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New Labour in a nutshell

Given the government's determination to be the first to raise money by selling the right to pollute (see story below), you might think that our Lords and Masters would be determined to auction the maximum number of EU emissions trading allowances that European rules permit. Not so.

After all, there has been a considerable scandal attached to the way in which all the electricity generators have managed so far to get all their emission allowances for free. But then have promptly put up all their prices on the pretence they had bought the permits on the open trading market. Consequently they are now receiving windfall profits worth around £ 70bn. That is right. £70bn. All paid for by we consumers.

It is, therefore, entirely reasonable for the generating companies to be forced to pay out of their own pockets for the maximum number of permits permitted. Which up until 2013 is just 10% of the allowances set aside for the electricity industry.

Fair enough, you might think. The government could take the money in from at least that 10%. And maybe follow the example of the Dutch or the Austrians, and ring-fence the money to help poorer people cope with these inflated power bills?

So is that what is planned? Not on your life. The UK government has decided it won't take up the right to sell all 10% of the allowances to the generators. Instead, it has decided to take pity on these poor penurious multinationals. And just auction 7%. Rather than the permitted 10%.

Why have the Whitehall mandarins decided to hand out the extra 3% free and gratis, and so forgo around £600m. Money that could have gone to help eliminate fuel poverty. Apparently, the official explanation is that they were worried that if they did auction more than just 7%, they might overshoot that 10% maximum. Such caution might have justified limiting the amount to be auctioned to (say) 9.75. But only 7%? Phooey.

Oh ,and apparently it is "not government policy" ever to ring fence revenues for any specific piece of expenditure. Instead at the start of this financial year, the government celebrated by cutting the main fuel poverty programme, Warm Front, by 20%. It is New Labour's philosophy in a nutshell: Take away from the poor. Give to the rich.

Pipped to the post

Such is the decline in the value of the pound that, in its rush to be the first European government to auction  allowances under the EU carbon emissions trading scheme, ministers have ‘lost' the taxpayer around £10m.

This is because the entire trading system – which covers all types of electricity generation –   only recognises the euro as a currency. In consequence, all such auctions have to be in euros. But whereas,  when the sale took place in mid-November, the pound was worth 84 eurocents, right now it is around parity – in other words, worth one whole euro.

With the right to emit each tonne of carbon dioxide selling at 16.15 euros, this converted to an income for the government of some £54m in November. However, had the government waited until the New Year, the exchange rate would have upped the value to around £64m. I really don't think the loss of revenue was worth the dubious honour of pipping all those other European governments to the post to start auctioning.

Can't beat them? Join them

Back in 2006, the government set up a competition. It offered to pay the majority of the costs to build the first 400 megawatt Carbon Capture & Storage (CCS) demonstration plant.
Most of the Big Six electricity generators decided to compete. Last July the government announced which  schemes were on the short list. The German power company RWE, which trades here as npower, was mightily miffed when its entry was eliminated.

It huffed and puffed. It announced it was considering legal proceeding against the government. For six months m'learned friends were rubbing their collective hands with glee, at the prospect of a lengthy full-scale battle in the Courts.

But then suddenly the threat of Court proceedings disappeared. Why? Because RWE has gone and bought 75% of a company called Peel Energy Carbon Capture. Which, unlike RWE, happens to have made not just the government short-list. It also just happens to be the bookies' favourite to be the winning CCS proposal. As they say, if you can't beat them, then you just have to join them.

Cost of imcompetence

The late Professor Roland Levinsky was a pioneering immunologist, and vice-chancellor of the University of Plymouth. He died because, in atrocious weather conditions, he walked into a live 11,000 volt power cable left dangling across a footpath near Wembury, Devon.
It was not as if the cable owners, Western Power Distribution (WPD), did not know about their insecure high-voltage cable. The company had been contacted several times by concerned people who had seen the cable hanging loose.

But instead of logging the problem as "dangerous", the company call centre instead listed it as just "miscellaneous". So the power was never turned off. And an engineer despatched to fix the fault was diverted elsewhere.

And the cost to WPD for its incompetence, which took the life of a distinguished academic? The paltry total of £270,000. Including legal costs. In a world where electricity companies are walking off with billions worth of unearned, windfall profits, such judicial generosity makes me despair.

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