George Osborne today pens a joint op ed in the Financial Times with Columbia University economics professor Jeffrey Sachs. After a series of letters last month from senior economists on the case for slower fiscal consolidation, the article attempts to make the case for faster action on the deficit but has been attacked for attacking “straw men“.  It also exposes Osborne’s hypocrisy on financial regulation.

In the FT, Osborne and Sachs write:

In the recent duel of macro-economists, one camp has called for early budget consolidation, followed by further measures over five years. We agree. Others want more fiscal stimulus, delaying deficit reduction. We believe delaying the start of deficit reduction would put long-term recovery at risk. Such an approach misjudges politics, financial markets, and underlying economic realities.

Blaming our predicament on financial markets, as some in the second camp do, ignores the awkward truth that governments have enabled, if not enthusiastically promoted, recklessness, through chronic deficits and lax financial regulation.

But before the crash, George Osborne believed there was too much not too little financial regulation. For example, at a Chamber of Commerce event in April 2006, Osborne said:

“Regulation too inhibits enterprise. For example, speak to any business in financial services – from the largest investment bank to smallest independent financial adviser – and the threat of future regulation from Whitehall and Brussels is now their number one concern.”

Meanwhile, in August 2007 – as subprime mortgage backed securities started causing a worldwide credit crunch – David Cameron endorsed a report by John Redwood outlining plans to cut £14 billion in in red tape and regulation for UK businesses. According to the Sunday Telegraph, Mr Redwood’s plan outlined that:

“A vast range of regulations on the financial services industry should either be abolished or watered down, including money-laundering restrictions affecting banks and building societies. Mr Redwood’s group also sees “no need to continue” to regulate mortgage provision, saying it is the lender, not the client, who takes the risk.

A recent report by Madano – which analysed the background of parliamentary candidates primarily from the Conservative party – found, according to the Times, that, “The number of candidates running this year with experience in finance has doubled to 10 per cent from the 1997 intake of MPs.”

Mr Osborne is on one side of a legitimate economic debate about the speed of deficit consolidation. But he has no right to make political capital out of financial regulation.

Our guest writer is Mark Pack of Mark Pack’s blog and co-editor of Liberal Democrat Voice

You judge a set of tax proposals by who gets what money. It sounds obvious, doesn’t it? Who could possibly object to that? Well, for a start – me.

The reason is highlighted by Will Straw’s analysis yesterday of the key policy goals laid down by Nick Clegg. Looking at the Liberal Democrat proposals to raise the basic threshold to £10,000 and so take millions out of the income tax system all together, Will judged it on the basis of who gets what in their pocket (or rather, a promise of a shortly to be published analysis of that). But that’s not the whole story.

There is a major benefit which doesn’t get counted in pounds and pence in your pocket from being taken out of the income tax system – if you are the sort of person who struggles to handle complicated bureaucracy, who moves in and out of jobs through the year, who doesn’t have the financial cushion to see them through while tax takes are adjusted and over/under payments come and go. Or indeed, if you’re the sort of person for whom all of that applies.

Among the millions who would be taken out of income tax all together with a £10,000 threshold are many who fall into those descriptions.

People who will benefit from having the hassle of struggling with the tax system lifted from them. People who will benefit from not having to worry about how tax is under or over-paid if they move between jobs or different pieces of part-time work. People who will benefit from not struggling to make ends meet because, while there is a tax adjustment coming down the line, they aren’t getting the money in their bank account right now. People who just don’t have the financial resources and bureaucratic experience to see themselves through dealing with an at times complicated, unforgiving and slow moving tax system.

Making bureaucracy simple for individuals is a much under-rated policy goal. Business and red-tape hogs the limelight in this respect – with the result that we end up with well intentioned policies such as the Office of the Public Guardian mired in over-complicated, expensive bureaucracy that turns what should be a great service for the most vulnerable in society into a service for those with money to spend on lawyers.

So when judging a tax policy – and above all, when judging it by the progressive yardstick – don’t just look at the theoretical implications. Look at the bureaucratic reality too.

Contrary to what you may have read on Iain Dale’s diary, I have not lost my economic marbles. Indeed, it is Mr Dale who shows a clear lack of economic understanding.

Dale writes today:

“I did a short turn on Sky News yesterday alongside Will Straw of Left Foot Forward. Incredibly, he seemed to be advocating that far from cutting public expenditure, we should be borrowing and spending more. He reckoned there was some sort of ’slush fund’ available to pump money into various sectors because unemployment hadn’t reached the heights many people thought it might. So just because the government hadn’t spent money on unemployment benefit, it could now spend this money on other, as yet undefined, things.

“And there you have the difference between the left and the right. If it were me, I’d use the money to reduce borrowing, whereas Will would spend, spend, spend. And we all know where that gets us.”

Yes, we do, Iain. The economic stimulus of autumn 2008 – opposed by the Tories – has dampened the worst impact of the recession, particularly on the labour market. And yet, the British economy “remains very depressed” according to the National Institute of Economic and Social Research.

And far from Dale’s claim, I was at pains to suggest that there wasn’t a “slush fund” (Martin Stanford’s words) and that any additional economic stimulus should be spent on essential investments. The point here is not to borrow further but to ensure that money not spent on unemployment benefits is used for investment – a point on which I was happy to co-sign a letter in today’s Guardian organised by Colin Burgon MP. For the record, here’s what I said on Sky:

Straw: And of course because the impact of the recession has been less severe on unemployment than previous recessions, there is some money that’s been saved and that can be used for really important projects like infrastructure investments and so on, particularly in green industries.

Sandford: So there’s a slush fund essentially to try and woo the voters?

Straw: No I don’t think we should see it as a slush fund to woo the voters. I think economic times are much, much, much too serious for that. If this money emerges, it should be used for investment purposes for the good of the country.

As for Dale he appears to be in cloud cuckoo-land on a number of fronts. On Sky he said:

“I’ve never expected massive cuts in the first year. So I think it’s a convenient scare tactic for Labour to say that there will be massive cuts which will lead to unemployment and all the rest of it. But I think it’s a false argument.

“I think the more interesting argument is whether this is going to be Gordon Brown’s budget or is it going to be Alistair Darling’s? Because I think Alistair Darling actually understands the seriousness of the situation. He himself has predicted a deficit of £178 billion this year. But we see from tax revenues which are plummeting that it could be much more than that. So any govermment which comes after May 6th will have to make clear what their plans for cutting the deficit are going to be.

Three questions for Iain Dale (I won’t hold my breath):

1. Why do you think cuts in 2010-11 are necessary when they are opposed by the 67 economists who wrote to the Financial Times, the Confederation of British Industry, the Institute for Fiscal Studies, and the IMF?

2. Why is it a Labour scare tactic to fear the pace of cuts from an incoming Tory government when David Cameron has accused the Government of “moral cowardice” by failing to promise immediate public spending cuts?

3. Which economic report have you read which suggests that the deficit will be above £178 billion?

Political “common-sense” says that we need swingeing public sector cuts. But what we are not told by their advocates is that they would quickly lead to significant job losses for women. Up to now this recession has hit men’s jobs harder than women’s, although the gender difference in unemployment increases has been less than in the 1980s or 1990s downturns.

But this is not because women have intrinsically higher job security. In many sectors, such as manufacturing, finance and hotels and restaurants, men and women have been equally likely to lose their jobs. The reason is that women are more likely to work in the public sector (as TUC analysis shows), and so far there have been fewer job losses in the public sector than the private. Indeed women make up the majority of the public sector workforce, with around four in ten working women having public sector jobs.

Widespread public sector job losses would have a disproportionate affect on female employees and their families. The effects would be worse in the regions that already have high male unemployment rates; the three regions where over 10 per cent of working age men are out of work – North East England, Yorkshire and the Humber and the West Midlands - are also all areas where over 40 per cent of female employees work in public sector jobs.

Pensioner poverty is far more prevalent among women than men, with women’s average income in retirement just 62 per cent the level that the average retired man will have to live on. However public sector pensions improve women’s overall level of pension provision. Because more women than men work in the public sector they have nearly two-thirds of public sector defined benefit schemes – not all of which are final salary. Large-scale redundancies, as well as attempts to level down public sector pensions, would increase the number of women facing poverty in retirement.

While no one can oppose improving public sector efficiency, public sector job cuts are more likely to be unplanned job reductions that leave the same amount of work to be done by fewer people, leading to stress and pressures to do unpaid overtime. As women are much more likely to be carers – with many facing a double burden of care, housework and paid employment – they have much less scope to absorb these extra demands and are more likely to pay the price as services are reduced.

Thanks to bold action by government and the Bank of England, both women and men have seen their employment rates fall by far less than in previous downturns, and as yet levels of inactivity have hardly risen (with what rises there have been mainly due to an increase in the numbers of students).
But real challenges also remain - involuntary part-time work is an increasing problem for women and men.

We can be pretty sure that the recession will not lead to positive changes in our working culture that will give employees more choice of working hours through more flexible working schemes and the creation of high quality part-time vacancies. It is more likely that a better than expected headline rate of unemployment hides continuing underemployment and consequent low wages.

The alternative would be positive action to create a fairer post-recession labour market. But sweeping cuts with consequent rising female unemployment rates, higher pensioner poverty, and even more pressure on women trying to juggle work with other responsibilities are no place to start.

The Director of the Science Museum, Chris Rapley, says that scientists engaging in public debate on climate change face a series of asymmetries including seeing the rules of scientific discourse rubbing up against political “mud wrestling”. Speaking in a detailed discussion on ‘climate change science and its sceptics’ in central London, Professor Rapley went on to describe the “political ineptitude of scientists”.

The debate, hosted by Policy Network, examined growing public scepticism over whether climate change is manmade and what should be done by the scientific community in response. Mr Rapley questioned the title of the debate and outlined his disquiet with “the appropriation of scepticism by those who oppose the science.”

Professor Chris Rapley, a former Director of the British Antarctic Survey, said he was concerned by the dwindling number of experts who can talk “authoritatively about the big picture” suggesting that the number of ‘T-shaped people‘ with both broad and deep knowledge on climate change was overwhelmed by “people willing to prognosticate”. He quipped that he would not mention Melanie Phillips, who has been criticised for her outbursts on climate change.

In response, Benny Peiser, a social anthropologist who heads up the sceptical Global Warming Policy Foundation, said:

“You painted a picture that is slightly one side of the honest scientist on the one side and the polemic campaigner on the other. The other part of the debate is that there are honest and eminent scientists on the other side who have been silenced for 10 to 15 years. That is part of the perception that part of the scientific community has been excommunicated. Unless there is a new dialogue, there will be this problem.”

Rapley replied:

“It’s always healthy to have that open debate but it can be bedevilled by passions outrunning logic … I have not been convinced by your eminent scientists … some of whom are very flaky.

“There is a tyranny at work here. My impression is that where scientists know there are big uncertainties, they are afraid to emphasise them because people will misunderstand them. The evidence is that when they confess to them, they are exploited.”

Anthony Giddens, Professor Emeritus at the LSE and author of ‘The Politics of Climate Change‘ said:

“Scientists don’t know anything about politics and are bruised and amazed by the discussion in the wider world. Most people who write about politics don’t know anything about the scientific community – a new dialogue is needed.”

Peter Luff, CEO of Action for a Global Climate Community, asked:

“How do we regain that word scepticism? There is an overlap between climate sceptics and Eurosceptics who tend to see a conspiracy.”

Joss Garman, a regular contributor to Left Foot Forward, told me afterwards:

“The thing that struck me most was that there was a real consensus in the room (amongst those who accepted the scientific consensus view that fossil fuel polluting is driving global warming) that it would be helpful to reframe the argument to one about risk and probability and away from the view that the science is all settled.

“Since we know that the vast majority of scientists – literally thousands of humanity’s greatest minds – are of the view that there is a staggering chance, of 90 per cent, that climate change is caused by fossil fuel burning, and since we know that would increase the sum total of human suffering and drive millions of plant and animal species to extinction, its not an unreasonable expectation that, put like that, most reasonable people will want to take out an insurance plan – in other words for there to be a reduction in the amount of carbon dioxide we emit.”

Figures released today show the UK’s trade deficit in goods widened to £8 billion in January from £7 billion in December. This was mainly the result of a 6 per cent fall in export volumes (excluding oil and erratic items).

This will come as a blow to those looking to the export sector to strengthen the UK economy’s recovery from recession.

Sterling’s effective exchange rate fell by 25 per cent in 2008; this was supposed to make UK industry more competitive and boost overseas sales of British goods. So far, there is little evidence that this is happening.

The January data are probably a blip – trade data are among the most erratic of all data releases. More worrying is the underlying trend, which shows only modest growth in export volumes over the last year.

Of course, this is due in no small part to the weakness of demand in the UK’s main export markets, particularly in the rest of Europe, and it should be that export growth will improve once Europe’s economic recovery picks up speed.

There are also some grounds for optimism in the latest business surveys. The Bank of England’s agents’ report and the CBI’s survey of manufacturing both show a steady improvement in optimism about the outlook for exports in recent months.

However, the Bank of England does note that some companies are taking advantage of sterling’s weakness to push up profit margins, rather than allowing it to feed through into enhanced competitiveness.

Depending what happens to these higher profits, this probably means some of the potential benefits of sterling’s fall – in terms of more exports, more output and more jobs – are being lost.

Our guest writer is David Nash, international climate change researcher at the Institute for Public Policy Research (ippr)

Controversies surrounding renewable biofuels have emerged afresh in recent weeks. First came a leaked EU document proposing changes to European Commission sustainability standards which would enable palm oil plantations to be categorised as natural forests.

This was swiftly followed by rumours of an internal memo in which a senior EU official allegedly concedes that taking account of the total carbon footprint of biofuels would “kill” the EU’s budding green fuel industry.

The EU has a keen interest in the ongoing debate on green energy fuels, not least because it subsidises production to the tune of £3 billion each year in order to deliver on a legal pledge to source 10% of transport fuels from renewable sources by 2020.

In the UK, liquid biofuels accounted for 2.7% of transport fuel supplied between April 2008 and January 2009.

However, the EU legislation has been met with stern criticism from environmental campaigners and development groups, who argue that green fuels force up food prices and, contrary to popular belief, do not deliver greater greenhouse gas emissions savings than their conventional fossil-based counterparts.

The environmental community is particularly concerned by carbon emissions caused by “indirect land-use change” – where farmers are forced to clear carbon-rich rainforests and drain peatlands for agricultural harvest because existing land has been swallowed up for energy crop cultivation.

They also point out that fertilisers used to grow industrial energy crops are rich in nitrous oxide, a harmful pollutant with a life span of approximately 100-120 years, which threatens soil and plant ecosystems.

These new revelations coincide with the release of a new report by ActionAid which argues that large-scale biofuel production has led to land grab and the displacement of local communities in developing countries.

The NGO also says that if all global biofuel targets – including the EU’s 2020 pledge – are met, the resulting depletion of maize, wheat and soya bean stocks would raise global food prices by 76%. In Africa, where 80% of household income is spent on foodstuffs, a small hike in food prices could have devastating humanitarian consequences.

The tendency then to condemn the expansion of biofuels and tar industrial producers with the same ugly brush as the major oil conglomerates is unsurprising and in many ways justified. Yet for all the many flaws of liquid fuels, the wider debate over bio-energy warrants a more nuanced approach.

First, there are alternatives to the industrial monoculture of liquid biofuels. In particular, there needs to be greater exploration of, and innovation in, advanced algae and waste-based biofuels, which do promise clear carbon emission savings but are currently underdeveloped and commercially unviable.

The latter, which are due to be trialled by British Airways to fuel Boeing jets at London City Airport, could significantly cut the amount of UK household and industrial waste that goes to landfill.

Other nascent innovations such as the compact FuelPod 2 which blends used cooking oil with methanol to produce up to 50 litres of bio-diesel every day are already on the market.

Yet if, as the Department for Transport estimates, up to one third of UK transport fuel is to come from home-grown green fuels in the future – and if we’re not going to rely wholly on conventional energy crops – then these types of devices and other new technologies will need to become a whole lot cheaper.

Second, more needs to be done to promote sustainable forestry and land management in countries like Indonesia and Malaysia. Instead of proposing highly suspect changes to sustainability standards in order to stand a better chance of achieving its 2020 target, the EU and others should be supporting developing countries to establish better local monitoring and accounting systems for biofuel generation.

Regulation is also needed to ensure that multinational green fuel firms investing in developing countries conform to minimum standards of consultation with local communities and build domestic profitability and environmental impact considerations into their operational plans.

Although biofuel expansion has been blamed for the 2008 spike in food prices, culling bio-ethanol production in Brazil and the US – which together accounted for 89% of production in 2008 – could potentially lead to greater worldwide demand for oil.

Escalating oil prices would likely hike up food prices, while the queues at the pumps could be as long as in 2000.

Can we say goodbye to biofuels once and for all? Probably not.

Policymakers are still some way off catalysing the mass ramp-out of commercial hybrid and electric vehicles and if we are not to rely solely on fossil fuels, bio-energy is perhaps the best alternative for powering transport in the short term.

At the launch of their report, fittingly hosted by the British Transport museum, Action Aid’s Tim Rice rightly called for measures to curb demand for transport fuels, including investing in better public transport and incentivising walking and cycling.

However, discouraging car travel remains an uphill battle so long as Jeremy Clarkson commands the ears of a large proportion of the British electorate.

In the meantime, we need to work out how best to balance the sustainable, certified and small-scale cultivation of biofuels with the paramount need to counteract mounting world hunger and cut carbon emissions.

George Osborne today claims that British business supports his “age of austerity” including cuts to public spending in 2010-11. Aside from the naked “supply siders” at the Institute of Directors, this is simply not the case.

George Osborne is widely quoted today responding to new reports by the Confederation of British Industry and Institute of Directors. He crows:

“The voices of British business are now saying what we Conservatives have been saying: earlier action on the deficit is a key to securing the recovery. It is a huge vindication of our approach.

“There is an emerging consensus that Gordon Brown’s economic approach is simply not credible.”

But is this the case? The Confederation of British Industry’s letter to Alistair Darling talks only about the time period over which the budget should be returned to balance, not when the cuts should start. Could this be because in September, the CBI’s Director General, Richard Lambert, told the Today programme:

“the economy is too fragile right now for massive cuts in public spending so we think that the government should be giving a credible plan for getting fiscal conditions into shape.”

Meanwhile, as the Independent reports, a key economic adviser to the Tories, Sir Alan Budd, has criticised the Conservative’s approach:

“If you go too quickly then there is a risk that the recovery will be snuffed out and we will go back into a recession. I mean what the Americans say, ‘Remember 1937′.”

And Madeleine Bunting in today’s Guardian writes that:

A group of economic historians argue that the public debt is not historically high, or even particularly high compared with other developed nations. They even got support from a very unlikely quarter when two Goldman Sachs economists argued in a report that the public debt is not as “cataclysmic as some commentators suggest”.

While Ruth Sunderland in yesterday’s Observer devastatingly shows the failings of the private sector:

A paper from the Centre for Research in Socio-Cultural Change (Cresc) at the University of Manchester* has found that despite a decade of apparent economic boom, private-sector jobs were not generated in sufficient numbers to fill the gap left by traditional manufacturing.

This leaves only the Institute of Directors wholeheartedly supporting the Conservative’s desire to start the cuts in 2010-11. The IoD is, of course, an elite organisation for “business leaders” and hardly a voice for all of British business. But their “supply side” agenda could not be clearer. As well as cuts in 2010-11, they also want:

• a new corporation tax rate of 15 per cent

• a new fiscal target to reduce spending to 35 per cent of GDP by 2020-21

• abolishing Sure Start and Education Maintenance Allowances as part of £50bn of savings

These policies would leave Britain with corporate tax rates lower than any country in the OECD aside from Switzerland, and the basket cases of Iceland and Ireland. The fiscal target would see spending fall below the 39 per cent reached by the Thatcher government in the late-1980s. Perhaps the Conservatives should be tell us if this is their true agenda.

Our guest writer is Sophia Parker, acting director of the Resolution Foundation

Today the Resolution Foundation publishes two reports exploring the financial health of the UK’s “low earning” households.

The latest Low Earners Audit takes an overview of how the 7.2 million households living below median income but broadly independent of state support are faring in the recession, and our second report – Behind the Balance Sheet – digs deeper and reveals how this group are the real “squeezed middle”, living right on the very edge of their means and surviving on an average earned household income of £15,800.

They lack the safety nets and savings of better-off households, and yet are being hit harder than workless households by the double whammy of unemployment and underemployment in the current downturn.

While for some, reduced working hours might be a welcome shift in gear, for others it represents a real threat. The number of low income households who say they are struggling to keep up with bills because of a drop in hours has doubled since 2008.

The TUC shows that involuntary part-time and temporary work is on the increase during the recession, and our analysis shows that four million low earners reported a drop in income last year.

Put this alongside a higher rate of inflation for low earners (thanks to increases in food and fuel costs), together with £1.9 billion of unsecured debt across 3.6 million of the most economically fragile households, and it’s little wonder that the optimism of low earners about their personal economic futures has dropped 20 percentage points since 2001.

We do not think that the solution to such poor financial health rests in more money-education alone; our research shows that low income households are often better budgeters than other income groups.

We argue instead that the focus should be on providing more responsive support via the tax credit and benefits systems. We want to see the development of banking services (particularly savings products and affordable credit) that deliver for low-earner households without exploiting them.

More fundamentally, our reports point to the fact that the financial health of low income households is determined by a whole host of “hidden” assets and liabilities, such as skill levels, housing tenure and caring responsibilities.

Growing inequalities in terms of asset-ownership, and the stratification of the labour market risk leaving low earners stuck, unable to advance at work or build up their financial resilience.

The underlying problems faced by this real middle – and highlighted by the recession – need to be at the heart of any future government’s priorities.

With President Obama sending legislative wording of his much vaunted ‘Volcker’ proposals to the US Congress this week, the debate surronding its controversial reform measures erupted once again.

Speaking from New York, business secretary Lord Mandelson said the proposals were over-ambitious:

“Trying to apply sweeping rules about the structure, content and range of activities of banking entities is too difficult to do.”

He instead argued for greater focus to be placed on securing an effective international regulatory system co-ordinated by members of the G20.

The so-called “Volcker rule” is the brainchild of the former US Federal Reserve chairman and now Whitehouse economic policy adviser Paul Volcker. At its heart is the plan to stop retail and commercial banking from being exposed to speculative financial markets.

This will be achieved through limiting the size of banks and separating their investment banking ‘casino’ activities from day-to-day depository banking. Banks in future would be barred from engaging in ‘proprietary trading’, which involves firms betting on financial markets with their own money, rather than simply carrying out a trade for a client in which their money is only at risk.

Mandelson’s gentle critique of these measures was correct for several reasons:

Firstly, they detract attention and focus away from global efforts in agreeing a regulatory framework for the financial system. A multi-national approach is already being considered and debated by the G20. Any possible agreement that can be secured by the biggest and wealthiest nations in the world must be the main priority.

Secondly, the Volcker proposals will not necessarily “de-risk” the financial markets. They will succeed in safeguarding the financial integrity of retail depository banking, however despite the separation, “casino2 style investment banking will still take place and be an integral part of the financial system.

And with the volume of trading of these firms remaining high, the financial markets and thus wider economy will still be at risk. Effective regulation, firewalls, and “living wills” are the key to shielding the markets. These measures are currently being pursued by the government.

Also, a serious practical consideration that has been neglected is the current state of the banking world. Many countries, at the height of the financial crisis, poured in billions to rescue and save their biggest banks. Taxpayers all around the world have large stakes in their nations’ banks. Profitable trading operations underpin large parts of their activities.

To separate these divisions has the potential to seriously de-value shares, and thus taxpayers’ equity. Questions remain too, whether Obama’s measures would have fully protected even the US economy during the financial crisis, with Peter Morici of the University of Maryland arguing:

“Smaller US banks got into trouble buying mortgage-backed securities and putting them on their books – this isn’t prevented by a ban on proprietary trading.“

As one can see, the jury is still clearly out on “Volckers law”.

Further scientific evidence is published today showing the significant rise in the Earth’s temperature since the middle of the 20th century can only have been the result of human activity – no natural phenomena, such as volcanic eruptions or variations in the activity of the Sun, could have caused such a rise.

The study, published in the Wiley Interdisciplinary Reviews of Climate Change, concluded that:

“There is an increasingly remote possibility that climate change is dominated by natural rather than anthropogenic [man-made] factors.”

The findings echo those of senior figures at the Met Office, like director of operations Keith Groves, who, as Left Foot Forward reported in January, explained to Newsnight:

“To actually reproduce the change in temperature that we’ve seen in the last 100 years, the only way you can do that is by adding carbon dioxide into the model.“

The news comes as Ed Miliband calls on David Cameron to agree a consensus on tackling climate change, questioning the Conservative party’s “commitment to developing renewable energy”.

In a letter to the Tory leader, Miliband writes:

“There are increasing concerns about your Party’s climate change and energy policy, most particularly questions surrounding your Party’s commitment to developing renewable energy. It is important for the nation’s future prosperity that there is cross-party consensus on the importance of renewables to achieve our climate change and energy security goals. It is difficult to achieve that consensus because of the following positions taken up by your party and its elected representatives nationally and locally.

“Your failure to fully and publicly commit to the target agreed by this government, to generate 15% of the UK’s energy by renewable means by 2020, is creating uncertainty for industry and reducing the prospects for future energy investment.

“The Tories in power have a weak record on wind power. Councils run by your party turn down sixty per cent of applications for wind projects. Nothing in your Party’s documents or in your public declarations indicate that you at a national level are doing anything to challenge the resistance by Tory councillors to clean energy projects, nor have you agreed with us that a systematic mapping of the renewable resource in the UK would enable all communities to be able to sensitively and appropriately site wind projects to contribute to our national target.

“Your most recent planning document is a further cause of concern; you would neuter the Infrastructure Planning Commission, scrap regional planning and introduce a third party right to appeal. This is a recipe for delay which would threaten our energy security and our climate change objectives. The British public will conclude that the greening of the Tory Party was a temporary measure, dumped when it had served the purpose of detoxifying your brand.

“The opinions of your business spokesman Ken Clarke also indicate that the Tories are weak on wind power. He told a right-wing think tank: “My view is that those few wild and open spaces that we have left in Britain should not be used for wind turbines”. You have yet to disassociate yourself from his views. I would urge you to do so.

“Pledging to clean up our energy supply is a key test of your Party’s professed intention to tackle climate change and provide energy security. Your commitment to the 15% renewable energy target would be a step towards establishing the cross-party consensus required for industry certainty. The activities of the Tory Party in power run counter to claims to be a climate-sensitive party and the public pronouncements of senior Conservatives confirm the view that Tories would put the low carbon future at risk.

“I fear that without some effort on your part to shift your party’s position on renewable energy, the public will conclude you and your party are not serious about tackling climate change or ensuring energy security.”

• To co-sign the climate change secretary’s letter visit Ed’s Pledge

Our guest writer is Anna Coote, head of social policy at the new economics foundation

There’s no such thing as a new idea.  But sometimes an old idea deserves a fresh look because things have changed and its hour has come.

One such idea is to shorten the working week.  This is proposed in a new report by nef (the new economics foundation) as one way to tackle the environmental, social and economic crises that are shaping politics in the 21^st century. But the idea is more radically framed than it used to be. Instead of a minor reduction to, say, 35 hours, the call is for a substantial shift in the balance of paid and unpaid time, moving towards 21 hours as the new standard.

The crises we face are inter-related – the combination is unprecedented.  We have rapidly depleting natural resources and accelerating climate change; widening inequalities and growing concern about social fragmentation and disorder; collapse of global financial systems, a deep and intractable economic downturn and astronomical levels of government debt. All this calls for a bold response.

Economic growth over the last 30 to 40 years has depended on a volatile mix of depressed wages and escalating material consumption. People have worked punishingly long hours and then borrowed to consume what they still cannot afford. Hence the credit bubble that brought the global economy to its knees.

Over the same period, the gap between rich and poor has grown dramatically. In the wake of the recession, nearly two and a half million are unemployed. The government is deeply indebted and gearing up for a massive cull of public sector jobs. Meanwhile, many are working long hours to hang on to their employment and increasing numbers say they find it hard to combine paid work with caring for children or having any other kind of life.

People on modest incomes struggle to pay for things they think they need to secure their place in society and to keep up with the pace of life – a car, a second car, household appliances, computer games, airline tickets, ‘convenience’ foods – and much, much more.  We have come to regard these accoutrements of middle-class life as our entitlement, signalling identity and status. Now we are urged to buy more to help the economy recover and grow.  But the consumerism that sustains western lifestyles is squandering precious natural resources and the climate clock is ticking.

A new, much shorter, ‘standard’ working week would provide an opportunity to spread paid and unpaid time more evenly across the population. That way, more people would have a chance not only to earn a living but also to do the other things that make human society possible – being parents and carers, friends and neighbours, creative individuals and engaged citizens. It would prompt us to adjust our values and expectations, to buy less stuff and live more sustainable lives. It would make it easier for men and women to share paid and unpaid work more equally. It would challenge the discredited model of global capitalism that is fuelled by credit and shopping.

The most obvious objection to a 21-hour week is that it will reduce earnings and hit low-income groups the hardest. nef is proposing a gradual transition, over a decade more, with time to put compensating measures in place. These would include trading wage increments for shorter hours year-on-year, giving employers incentives to take on more staff, limiting paid overtime, training to fill skills gaps, raising the minimum wage, more progressive taxation and arrangements for flexible working to suit the different needs of employees – such as job sharing, school term shifts, care leave and learning sabbaticals.

The French experiment with a maximum of 35 hours, or 1600 hours across the year, had mixed results. Introduced in 2000, it was popular with women with young children but less so with those whose employers made unpredictable changes to when they put in their hours. A key lesson is that people care as much about control over their time as they do about the number of hours they work.

The move to a 21-hour week should not be a matter of coercion.  Some will want to work longer hours and that should remain a matter of choice.  The point is to change what is generally accepted as the norm.  And to consider it as part of a larger transition aimed at building a sustainable future – by safeguarding natural resources, building a more equal and cohesive society, and developing an economy that serves the needs of people and the planet, rather than stripping their assets.

In an astonishing but largely unreported u-turn yesterday, two of Britain’s leading climate sceptics, Lord Lawson and his colleague Benny Peiser – both of the Global Warming Policy Foundation – conceded that the emails stolen from the Climatic Research Unit (CRU) did nothing to question the underlying science of climate change.

Lawson was quoted in The Guardian as having told MPs:

“This is nothing to do with the basic science, that’s not the issue.”

But Lord Lawson has previously written:

“The scientific basis for global warming projections is now under scrutiny as never before. The principal source of these projections is produced by a small group of scientists at the Climatic Research Unit (CRU), affiliated to the University of East Anglia…

“Astonishingly, what appears, at least at first blush, to have emerged is that the scientists have been manipulating the raw temperature figures to show a relentlessly rising global warming trend.”

Adding:

“What is clear is that the integrity of the scientific evidence on which not merely the British Government, but other countries, too, through the Intergovernmental Panel on Climate Change, claim to base far-reaching and hugely expensive policy decisions, has been called into question.”

Benny Peiser has also consistently used the CRU hack to cast doubt on the science, writing in The Observer:

“Global warming science and climate policy face a severe and deepening crisis of credibility. The whole climate agenda is confronted by growing doubt and criticism, not least as a result of the so-called Climategate scandal”

Andy Russell notes on his blog how Lord Lawson tripped up when discussing the now infamous ‘hide the decline’ emails too:

“Evan Harris MP did excellent work in setting Lawson up for a fall in his questions about the “…hide the decline…” emails. Lawson was claiming that the details of dendroclimatology divergence were not discussed in any of the subsequent key papers on tree ring based climate reconstructions.

“Harris then got Lawson to agree that if the CRU scientists could show that they did discuss this matter in their publications then this was not an issue…

“Harris completed his manoeuvre of highlighting Lord Lawson’s misunderstanding of the divergence issue – Phil Jones described that the “trick” was discussed in a Nature paper (in 1997!) where he suspects they were the first group to use the term “divergence”, and that they were explicit in subsequent papers about this issue.

“I suspect that this will be a key point in the committee’s report.”

The Telegraph today publishes a letter from a number of prominent Lords including the Royal Society’s Lord Rees and Lord May but also BP’s former boss, Lord Browne, and Richard Lambert, the director General of the CBI.

They write:

“Sceptics have seized the opportunity to claim that the whole edifice of climate change science is crumbling. This is far from the truth.

“The overwhelming body of peer-reviewed scientific evidence shows that climate change is happening and is very likely to be caused by human activity…

“The challenge is in risk management, and none of the evidence implies that we can be confident that the risks are small. On the contrary, the evidence strongly suggests that the risks are major and delay in action is dangerous.”

Our guest writer is Damien Morris of the Sandbag Climate Campaign

Climate sceptic Lord Lawson has again failed to answer questions over who funds the Global Warming Policy Foundation (GWPF) during his appearance at the Science and Technology select committee yesterday. The committe did, however, talk about the “climategate” emails scandal, which back in November 2009 the newspapers were awash with, a fearsome scandal that threatened to rock the foundations of the world’s budding and hard-won trust in climate science.

Since Copenhagen, this scandal has paved the way for a succession of other stories throwing up fresh questions over the reliability of the science.

But yesterday, this so-called scandal started to look like a bit of a damp squib. Anticipating the latest skirmish in the great global warming debate, interest from journalists and the public was sufficient to fill the committe room to capacity. But in the 3 hour session, there was barely a scuffle and absolutely no sign of anything really salacious or sinister.

The Climatic Research Unit (CRU) – far from being a crumbling cornerstone of the climate change fortress – was actually holding up pretty well, and the leaked emails started to look like a bit of a side event. Indeed, the press were sufficiently weary of the hearing that they didn’t linger for evidence from three of UKs highest scientific authorities, leaving as soon as they had heard both Phil Jones and the GWPF sceptics say their piece.

In recent months, many commentators have sought to defend climate science by marginalising the CRU and treating them as a few bad apples, but increasingly it appears that they gave too much ground.

The CRU’s scientific contributions to the refinement and analysis of the temperature record seems above reproach within the scientific community, as attested in person by the UK’s chief scientist, John Beddington, the DEFRA chief scientist, Bob Watson, and the Met Office chief scientist, Julia Slingo. Like Jones, they confirmed that CRU’s findings on the temperature record have been separately reached by the National Oceanic and Atmospheric Administration (NOAA) and NASA in the United States, but also by researchers in Russia and Japan.

CRU may yet deserve censure – though this is far from clear – in relation to their sluggish responsiveness to Freedom of Information (FoI) requests. This will be explored in due course by the Information Commission, but is not a question impacting the science. Without prejudging the outcome of the Commission’s investigations, it appears that considerable amounts of data used by Jones was owned by foreign meteorological offices, and could not be made public without their permission.

Since last November the Met Office has worked with CRU to try and source permissions and has made roughly 75 per cent of the data available on its own site. There is also the question of whether 61 Freedom of Information requests to a small team of three researchers represents a “vexatious request“ designed only to cause “disruption or annoyance”.

Also, some content of the leaked emails raises questions about how appropriate and transparent certain tree-ring methodologies were in published scientific papers, and whether some comments in Jones’s correspondence about particular journals and authors represented an effort to unfairly suppress publication of their material. Both concerns – but especially the latter– will be investigated by a team led by Sir Muir Russell in coming months.

So, after all that, no sign of an earth-shattering climate scandal, nor even much assurance of a minor FOI or professional misconduct scandal!

In the cold dawn of the committee hearing, one wonders how the British media managed to get itself so drunk on the hype of climate-science in crisis. First we have the East Anglia email leak which now hopelessly fails to live up to its moniker of “climategate”.

Secondly, the key facts in the WWF paper attacked in “amazongate” fully withstood scrutiny. Only “glaciergate” managed to graze the science by correcting just one (admittedly alarmist fact) in the whole of the IPCC Working Group II report on impacts. The Working Group I report on the physical science basis remains impregnable.

Yet despite the invalidity or insignificance of each new development, we are warned each time that the scientific consensus is under threat, or that we may have to suddenly dissolve our trust in key scientists and institutions.

The select committee hearing made clear that that the science of climate change is as robust as ever, and that the uncertainties in the science are fully represented in the probablistic language and estimate ranges in the key documents.

Regrettably, as far as public confidence in the science is concerned, the climate cynics’ strategy of throwing mud until it sticks appears to be working, and the inquiries which might exonerate CRU of any misconduct have themselves somehow become suggestive of its implicit guilt. Even the Met Office’s project to augment and refine the future temperature record risks being interpreted as a response to some fatal weakness in the CRU temperature record, rather than a long-planned advancement of its good work.

I hope that today’s hearing gave the British media a reality check against the sensationalist climate reporting it has been drawn into in recent months, which has undeservedly damaged both the confidence of the British public in climate science and their concern for climate change. The British media has gone on a four month bender on climate controversy. The hangover is going to be bloody awful, but the one thing that’s for sure is that it will only get worse the longer we put it off.

The Chairman and Director of the Global Warming Policy Foundation appear before the Science and Technology Select Committee this afternoon. Left Foot Forward sets out five questions they should be asked.

1. Who funds the Global Warming Policy Foundation?

Lord Lawson has written in the Independent on Sunday:

“the GWPF was “funded entirely by voluntary donations from a number of private individuals and charitable trusts. In order to make clear its complete independence, it does not accept gifts from either energy companies or anyone with a significant interest in an energy company”.”

Who are these private individuals and charitable trusts?

2. Why is the GWPF sharing offices with the Institute of Materials, Minerals and Mining?

The GWPF are based at 1 Carlton House Terrace, SW1Y 5DB.

Also at this address is the Institute of Materials, Minerals and Mining, which “exists to promote and develop all aspects of materials science and engineering, geology, mining and associated technologies, mineral and petroleum engineering and extraction metallurgy, as a leading authority in the worldwide materials and mining community.”

3.What links does Lord Lawson have with big oil?

Lord Lawson told Channel 4 News that, “I have no links to oil companies of any kind”.

But the Central Europe Trust – which he chairs and in which he has “significant shareholdings” – claim as clients BP Amoco, Royal Dutch/Shell Group, Texaco, and Total Fina Elf.

4.Why does the GWPF’s academic advisory council include a number of climate sceptics?

The aim of the GWPF “is to provide the most robust and reliable economic analysis and advice”.

Why then does their small academic advisory council include well known climate sceptics including:

• Ian Plimer, the author of “Heaven and Earth – Global Warming: The Missing Science”

• Philip Stott who has written that “global warming is a faith“

• Sir Ian Byatt who has faced calls to be sacked as chairman of Scotland’s water regulator for his thoughts on climate change; and

• Professor Richard Lindzen who appeared on the Great Global Warming Swindle.

5. Why does the GWPF’s board of trustees include a known climate sceptic?

The Liverpool Daily Post quotes remarks made by GWPF trustee, the Bishop of Chester:

The row followed the Bishop of Chester’s speech in a House of Lords debate on energy, in which he said discussion about the causes of global warming was “still open”.

Describing himself as a “scientist in a previous incarnation”, Dr Forster – whose diocese includes Wirral – said there was no consensus among climate scientists that “carbon dioxide levels are the key determinant”.

And he told peers: “Climate science is a notoriously imprecise area, because the phenomena under investigation are so large.

“That makes precision difficult to achieve.”

With most of the data now in, it is clear that the UK economy stabilised in the second half of 2009, after its shocking fall between mid-2008 and mid-2009. Real GDP increased by 0.3 per cent in the fourth quarter of last year after contracting by 0.3 per cent in the third; manufacturing output was broadly flat (indeed it stopped falling in January last year); and employment and unemployment were little changed after July.

Some credit for this must go to policymakers: interest rates at rock-bottom levels and £200 billion of quantitative easing and a modest fiscal stimulus – through the lowering of the standard rate of VAT, the car scrappage scheme and an acceleration in public investment spending – all supported the economy and prevented an even worse outcome than the one actually experienced.

However, the economy looks to have got off to a weak start in 2010. Retail sales fell sharply in January, the claimant count measure of unemployment increased and public sector borrowing was much higher than expected due to weak tax revenues. In part, this can be blamed on the very bad weather and on people bringing forward spending into December to avoid the hike in VAT. But, with average earnings now increasing at a pace well below price inflation, households’ spending power is being squeezed.

This could mean that 2010 turns out to be a poor year for consumer spending. If so, the economic recovery is likely to remain sluggish for the next few quarters.

Meanwhile, economists – and politicians – have fallen out over the wisdom of more fiscal tightening in 2010/11 (over and above that already set out in the Pre-Budget Report). One group argues that the government’s deficit needs to be reduced more quickly to maintain the confidence of financial markets, another that more aggressive action would risk tipping the economy back into recession.

All though agree that the fragility of the economic recovery needs to be taken into account – and the latest data certainly look too fragile to allow for any extra fiscal tightening at this stage:

1. The UK economy grew by 0.3 per cent in the final quarter of 2009. Revised figures show that the UK economy grew by 0.3% in the final quarter of 2009, not 0.1% as previously reported. The revision was due to faster than expected growth in both services and manufacturing in December.

The Index of Services for December rose by 0.6%, while the Index of Production (which measures the output of manufacturing and utilities) increased by 0.5%. The composition of growth will have been disappointing to those hoping for a shift in the balance of the economy. Consumer spending increased by 0.4%, while business investment contracted by 3.1%. And, although exports increased by 3.7%, imports grew by 4.1% and so net exports subtracted 0.2pp from growth.

2. Retail sales dropped in January. The volume of retail sales dropped by 1.8 per cent between December 2009 and January 2010 – the result of bad weather and the increase in VAT from 15 to 17.5 per cent, which probably led to some spending being brought forward into the last few months of 2009. Retail sales fell in the second half of 2008 before recovering during much of 2009.

The risk in 2010 is that they fall again. Earnings have been increasing less rapidly than prices for much of the last year, putting a squeeze on households’ spending power. Now that the support from the lower rate of VAT has gone, they might respond by spending less.

3. Official figures show unemployment has stopped increasing. The Labour Force Survey measure of unemployment fell by 3,000 between the third and fourth quarters of last year and was little changed throughout its second half. However, the claimant count measure increased by 23,500 in January. It would be easy to blame this solely on the bad weather, which undoubtedly had some effect, e.g. on activity and employment in the construction industry.

But there is a lot of anecdotal evidence of job losses in the first two months of the year, for example in local authorities, which are nothing to do with the weather. Senior government figures have been warning for some time that unemployment would resume its increase in the first half of this year.

4. Full-time employment is still falling. The economy is still not growing fast enough to stop the fall in employment that began in May 2008, since when 660,000 jobs have been lost. What is more, full-time employment has fallen by 860,000 over this period, while part-time working has increased by 200,000.

It is likely that much of this increase in part-time working is, from the workers’ point of view, involuntary. There are over 1 million people who say they are working part-time because they cannot find a full-time job – up from 700,000 two years ago.

5. Activity in manufacturing has stabilised. Although manufacturing output increased by 0.9 per cent in December, it is too soon to be sure that a recovery has begun. Output tends to be erratic from month to month.

What can be said is that the downturn in manufacturing activity actually ended as long ago as January 2009, and output was broadly unchanged throughout the rest of 2009.

6. Earnings are increasing very slowly. Average weekly earnings increased by just under 1 per cent over the year to the three months ending in December (just over 1 per cent if bonuses are excluded). Surveys suggest that many employers are looking for wage freezes, or very small rates of increase, in 2010, so earnings growth looks set to stay low.

This suggests that domestic inflation pressures will be of little concern.

7. Inflation has increased again.v Consumer price inflation increased to 3.5 per cent in January, boosted by the return of the standard rate of VAT to 17.5 per cent and by higher petrol and diesel prices. Because inflation was more than 1 percentage point away from its 2 per cent target, the Governor of the Bank of England had to write a letter of explanation to the Chancellor.

In this letter, he expressed his optimism that inflation would fall back soon and be below the target rate by the end of the year.

8. Public sector borrowing is on track to hit the Chancellor’s forecast for the full year.v After two months when public sector net borrowing came in below expected levels, January 2010 was the first January since records began in 1993 when net borrowing was positive (there is usually a surplus because January is a big month for tax receipts).

Borrowing totalled £122.4 billion in the first ten months of the 2009/10 fiscal year and it remains on track for the Pre-Budget Report forecast of £178 billion in the full year.

9. No change in monetary policy. After its February meeting, the Monetary Policy Committee decided to leave bank rate at 0.5 per cent and the scale of quantitative easing at £200 billion. Its statement after the meeting said that ‘The Committee will continue to monitor the appropriate scale of the asset purchase programme and further purchases would be made should the outlook warrant them.’

It is clear, therefore, that the MPC is more inclined to increase monetary stimulus than to begin to withdraw it, suggesting it is more worried about the weak economic recovery than it is about higher inflation.

10. Sterling has been stable for over a year now. The weakness of sterling has been blamed recently for some of the increase in inflation in the UK and cited as evidence that overseas investors might soon lose confidence in the UK because the government is not planning to take enough action in 2010 to cut its borrowing requirement.

In fact, sterling’s fall took place in 2008. During 2009 its exchange rate index (its value against a basket of other currencies) increased by 9 per cent. So far this year it is little changed.

Revised figures show that the UK economy grew by 0.3% in the final quarter of 2009, not 0.1% as previously reported. The revision was due to faster than expected growth in both services and manufacturing in December.

The Index of Services for December rose by 0.6%, while the Index of Production (which measures the output of manufacturing and utilities) increased by 0.5%. These figures were not available when the preliminary estimate of overall growth was reported.

However, the decline in gross domestic product during the recession has been revised up to 6.2%, from 6%.

Meanwhile, the composition of growth in the final quarter of 2009 will have been disappointing to those hoping for a shift in the balance of the economy. Consumer spending increased by 0.4%, while business investment contracted by 3.1%. And, although exports increased by 3.7%, imports grew by 4.1% and so net exports subtracted 0.2pp from growth.

Although other economic data also show the economy was improving in the final quarter of 2009, in particular unemployment stopping falling, it is too soon to be sure that the economy is safely out of recession.

Growth in the first quarter of 2010 could be very weak as a result of the bad weather, which will have affected construction activity for example, and if the increase in the main rate of VAT from 15 to 17.5% in January caused some people to bring spending forward into the final months of 2009.

A cross-party group came within eight votes of passing a new green standard for power plants last night. Poor Lib Dem turnout has been blamed for stopping the measure passing.

In a sizeable rebellion, 27 Labour MPs last night voted against the government, and in favour of introducing a new green standard for power stations that would outlaw the building of the most polluting power stations like Kingsnorth.

The amendment to introduce an emissions performance standards (EPS) for power plants was narrowly defeated by just eight votes. Thirteen Lib Dem MPs, including Nick Clegg, Vince Cable and Chris Huhne did not bother to turn up. Had they done so, and voted for the measure they themselves have championed, the government would have been defeated and Parliament would have ended the era of dirty coal.

David Cameron who has been a prominent supporter of the EPS led many of his Conservative MPs through the chamber to support the new green standard – but thirty nine of his MPs did not vote either.

Among the Labour backbenchers who supported the new green measure were Alan Simpson, Jon Cruddas, and Colin Burgon, who was a prominent figure in the Leeds miner’s strike in the 1980s. A few Labour MPs including Dianne Abbott, Fabian Hamilton and Austin Mitchell told climate campaigners they’d vote for the amendment but then either voted against it or abstained. Reacting to the vote, the Executive Director of Greenpeace UK, John Sauven, told Left Foot Forward:

“Yesterday’s vote shows the depth of unease within the Labour party about a bill that hands billions of pounds to energy companies but fails to hold them to account. Ministers caved into lobbyists from big German utilities who claimed that this measure would scare off investment, when the evidence from places like California shows that the opposite is true. Investors want certainty. Without an emissions performance standard new power stations are subject not to a legally binding limit, but to a gentleman’s agreement that leaves an uncertain future for both investors and the UK’s climate targets.”

George Osborne has set out his support for limits on bankers’ pay. Speaking on the BBC’s Today programme he said, “The level of pay in the banking sector has got completely out of kilter with the rest of society.” His remarks come as the left-wing pressure group, Compass, set out detailed proposals to tackle the excesses in the banking sector.

Compass publishes a report, “Never Again,” which sets out six policies to “transfer risk from the state and taxpayers back on to the financial institutions”. The proposals including “a short term ceiling on total remuneration given as both cash and share options.” The paper calls for a low compensation ratio – the percentage of an institution’s net revenue allocated to staff pay – of around 15 per cent. They outline that 76 per cent support the policy and argue that:

“During the boom years investment banks set aside between 45% and 65% of their net revenue to pay staff before calculating profits or paying out dividends to shareholders. The latest round of payouts have had a compensation ratio of nearer 30-40% as banks try to convince politicians and the public that they can self-regulate. High staff costs leads to diminishing profits and dividends as well as lower capital reserves. It also puts huge pressure on less profitable institutions – for example the 2009 compensation ratio for UBS is 81.2% which is unaffordable in the long term.

Speaking on the Today programme, George Osborne said:

“The level of pay in the banking sector has got completely out of kilter with the rest of society. It is totally disproportaion to what doctors are paid, people working in industry are paid, teachers are paid, and the like. And we need to bring down pay across the sector – not just in one bank – across the sector. And thinks like a bank tax, international agreed, might help do that.”

This expanded a point made last night in his Mais Lecture. Osborne said:

But I also believe we should pursue international agreement for a levy on the banking system, similar to the levy on wholesale funding proposed by President Obama or the levy already implemented in Sweden, as well as for structural reforms to prevent retail banks with implicit taxpayer guarantees from engaging in the riskiest activities such as large scale proprietary trading.

In September, Gordon Brown jointly signed a letter with Angela Merkel and Nicolas Sarkozy calling for action on the “reprehensible practices” of the banking sector. The letter said:

“The variable remuneration including bonuses, should be kept at an appropriate level in relation to the fixed remuneration and must depend on the performance of the bank, the business unit and the individuals.”

Responding to Mr Osborne’s comments, Gavin Hayes told Left Foot Forward:

“If you can get international agreement, all well and good. But individual nations can take their own individual action. And Britain took a lead on the windfall tax and France also adopted it. Britain needs to take the lead on these issues.”

Compass have also called for the bankers’ bonus windfall tax to be made permanent and extended in scope to include hedge funds and private equity firms; for the introduction of the popular “Robin Hood” Financial Transaction Tax; the separation of retail and investment banks; and a high pay commission.

Yesterday, the Business Innovation and Skills Committee published a report questioning the 50p broadband tax that the Government aims to place on fixed phone lines to pay for the increased broadband speeds outlined in the Digital Economy Bill.

The Committee called the tax regressive and Left Foot Forward has written about this previously. As stated in the committee’s report, the tax will hit the less well-off or the elderly, who are also the demographic least likely to use super-fast broadband.

According to the report, younger and more financially well-off users are these days increasingly using mobile phones rather than land-lines, which would not be affected by this tax.

Importantly, will this tax raise enough money? Current targets are 2mbps, which is paltry compared to the 100mbps targets set out by other countries. According to the report:

“The levy is expected to raise £1 billion over the course of seven years.”

Australia will be spending £20.9bn to fund their huge upgrade. Surely, it is in the best interests of the UK to pay more for far better infrastructure which will be significantly less costly in the long run? In a future economy, future thinking is vital.

The report quotes evidence from witnesses that suggest the Internet Service Providers (ISPs) should help pick up the tab. Ed Miliband and Ofgem have previously threatened similar action against power companies if they don’t commit to upgrading the electricity networks to plan for a carbon free economy – feasibly, the same could work here.

It is after all in the best interests of ISPs to have a wider audience as obviously that will lead to an improved marketplace. It makes sense then that they should put in since they will reap the profits. It is up to the Government to step in here.

On a far more technical point, as stated in a previous a Left Foot Forward article, currently, optic fibre is taxed but copper cable is not. If optical fibre wasn’t taxed, ISPs may be more willing to take up a significant proportion of the costs, allowing the government to have less opposition to forcing them to upgrade.

Another alternative is to simply add a tax to mobile phones and/or broadband users themselves, almost in a pay per use scenario which is obviously fairer that the 50p tax.

However, the Government is right. It is vitally necessary for the digital infrastructure to be improved to ensure Britain is able to keep up with other nations and be competitive in the ever changing digital market.

It has to be paid for, but are there better ways to pay for it?