Item widget-area-1 not registered or doesn't have a view.php file.

Political Expediency vs Saving the Planet

Dangerous times ahead as politicians weigh up the pros of sacrificing long-term climate and environmental goals for short-term electoral gains.

Blain’s Morning Porridge – July 24th 2023: Political Expediency vs Saving the Planet

“Politics is the art of looking for trouble, finding it whether it exists or not, diagnosing it incorrectly, and applying the wrong remedy.”

Dangerous times ahead as politicians weigh up the pros of sacrificing long-term climate and environmental goals for short-term electoral gains.

Some fascinating stuff going on in the political economy at present which should be ringing critical alarm bells for CEOs and CIOs alike: just how is the public appetite for the big long-term themes of ESG, sustainability, and climate focused investment potentially changing, how will that impact climate change planning, and what does it all mean in terms of investment priorities and possibilities? (It’s a Big Topic for a short note on a Monday morning after a week’s holiday… I will be delving back into the usual nitty-gritty of stock and bond prices, what central banks are thinking, inflation, rates and what-ever-next from tomorrow!)

At its core the Growth/Environment argument is an optimisation: how to balance economic growth versus protecting the environment from the negative consequences of growth while mitigating any damage done. How to create positives including jobs, wealth and raising living standards while avoiding the negatives of climate change, rising inequality and environmental collapse. These are long-term issues that require smart thinking and long-term planning.

You would think it should be a simple good vs bad thing debate. Nope. It all gets lost in the fog of increasingly polarised politics. There is a massive difference between optimising policy and political optimisation. Sadly, there seems to be little long-term planning at the core of the debate. (While I was on holiday last week I finally got round to reading the excellent Johnson at No 10 by Anthony Seldon and Raymond Newell. What struck me was the absolute lack of anything remotely resembling any kind of long-term plan for the economy, energy, Brexit or climate change… everything happened on the hoof..)

That seems to remain the case when it comes to policies to address climate change and the environment.

At one edge of the “debate” is how the Tories remarkable win in Boris Johnson’s old seat of Uxbridge is being framed. Rather than losing the seat the Tories clung on by transforming the bye-election into a protest vote at the imposition of ULEZ (Ultra Low Emission Zone) into the peripheral London parliamentary constituency. Deputy Chair of the Conservative Party, Lee Anderson (MP) said his party only won because they campaigned on the ULEZ expansion on the doorsteps, calling it a “money-grab” by London’s Labour mayor.

That’s one-part of the narrative the Right-Wing Press in the UK is now presenting – plucky Londoner’s rebelling against an unfair regressive tax imposed by the “climate-fascists” and “communists” in charge of the London Mayor’s office. However, some political thinkers want to move further: according to the ultra-right-wing GB News channel: “Tory MPs have pointed to the unexpected win as proof Rishi Sunak should scale back on the Government’s net zero plans.”

The Tories sense a changing mood among the electorate: voters repelled by climate change protestors, angry with left-wing wokery, gender politics, and rejecting of environmental policies that impact themselves. At a time when services are stretched, rising interest rates have hoiked mortgage payments, rising utility charges to cover years of underinvestment, and tax rises leave voters with less money as inflation devours their disposable incomes – then ULEZ is presented as the final straw breaking voter wallets. (Brilliant politics btw – all these wallet-emptying hits in terms of higher taxes, mortgages, rates and inflation come after 13 years of Tory government, but they win an election on the basis its Labour’s ULEZ to blame for everyone being broke! Brilliant. Utterly brilliant deflection politics.)

Lest we forget… it was Boris Johnson himself who originally implemented the ULEZ scheme while he was London mayor as his flagship policy.

The scientists say ULEZ has had a demonstrable effect in reducing pollution and improving air-quality in London. (Scientists? What would they know… ) London’s cardiovascular health has improved. Asthma rates are declining. However, the charge imposes costs on anyone driving an older car or van – about 6% of London cars and 14% of vans are hit by the tax. Yet, 45% of Tory voters at last week’s bye-election said they were voting to stop ULEZ because of the high cost it would impose directly upon them.

This week the Labour Party will be rowing back the ULEZ expansion plans, acutely aware they can’t afford not to win seats in the London outskirts – trading the benefits of ULEZ for electoral gain. There is plenty of information on the internet outlining the benefits of ULEZ and an equal and opposite number of articles saying it has achieved nothing.

At the other end of the spectrum is the current extreme climate debate. Call up your Twitter feed this morning and you will find soaring temperatures around the Mediterranean and wild fires in Greece dismissed as “invention” and “media speculation” on dozens of comments. Apparently record temperatures are normal – say’s Andrew Neil citing an IPCC 2021 report to argue everything remains in normal bounds.  The IPCC 2023 report says “changes to the climate system that are unparalleled over centuries to millennia are now occurring in every region of the world..”

Around the world politicians perceive the potential benefits of trading political expediency against long-term political goals. Slow down climate change costs to win political favour. Long-term? Hope the consequences will prove less than what the scientists predict. As I keep reminding readers: hope is never a strategy.

Government “stakeholders” are voters. Generally young voters will favour governments with strong commitments to green environmentally friendly policies. Older voters worry more about services and the-money-in-their-pocket and will tend to support lower spending on current intangibles such as future environmental improvement.

At its most basic the current arguments about slowing the green-transition, pulling back from net-zero, and rowing back of polluting transport are about sacrificing long-terms improvement vs short-term gain, while hoping aging demographics overcome angry young voters. If the Tories can persuade NIMBY voters its better to pay lower environmental costs today, but face even larger green costs tomorrow.. well that’s a political choice for voters.

Lets make it even more complex: Who should voters trust for information?

In recent months the targeting of the BBC has become ever more pronounced. Constant sniping about its “independence”, the licence fee, its “failure” to deal with Huw Edwards. The list of provocations is endless… each assault calculated to chip away another grain of public trust.  Last night I was reading how the excellent Simon Jack (the BBC’s business correspondent) has become the latest target, perceived as vulnerable because his sources told him Nigel Farage was dumped by Coutts for commercial reasons. Now we know Farage was dumped for reasons of wokery.

How does it play out? Who will we listen to if we can’t trust the BBC? A diminished BBC and strengthened privately owned media pushing whatever agenda its owners wish to pursue?

What should markets be doing?

Be sceptical and be aware. The duty of a company board is to serve the interests of its shareholders by maximising returns – or do you take the modern concept of stakeholders, including not just owners, but also its staff and customers, who are also voters? If governments are proving themselves incapable of pursuing long-term environmental objectives, can corporates be trusted to do the right thing? Sadly, recent experience in the management of privatised UK utilities – see my recent note on Thames Water – suggests not.

Five Things To Kickstart the Week

WSJ                             A World Transformed by 5 Percentage Points

BBerg                          Dollar Bearish Bets Climb to Record High Among Asset Managers

BBerg                          One Year After Liftoff, ECB Grapples with Endgame for Rate Hikes

FT                                Indian ban on rice exports stocks fears of global food inflation

Guardian                     Rishi Sunak urged to go for spring election by senior Conservatives

Out of time and back to the day job..

Bill Blain

Strategist – Shard Capital


Comments are closed.