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Home / Tim Worstall /Caroline Lucas always reminds us of Baldrick

Caroline Lucas always reminds us of Baldrick

Summary:
Not, we hasten to point out, on the basis of personal hygiene or cooking ability but on that of a surfeit of cunning plans. Every such plan having some great gaping hole between reality and its achievement. Take this being recommended in a letter to The Guardian: To fill this gap, the Green New Deal Group is calling for the chancellor, Rishi Sunak, to unveil a new market-leading “green recovery bond” Isa this summer, to keep his March budget promise of an NS&I green bond. Our research shows that this, like the pensioner bonds of 2015, could raise tens of billions of pounds and, as a first step to creating jobs in every constituency, that could be spent on employing a massive multi-skilled carbon army to make all the UK’s 30m buildings energy efficient. Meeting the official UK government

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Not, we hasten to point out, on the basis of personal hygiene or cooking ability but on that of a surfeit of cunning plans. Every such plan having some great gaping hole between reality and its achievement.

Take this being recommended in a letter to The Guardian:

To fill this gap, the Green New Deal Group is calling for the chancellor, Rishi Sunak, to unveil a new market-leading “green recovery bond” Isa this summer, to keep his March budget promise of an NS&I green bond. Our research shows that this, like the pensioner bonds of 2015, could raise tens of billions of pounds and, as a first step to creating jobs in every constituency, that could be spent on employing a massive multi-skilled carbon army to make all the UK’s 30m buildings energy efficient. Meeting the official UK government target of net zero emissions by 2050 will require making up to 20,000 properties a week energy efficient for the next 30 years.

We have actually read the full plan and variants of it that have appeared over the years. The hole is, well, who pays back the bond?

People invest in these new bonds, that’s fine. The money raised is then spent upon retrofitting UK housing to be carbon compliant - their phrasing, not ours. Well, we’re not sure about the need for this or the desirability of firehosing money at the problem but still, OK. Government guarantees the bonds and the interest rate is perhaps 1%. Just for the sake of the argument, we’ll all run with that.

OK, what then?

One example given is that heat pumps need to be installed in every house and dwelling. From other reports recently we hear that this will cost perhaps £15,000 per dwelling. This strikes us as violating the Stern Review’s injunction that the cure should not be more expensive than the problem but again, let’s simply run with the logic being employed.

Money is raised by government guaranteed bonds to install heat pumps. So, who pays back the bond?

This is not mentioned anywhere in any of the varied reports and proposals.

We can see two alternatives here. The householder never does pay back the price of the heat pump. It’s a free giftie from all of us out here to everyone that possesses - and it will be the owner of the housing that gains from £15,000 being spent upon it - a dwelling. Perhaps this is what is required but if this is so then no new bond is necessary. This is straight and flat out government spending and can and should be dealt with in the normal manner. Government taxes to spend, or government borrows to spend, or government prints money to spend, but no new financing method is necessary in the slightest.

Alternatively, the householder has to pay back the price of the heat pump, plus installation, so that the bonds can be serviced and investors receive their money back plus interest. What is the method by which this is going to be done? It seems a fairly important part of the investment case to us. After all, as Greensill and Gupta are currently showing, paying back money can be more difficult than borrowing it.

Further, if there is some clever scheme by which that multitude of small payment streams - the monthly slice of that £15,000 spread over the years and decades - can be both collected and enforced then what is it? And if we’ve got one then why is this special form of bond required? If 1% green bonds are what the market will fall for, given that we’ve got a repayment mechanism, then why not just general issuance instead of this special form?

This is indeed Baldrick in all his glory. A superficially pleasing idea that fails at the most important point. Bond issuance, the important part of the plan is how does the money come back to the investors? In all the “work” that has been done on this scheme there is not one single mention of this rather important point.

Is the carbon compliance a gift to householders? Or is there a householder repayment system? In either case there’s no need for these special bonds, is there?

At which point a question to the Green New Deal. What is the repayment mechanism?

We have asked this question of the one group member that we do talk to to be met with the insistence that of course our correspondent had absolutely nothing at all to do with this idea. Possibly wisely.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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