushed from university labs to be applied in industry, is being replaced with a network picture. Tom Blundell touched on this in his recent article explaining why Pfizer left Sandwich, where he talks about industry moving towards ‘open innovation’ and ‘open sourcing’ and outsourcing much of their work to small companies and university departments. This more integrated model means that yet-to-be-made government decisions around the future of R&D tax credits and the funding that used to be available through the Regional Development Agencies are all the more vital in any plans for growth.  It also points out how important other non-financial policy levers become: ensuring the right IP regime exists to make the most of this knowledge production wherever it arises; creating certainty around the future powers of Local Enterprise Partnerships and Enterprise Zones, so that valuable micro businesses can make smart decisions about location; ensuring these businesses can access funding through schemes such as the promised Green Investment Bank; and using strategic decisions on infrastructure, transport and energy policy to help develop a further technology pull.  Delivering that within a competitive world economy means more than a series of budgetary measures – next week, the UK needs to see a serious and coherent strategy for growth.

A New Political Paradigm

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Previously published on Labour List

Back in the early 1990s, the big new idea about New Labour was that our party challenged the paradigm which said that politicians had to choose between social policy and economic policy.  Labour argued that this was a false choice and that one had a positive impact on the other – the more support people had, the more they were able to work and vice versa.

Today there’s another political paradigm, writ large in much of the debate within the current coalition government, that SERA (Labour’s environment campaign) is pushing Labour to challenge – the idea that you have to choose between the economy or the environment.

Because the world is changing in such a way that it is going to become increasingly clear that addressing environmental concerns is our best hope for a strong economy and a fairer society. Indeed, ignoring what we call environmental problems today, will soon mean that we will have very serious economic and social justice problems to deal with tomorrow.

Two issues in particular are driving that.  Firstly, our continued reliance upon oil.  Predictions of oil prices mean that as soon as the next election, some households may be facing the choice between heating their homes or getting to work.  In terms of the bigger economic picture, it’s even more serious – escalating prices will make some sectors of the economy (like road haulage or cement manufacturing) unprofitable.  More importantly though, escalating prices are predicted to come with fluctuating prices too, creating enormous instability in our economy at the very time when we need security and sustainability.  Of course, we could follow George Osborne’s root and continue to subsidise these industries, but we might as well be offering grants for companies to keep using typewriters – the bottom line is that they are suffering problems because they are reliant upon an outdated technology – oil.  And the only answer is to use energy more efficiently and find alternative, renewable sources for the energy we do need.

Secondly, there’s another issue that we are worried about in SERA, that has the potential to affect us as seriously as the credit crunch but which deals with something even more fundamental than housing – and that’s food.   While we’ve enjoyed a generation of ever falling food prices, that has started to change.  Food prices in the UK reached record highs in 2011 and most experts expect them to continue to rise for the foreseeable future.  There are a number of reasons for this, including the cost of energy and competing demands for land use and from other countries like India and China.  But underlying all of these is the significant and destabilising effect of commodity speculation.

The commodities futures market has existed for hundreds of years and has helped farmers around the world deal with uncertainties like weather conditions.  But in the late 1990s the ‘futures contracts’ market was opened up and the banks, hedge funds and pension funds moved in, creating complicated financial products that involved making money from betting on food prices – sound familiar?   In 1996, 12% of the market for basic foods were held by speculators who have no connection with food.  Today, that figure is 61%.  The majority of the world’s food market is held by the same banks, hedgefunds and pension funds that almost bet our homes away and who are now gambling on hunger.

So while the environment has been a fringe issue for many in Labour for so long – like the embarrassing Uncle who always spoils the party, for Labour to have a serious vision for the future of the UK that is progressive, economically credible and fair, the environmental issues that we at SERA have cared about for so long has to be at its heart.


The Big Fix

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From this month’s Progress magazine: Why we need to break up the big six:

The energy industry has become too much of a cartel. It is time to break it up, argues Melanie Smallman.

This winter more than four million households in the UK will face fuel poverty, as average annual fuel bills rise to £1,345. Coming on top of salary freezes and soaring transport costs, most of us will pay an extra £175 to keep our homes warm and lit. Yet Ofgem is predicting that the companies selling us this energy will see profits leap from £15 to £125 per customer this year. Alongside these price hikes, however, the UK’s energy infrastructure is in desperate need of hundreds of billions of pounds of investment and we are falling far behind in our renewables targets as the energy companies threaten consumers with the cost of going green.

All of this is no secret in the energy industry – the energy regulator, the government and even the companies themselves are aware of the problems ahead. But only Labour is promising the action necessary to address the situation – to break up the monopoly of the ‘big six’ energy companies.

The reason we need such a dramatic intervention is because the ‘market’ that was set up when gas and electricity were privatised in the 1980s has come to function more like a cartel than a proper open market. Energy generators and retailers quickly consolidated and ‘vertically integrated’, so the ‘big six’ now are both the biggest producers and retailers of energy. This means that most trades in the energy wholesale market are within the same company. As a result there is no way of knowing whether or not energy companies are artificially inflating the price of the energy that they eventually sell to households, or to other new retailers who want to enter the market. It also makes it harder for new energy-generating companies – for example, those producing green energy – to find a buyer and an honest price. Over time, all of the energy companies have also taken up the same hedging techniques to price uncertainty, such that a price rise for one almost always becomes a price rise for them all.

The consequence is an opaque market, effectively closed to competition and new entrants. To make this wholesale market more transparent and open we need to stop producers selling energy exclusively to their retail arm without going through the open market. This means creating a ‘pool’ of generated energy that can be bought and sold on to customers by any company, allowing new generators and retailers entry into the market at a fair and open price, but also making the relationship between wholesale and retail prices much clearer. Experts believe that this could reduce utility bills for 80 per cent of customers.

With oil prices predicted to rise for the foreseeable future, high energy bills are, unfortunately, not going to go away. If we are to make a serious difference to people’s energy costs we will still need to move much faster to make homes more energy efficient, ensure we re-examine the current pricing structure that makes electricity cheaper the more you use, and support more community- and cooperative-owned energy companies. But at least with a more transparent market we could be more confident that the energy companies’ huge profits are not coming directly from customers’ pockets this winter.


Greens bury their heads in the sands of technology

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My opinion piece from last week’s Research Fortnight:

Greens Bury their Heads in the Sands of Technology

Last month, the UK’s Atomic Weapons Establishment and Rutherford Appleton Laboratory signed a memo- randum of understanding with the National Ignition Facility of the US in a bid to develop clean energy from nuclear fusion. Although the nuclear fusion idea has been around for decades, there appears to be a new sense of optimism and credibility around its potential as a real energy source. Announcing the agreement at the Institute of Physics, science minister David Willetts argued that nuclear fusion can no longer be dismissed as something on the far horizon.

Affordable, low-carbon energy has to be the dream environmental ticket. It would end the need to implore people to make difficult lifestyle changes or choose between the economy or the environment. It would end fuel poverty. And today’s conversations about carbon taxes and personal carbon allowances would become as arcane as slide-rules and pounds, shillings and pence.

Surprising, then, that environmental groups have said so little about the announcement—you might rea- sonably have expected to hear their loud calls for more investment and faster development.

But lack of enthusiasm from green groups for nucle- ar fusion is entirely consistent with their ambivalence towards almost every other emerging technology in the past few decades. From alternative aviation fuels to geoengineering—even as a last resort—their cry is always: “We have all the technologies we need”.

For most of us that statement doesn’t make sense— their position reveals how green groups’ attitudes to science and technology are being driven as much by a particular view about how people should live their lives as by a desire to safeguard the environment. Specifically, at the heart of their world view is the idea that that environmental problems are caused by human interference. Logically, the solutions that follow involve humans withdrawing and having a lighter touch on the environment.

The history of science and technology tells a different story, of humans intervening to solve difficult problems, often in a short space of time. Science has changed human immunodeficiency virus from a death sentence to a chronic illness, more people are surviving longer after cancer, and we’ve been to the moon—all the result of focusing human ingenuity and resources on a problem. Even the internal combustion engine, the source of our current environmental worries, has helped create lifestyles and opportunities that previous generations never dreamed of. Yes, there are sometimes unintend- ed side effects, but it is usually more, not less, science that eventually addresses these. Far from having all of the technologies we need, if problems such as climate change are seen as the consequence of a society lum- bered with outdated, inappropriate technologies, then we are in desperate need of new, transformative ones. Tackling climate change and finding a low-carbon energy source that really is too cheap—and clean—to-meter could be our generation’s moon-shot.

The prize would be huge. Apart from the financial benefits, clean, cheap energy might sustain the quality of people’s lives and economic growth as well as safe-guard the environment.

Whatever that source is, it will need investment on an unprecedented scale; US President Barack Obama has called for $150 billion to be spent on clean technol- ogy research as a ‘down payment’ on what will really be needed. More recently google.org’s clean-energy project calculated that while the Intergovernmental Panel on Climate Change’s target to reduce emissions by 80 per by 2050 was difficult, meeting it would require a much more ‘aggressive’ innovation policy than we have.

Furthermore, they argued that a mere five-year delay in starting this ‘aggressive’ investment in clean ener- gy research could cost the US economy an aggregate $2.3 trillion to $3.2tn in unrealised GDP gains, 1.2 mil- lion to 1.4m net jobs, and result in an increase of between 8 and 28 gigatons in greenhouse gas emissions by 2050.

In other words, it might seem costly now, but the economic and environ- mental price we will pay in the future will be much higher.

If tackling climate change at any cost is the aim of environmental campaigners, then far from claiming we have all the technologies we need, they should be taking a hard look at these figures and mobilising their sup- porters to demand that this investment is found urgently.


George Osborne’s Speech – the least green, ever!

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Yesterday, Tory Chancellor George Osbourne gave one of the least-green speeches ever. In less than half an hour, he demolished his government’s aspiration to be the greenest government ever and announced that the UK no longer wished to lead the world in moving to a low-carbon future.

Promising that the UK won’t go further or faster than our European neighbours on tackling climate change might have quietened critical colleagues, many of whom are climate sceptics. Blaming renewables for increases in energy prices perhaps let his big-business friends in energy companies off the hook while they continue to rake in huge profits at the expense of consumers. But neither position will help the ordinary citizens of the UK who are paying the price of escalating oil prices. Nor will they encourage innovators and investors to the industries of the future to set up and create vital jobs in the UK, nor build a more sustainable economy for the UK in the future.

As I’ve argued before, the big problem with Osbourne’s position is that it is based on a false dichotomy – that you have to choose between tackling climate change and economic growth. Time and time again the evidence points to the opposite – that moving to a low carbon future is actually a race with long-term economic security as the prize. The winners will be the economies that develop clean renewable energy systems first and sell them to the rest of the world. A recent report bygoogle.org describes it as an innovation arms race, with breakthrough innovations in clean energy potentially adding $155 billion per year in GDP, creating 1.1 million net jobs, while reducing household energy costs by $942 per year, oil consumption by 1.1 billion barrels per year, and carbon emissions 13% by 2030 vs. Business as Usual.  Far from being a burden that makes us less competitive with the rest of Europe, ambitious plans to decarbonise our economy earlier will give us a competitive advantage when it comes to winning these jobs and growth.

Building a future economy for the UK is not about gently balancing the advantages of the old oil-dependent economy with the opportunities of a low carbon future.  We cannot compete in the 21st Century with an economy built for the 18th Century.  We need a low-carbon industrial revolution if we’re not to see jobs lost, growth forgone and large aspects of life our of reach for many. George Osbourne’s speech might have quietened down some loud screams from the industries that aren’t ready for this revolution, but yesterday he might as well have backed the slide-rule industry He might think that reducing carbon emissions are all about caring for the environment. In truth it’s all about the economy.


A Revved-up Energy Policy

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A few weeks ago I mentioned that I’d been asked to write an article about what Labour’s energy policy should look like in 2015.  You can read the article on Progress’s website.

I’ve had a great response since it has been published (with people even telling me that I’ve made energy policy sound exciting!), so I thought I’d also publish the longer version of the article here.  It’s an earlier draft, so not quite as well edited, but gives a tiny bit more detail for anyone who’s interested.

Labour needs a Revved-up Energy Policy

By 2015, the government is hoping that the UK will be a much rosier place.  They dream that the worse of the cuts will have been made and global economies will have improved. But couple that with their current heel-dragging over energy policy, and their rosy dream will be rapidly heading towards a new nightmare.

Because experts are predicting that oil prices will spike around 2014/2015, as the oil reserves built up by OPEC during the recession get used up.  While many households are stretched by the current $100 a barrel price of oil, by 2015, prices could be heading towards $185. Without new and drastic action to reduce our reliance upon oil before then, such a huge hike would make heating and lighting homes difficult and put transport out of reach for many, as well as driving food prices skywards and putting whole sectors of the UK economy under unbearable pressure.  Suddenly energy policy will no longer be a boring issue for the anoraks but a matter of social justice at the heart of our concerns.

Looking towards Labour’s policies for 2015 then, an energy policy that tweaks our current set up, substituting one form of energy for another, hoping we’ll use a little less just won’t cut it when people will be choosing between getting to work or heating their homes.  Nor will being modest about the scale of the challenge ahead help us convince people that Labour has a plan for a brighter new future. Going into the next election, Labour’s energy policy has to be huge and ambitious.  It has to underpin everything we say and plan to do.  And it has to inspire a generation.

So what would such a revved-up energy policy look like?  Firstly, we will have to face up to the immediate problem of prices, offering help to the poorest families, breaking the big-six’s stranglehold on the domestic market to open up competition and drive down bills for everyone else. Coupled to that, we should also have a very clear idea about how we will help households cope in the longer term – the idea of the no-bill or low-bill home (a house that is insulated and generates its own energy, such that it has little or no reliance on external energy supplies) is compelling, simple and ambitious.

Secondly, we need plans to renew our energy infrastructure. And that doesn’t mean replacing a couple of coal-fired power stations with a nuclear one, but a serious, wholesale re-think and upgrade of the way we generate and distribute energy.  We cannot afford to base the new economy upon wasteful and outdated energy infrastructure, built for an industrial era.  When energy was ‘too cheap to meter’ it made sense to build a network around a handful of big, remote power stations, but it’s incredibly wasteful – a shocking 65% of energy going into the system is lost as heat in generation and transmission.  Today we need a new, more efficient network, where energy is produced nearer to where it is needed, where heat isn’t wasted by used to heat homes and offices, where smaller, community scale renewable generation is accommodated and where gaps in renewable supplies can be smoothed out by being part of a European Supergrid.

Thirdly, our policy needs to change the relationship that citizens have with energy.  I’ve argued elsewhere that this is like the changes in home ownership in the 1970s and 1980s that helped modernize our housing stock. Introducing a ‘community dividend’ so that communities can ‘own’ a stake in energy production and ensuring feed-in-tariffs continue to work for community and cooperative scale energy projects could enable communities to share in the profits and help tackle fuel poverty. But, more importantly, just as home owners make decisions about their homes for reasons not just financial, a community stake could also help change the role and perspective of energy companies – taking their long-term responsibilities for the energy infrastructure, their charging structures and their impact on the environment more seriously.

Finally we need large-scale investment in research, development, demonstration and roll-out of low carbon technologies, to help drive down the price of renewables. While the current Tory-led coalition government is cutting the UK’s R&D budget, the United States has promised $17 billion, with China, France and Germany outlining similarly ambitious plans.  At the same time, it is becoming increasingly clear that with the twin pressures of energy security and climate change, the country to move to a low-carbon energy system first will not only secure their energy future, but their global competitiveness too.

It might all sound expensive, but in the run up to the next election we have to argue that missing the jobs this investment will create and loosing our in the global marketplace will be condemning the UK to an insecure and economically vulnerable future – an even bigger price to pay.


Is saving the planet a question of shame?

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‘Save the Planet’ seems to be the rallying cry for many green groups.  I’ve been arguing for some time however that while this message appeals to those motivated by the desire to ‘do the right thing’, it’s failing to move sufficient numbers of people into action.

My argument has drawn upon a number of pieces of research that have looked at the motivations and the responses to different environmental messages of different sectors of the population.  For instance, the ‘Warm Words’ study from the IPPR which found that the alarmist and small actions narratives around climate change disempowered people and lacked credibility; or work looking atcultural dynamics, which suggests that most people are motivated by satisfying status driven needs and reject messages that criticise their lifestyle choices.

This week however, a blog piece ‘What saves Energy – Shame’ has added even more colour to my argument.  The article outlines new research from MIT that looked at what motivates people to act in environmentally friendly ways.  I’m not sure that ‘shame’ is quite the right term (shame falls into my trap of telling people they’re doing something wrong – it’s more about ”this is how we do things around here”), but the researchers found that social norms were  key to getting people to act.  The blog gives an interesting and vivid example:

“In 2008, a ritzy hotel in Phoenix, Arizona (a city with a limited energy future) induced conservation with three different signs. One witless card said “Save the Environment.” Another encouraged bathers to “Preserve Resources for the Future.” But the card that got guests reusing their towels in big numbers said “Join Your Fellow Citizens In Helping to Save the Environment.” It also included information that 70 per cent of guests generally did so.”

I might not be buying the ‘nudge’ solutions being prescribed (it makes it sound as if changing behaviour is really easy, when it’s not), but it does point to the need for a different way of talking about the environment.


Community dividend: Changing our relationship with energy

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Earlier this week I was asked to write an article about Labour’s Energy policy should look like in 2015.  I’ll post my thoughts on that when the article is published.  But in the course of my research, I revisited an article I wrote a couple of years ago for a collection of essays on the priorities for a low carbon transition on the Policy Network’s Politics of Climate Change blog.

In my contribution, I argued that we need to change the relationship citizens have with energy by giving communities a stake in energy generation. The analogy I drew was with the way in which changes to home ownership in the 1970s and 1980s improved our housing stock.

“Taking housing as an analogy, changing the ownership of our housing stock during the 1970s and 80s, increasing the number of owner-occupiers, was the solution to modernising our homes. As we move towards more renewables, a similar change in the ownership of our energy system could help modernise our energy system – introducing  a ‘community dividend’ so that communities can ‘own’ a stake in energy production, perhaps in return for a fast track planning process or as a new version of planning gain agreements. Owning such a stake could enable communities to share in the profits and help tackle fuel poverty. But, more importantly, just as home owners make decisions about their homes for reasons not just financial, a community stake could also help change the role and perspective of energy companies – taking their long-term responsibilities for the energy infrastructure, their charging structures and their impact on the environment more seriously.”

It still makes sense to me.  The original article is here.


Carbon budget compromises put the economy as well as the environment at risk

Posted by melaniesmallman in Uncategorized. Leave a Comment | Edit

After many weeks’ pressure from environmental groups and amidst much fanfare from Downing Street, the Tory-led Coalition Government is now expected to sign up to a compromised version of the Committee on Climate Change’s recommendations for a fourth carbon budget. The last minute caveats that have been introduced give the UK a get-out clause that allows targets to be abandoned if other European Countries backslide on their emission reduction targets and promise support for carbon intensive industries in the meantime. This might seem a reasonable compromise in order to heal the rift in the cabinet and get the carbon budget agreed, unfortunately it offers little help to the people of Britain facing escalating oil prices, fails to give the right signals to low-carbon investors and risks us loosing the main benefits of pressing ahead with this green industrial revolution.  Most worryingly of all, it demonstrates how little this government really understands about the importance of a low-carbon future for the UK’s economy.

The idea behind the caveats is easy to understand – at a time when growth is the priority and cutting red-tape is your focus, why would you want to burden UK businesses with additional regulation?  Making sure that our economy remains on a level playing field with the rest of Europe is a reasonable thing to do, right?  Well only if you think that legislation that helps move us to a low carbon economy before others is a burden or competitive disadvantage.  But the evidence suggests otherwise. DECC Minister Greg Barker pointed out, shortly after the election last year, that the global market for low carbon goods and services is currently valued at £3.2 trillion and estimated to grow to over £4 trillion by 2015.  But we will be competing with the rest of the world to get these industries and jobs. Recent research by Defra has also found that when the food and drink industry operate more sustainably – using resources more efficiently and creating less waste – costs can be driven down, allowing UK businesses to compete more effectively in the global market.  While this is unlikely to be true across all sectors and there will undoubtedly be some losers in the move to a low carbon economy, the Global Climate Network have assessed that the move will result in a net gain in jobs.  Far from being a burden that makes us less competitive with the rest of Europe, surely legislation that encourages us to be ready earlier will give us a competitive advantage when it comes to winning these jobs? Wind Turbine manufacturer Vestas seemed to think so earlier this week, when they told the government that the 2000 jobs they hoped to bring to the UK would only come through if they could see a genuine commitment to low carbon industries.

The caveats also suggests that the government still hasn’t understood that a low carbon economy is also the most resilient future economy for the UK.  There is growing evidence that thankfully the markets have got it though.  For instance, the recent research by A.T. Kearney which has found that greener businesses are currently able to access capital at much more favourable rates precisely because they are assessed as being exposed to fewer risks.  A perfect if surprising example of this in action is the way in which the organic food market has survived the economic downturn so successfully because the industry has been more insulated against fluctuating oil and food prices. And the Government’s own research has found that the UK’s low Carbon market defied wider market trends in 2009, to grow by an average of 4.3% while other sectors were contracting.  The Committee for Climate Change’s recommendations are trying to steer us on a clear path towards these calmer waters but the government’s caveat risks the economy running adrift again and again in the future.

But perhaps most importantly, the caveats shows how little the Government understands about the scale of the change needed.  The caveats makes sense if you think that building an economy for Britain in the 21st Century is about gently balancing the advantages of the old oil-dependent economy with the opportunities of the low carbon future.  But as a net-importer of oil and with oil prices being predicted to reach as high as $195 a barrel by 2020, there is a very real prospect that if we keep our dependency on oil then food and transport will become unaffordable for many people in the UK.  Unless the government is committing to massive and long-term public subsidies for oil-guzzling industries or citizens, to keep the country fed and on the go, they need to wake up an realise that we are facing nothing short of an industrial revolution here.  Arguing that we can’t afford it in the current economy is like the business that stuck to typewriters because computers were so much more expensive. The Government’s caveats to the carbon budget might quieten down some loud screams from the industries that aren’t ready for this revolution, but they might as well be backing the slide-rule industry.  In enacting the compromise, the Government will be will be turning their back on the challenge of our generation and asking our children to compete in the 21st Century with an economy built for the 18th Century. The Cabinet might think that the Committee for Climate Change’s recommendations are all about caring for the environment.  In truth, they’re very much about the UK’s economic success.


Private rents: High cost, Low Security

First published on Labour List. November 2010

David Lammy and Will Straw wrote an interesting piece on LabourList yesterday about the current housing benefit debate. They argued that Labour needs an alternative approach that looks after those who lose out from the benefit cuts, that does everything possible to reduce the number of people who are unemployed and introduces a rent cap in large cities to drive down rents and builds more homes.

I found it difficult to argue with most of the points they make. But I also think that they missed a vital issue that is at the heart of the problems for most benefit claimants living in the private rented sector – that the high rents and poor housing in the private sector comes coupled with a lack of security, which brings massive social costs.

As a councillor, my advice surgeries were filled with people experiencing terrible housing problems. But few were as desperate and hopeless as those families renting in the private sector. Most were living in sub-standard accommodation, afraid to ask for simple repairs for fear that their landlord would throw them out, or worse, raise the rent. And many were put-off taking on work in case the casual jobs on offer fell through, putting them at the start of a lengthy new claim for housing benefit that could push them into rent arrears and the road to eviction. Families spend years, if not decades like this, living in limbo, waiting for a chance of a ‘real home’ in the social rented sector – real homes that might never be offered to them. They can’t plan for their futures, their children can’t settle in school, and they can’t become part of their communities or play an active role in society like the rest of us. At the root of this problem is the lack of security offered by the assured shorthold tenancies that are the only option for private landlords.

The answer for Labour has traditionally been to call for more social housing to be built to help these families. Although this is undoubtedly the best long-term solution, the scale of the challenge is so huge that this can’t be the only solution. There are 4.5 million people on council waiting lists, but we have built only 176,000 new homes in the last 4 years. And we have many of the houses we need – it’s just that the insecure assured-shorthold tenancies by which they’re rented mean that they can’t provide anything but temporary housing. With 13% of the country’s housing stock being rented on such tenancies, and the number predicted to grow by 40% in the next 10 years, it is crucial that we give some thought to how we can bring the private rented sector back into proper use, with at least medium term tenancies.

It is easy to believe that private landlords are mini-Rachmans, only interested in making as much money as possible and therefore not game for providing homes on medium or long-term tenancies. But having spoken to many professional landlords in my quest to solve the housing shortage in my own London borough, I know that the two biggest risks to profit that landlords face are vacant periods and capital gains tax when a property is sold. Secure, rent-controlled tenancies (of the sort offered by social landlords) can smooth out the rental income – the lower monthly rents being offset by fewer rent-free periods. And while they won’t be the cup of tea for those out to make a fast buck from their property, they could be appealing to those serious landlords who are in it for the long game – whether these are the ‘professional’ landlords with many properties or the ‘amateurs’ buying a property as a pension investment. Coupling secure tenancies with an incentive like a reduction in capital gains tax for those landlords who have rented their property out at an acceptable rent on a long-term basis, has the potential to bring thousands of homes back into use – at a faster rate and lower cost than it would take to build the equivalent properties.

We undoubtedly need an alternative approach to housing benefit reform. But we need one that doesn’t just focus on the financial cost, but also the social cost that is created by the scandalous limbo in which so many benefit claimants in the private rented sector are forced to live. The market won’t sort that out – but new types of tenancies might.



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