Daily Archives: September 18, 2012

Kiran Stacey

The Lib Dem conference, which starts on Saturday, could be an awkward affair for the party leadership. It is the first conference when Nick Clegg has been faced with members of his own parliamentary party calling for his resignation, and the second successive one where the party has been languishing in the polls.

The agenda for the conference shows the party leadership willing to give the faithful some red meat in the form of Tory-bashing motions. There is a motion insisting on national pay bargaining, one recommitting the party to Lords reform and one resisting any attempts to expand Heathrow.

But the biggest problem could come during the debate on the economy, when an amendment will be discussed calling for the government to rip up its fiscal mandate and take immediate measures to stimulate the economy. Read more

Jim Pickard

The debate over shale fracking is warming up ahead of the government giving an expected go-ahead to the industry later this year.

Into the fray this morning came Lord Browne, former chief executive of BP, who – according to the Lords register of interests – is also a director of Cuadrilla, the only company currently fracking in Britain.

1: Directorships

Partner & Managing Director, Riverstone LLC (private equity; energy & power)

Director, CODA Automotive Inc (automotive; battery)

Director, Cuadrilla Resources Holdings Ltd (oil and gas)

Director, Fairfield Energy Ltd (oil and gas)

(Cuadrilla is not without controversy: it was reported recently that the company breached the conditions of its licence at its sites in Lancashire.)

Lord Browne writes this morning that the UK has “promising onshore shale resources” which can provide a “critical role” in future energy supply.

In an FT editorial, he writes:

“The hydraulic fracturing process – or fracking – used to extract natural gas from shale is on the political agenda across Europe and has raised important environmental questions. But good practice and the UK’s tough safety regulations mean it can be performed safely and without endangering water supplies. If that can be achieved, the prize is substantial…”

Ed Davey, the energy secretary, has responded to the Lord Browne editorial in a letter to this newspaper in which he accuses the oil executive of “regrettably partial” analysis. The peer was wrong to accuse the coalition of the “unthinking abandonment” of fossil fuels, he said.

“Our Carbon Plan implies a very significant role for unabated gas throughout the 2020s, and as back-up or with carbon capture and storage through the 2030s and 2040s. We expect new gas capacity of up to 20GW to be built between now and 2030. Shale gas may well play a part in our energy mix too, but until we have more certainty about the potential scale and costs of shale gas production in the UK it is unwise to assume it will be some kind of silver bullet,” he responded.

It does seem as if Browne has skirted over the point that fracking is hugely controversial, as my colleague Pilita Clark explained back in the spring. The new technique has opened up the potential for vast untapped reserves of oil and gas and has already transformed the US energy market; but not without any cost.

“As fracking spread in the US, however, so did complaints. Some people with private water wells near fracked gas wells claimed their water had turned brown or contained methane, the main component of shale gas. A house near one fracked well exploded in Ohio in 2007, catapulting an elderly couple from their bed, according to a subsequent lawsuit…… Or as Nick Grealy, a UK shale gas lobbyist, says: “Ninety per cent of people hadn’t heard of fracking – and the 9 per cent who had, heard something wrong or bad or both.”

Here is another analysis, this time by our former energy editor Sylvia Pfeifer:

Just as nuclear power has its drawbacks, however, there are also uncertainties around shale. Chief of these is the potential environmental toll. The industry is dogged by

 Read more

Jim Pickard

You could be forgiven a sense of déjà vu on reading that the coalition may freeze benefits and/or change the way they are uprated: we have been here before.

Most recently, in June, David Cameron said in a speech about benefits (at the Bluewater shopping centre in Kent) that something had to give on inflation-linked benefit increases.

Next, we need a debate about the limits of state provision. There are national questions we have to ask. This year we increased benefits by 5.2 per cent. That was in line with the inflation rate last September. But it was almost twice as much as the average wage increase.

Given that so many working people are struggling to make ends meet we have to ask whether this is the right approach. It might be better to link benefits to prices unless wages have slowed – in which case they could be linked to wages.

Long before that speech, the FT revealed a year ago that:

“George Osborne is looking at options to cut billions of pounds from next year’s benefits bill by scrapping inflation-linked rises, in a move that could trigger a fierce cabinet clash.

The chancellor is alarmed at the political and economic difficulties presented by the fact that benefits and pensions next year would rise by 5.2 per cent, in line with the bumper inflation figure for September, the base month for the calculation.

The FT has learnt that Mr Osborne has asked officials to provide models for a range of alternatives models, including raising benefits in line with average earnings growth of about 2.5 per cent or even freezing some payments altogether.

Iain Duncan Smith, work and pensions secretary, is said to be highly concerned….”

In the end Cameron was thwarted by Nick Clegg, who insisted that benefits should go up by the full amount.

The final compromise was revealed in the FT by Kiran Stacey: the Lib Dems judged that it was better for tax credits (ie hard-working low income families) to be hit rather than benefits – Read more

Jim Pickard

David Davis has added his weight to mounting Conservative criticism of the BAE-EADS merger as the two companies held a private briefing in Westminster to persuade MPs of the deal’s merits.

The influential rightwinger said the merger would cause the loss of a “massively important strategic British asset” and threaten heavy job losses.

“With strong French and German government interest in EADS, there is a risk that the British factories will come to be seen as peripheral to the core business of the merged company, with all the threats to employment that that involves,” said the MP, whose constituency is near BAE System’s Brough plant in Yorkshire.

Mr Davis questioned whether the new entity would gain entry to the American defence market.

“[The deal] raises serious concerns both in terms of competition and strategic national interest,” he warned. “Suggestions that this could be resolved before the end of the year strike me as wildly optimistic.”

On Monday afternoon two executives from EADS and BAE Systems took questions from MPs at a private meeting in the Commons. Journalists were banned from the briefing – I was politely ejected – and participants were asked not to talk to the press afterwards. (Although this was at the behest of the rather grand Ben Wallace MP, who chaired the gathering, rather than the companies.)

Bob Keen, head of government relations at BAE, told the MPs that the two companies had started talks on a merger after they lost the bid to provide Eurofighter jets to India in January, according to people in the room.

He told the MPs that French, German and Spanish influence over the combined business would be less than their current control over EADS – and that this was a condition of the deal. The French and Germans would end their current agreement to always vote in a bloc, he added.

The EADS executive, meanwhile – who had brought his own coloured charts – emphasised how many jobs the company had already created in the UK.

(I’m told that the new defence procurement minister, Philip Dunne, was also due to brief Read more