Resignations ahoy!

Dodds a Dud

As Anneliese Dodds heads for the backbenches in high dudgeon, Starmer's thoughts must be ones of pleasure that he curtailed her short outing as Shadow Chancellor so decisively before the GE.

And thoughts here at C@W turn to the Qn 2 of the 2025 predictions Compo!  But it's strictly defined, as follows: 

Date of Starmer's first Cabinet reshuffle, as defined below. One bonus point for each correctly-named departure or clear-cut demotion. Two bonus points for any complete change precisely identified (named outgoer and named replacement). "Cabinet reshuffle" = two or more changes to the Cabinet roster, unforced by resignation or death. Splitting of an existing Cabinet post into two or more new positions doesn't count per se - only if accompanied by reshuffle as defined above.

So - anyone care to update their predictions?

ND

By popular request: zonal pricing for GB electricity

Under both Labour and the previous Tory regimes, serious consideration has been / is being given by DESNZ & Ofgem to the introduction of zonal (wholesale) pricing of greater or lesser granularity.  Maybe it'll be a handful of regions with separate mini-markets at the wholesale level, maybe it'll be a serious plethora of pricing nodes, with nothing that could be termed a 'market' at each.  

[To recap: right now there is a single wholesale pricing zone across the whole of GB (not NI) - essentially, the whole of the national grid HV transmission system is a single trading point.  This doesn't mean that all bilateral trade in the UK takes place at the same (half-hourly) price: but there is a single, transparent 'settlement' price for each half-hour, arising out of open-market commercial activity, that is an absolutely vital marker for any number of other commercial applications - settlement of forward deals (many of them representing essential hedging activity); basis of CfD subsidies; basis of 'index-related deals' for companies that want to be exposed to spot market prices (there are some); etc etc.  Open markets for commodities cannot exist without such things, even if the design of each market is strikingly different in detail.  The market we're sketching here looks not at all like, say, the spot market for Brent Crude: but they both have the same essential features.]

Why might there be pressure for change to a more fragmented set-up of regional-or-even-smaller mini (/micro) markets?

The argument is essentially theoretical, albeit based on experiences elsewhere.  Its most vocal advocate is Octopus, the UK's largest energy supplier (with tentacles in all manner of other sectors).  We might explain it by analogy with postage stamps.  Whether I send a letter to someone in the same town, or to Inverness, the stamp will cost the same.  Is that in any way reflective of the costs and dynamics of the post?  Patently, it is not.  Why shouldn't postal rates be properly cost-reflective?  It would surely make for efficiencies.  If you wanna live in Inverness, well, there you go.  It doesn't take much to make the cross-over analogies: if you are determined to build your windfarm in the North of Scotland, why should you get paid for getting your electricity into the GB-wide market at the same wholesale price as if you have a windfarm close to the 'centre of gravity' of GB electricity demand where your product is actually needed?  You sure as Hell cause a lot more problems for the Grid.  Hence the idea of moving, at least to regional wholesale pricing, if not pricing at an even more granular 'nodal' level. 

Oh, and for completeness, those advocating such changes say "it'll be cheaper for everyone in the long run".  That's a big leap of faith, though, because although there might (possibly) (in the long run) be an overall system gain from efficiency, the distribution of that gain is unlikely to iron out the positions of the winners and - more significantly - the losers, of which more below.

From first principles, other things being equal I am a big advocate of cost-reflective everything - you need accurate cost / price signals in order to know what's going on in economic life.  It's a matter of policy if you subsequently decide to subsidise those 'losers' deemed to be horribly disadvantaged by this, and unable to rectify matters themselves by reacting rationally to those signals.  That should be the exception, of course, because the aim is positively to incentivise rational responses!

But there are other considerations than efficiency, and I'll highlight two.  The first is political: the great cry of "postcode lottery" goes up - you can hear it already - there being, errr, winners and losers on a geographical basis, with corresponding heartfelt loser-lobbies, and locally-based politicians to heed them.  That includes residential energy users, but also electricity generators.

The second is Liquidity.  For markets to function, there must be liquidity: it's of paramount importance - a big topic, but for those who don't know why this is so, we'll hold a tutorial another day.  How big (in economic terms) does a region need to be before one can be certain of enough free-trading commercial activity to constitute a liquid market?  There's no precise science, and a lot of ignorance in play.  Yes, we can point to some apparently much smaller electricity markets than GB's, where there seems to be adequate liquidity.  But sometimes these turn out to be not genuinely separate markets, but rather 'branches' of the same 'tree'. 

All I would conclude with is this:  the current GB market[1], with the rather blunt, non-granular price signals it sends, may not be quite as efficient as would be ideal, but it is liquid (some say, 'indeed - but only just') and that's a precious thing, not to be taken for granted or tampered with lightly.  If blundering, incomprehending hands break this thing - and Miliband / DESNZ / Ofgem-as-currently-led[2] are just the poeple to do that - it'll be a disaster.  I'm not in the thick of the current market-design dynamics, but I sure hope they know what they are about.

ND
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[1] I had a hand in the design of the original manifestation of the present market (2001), though there have been many modifications since.  You'll accuse me of pride and undue sentimental conservatism?  Fair enough!  But I know what the dangers are.

[2] There have been previous Ofgem regimes - and before that agency came into being, its predecessors 'Ofgas' and 'Offer' before it - that were truly excellent.  The present management is sub-standard.

While Trump & Putin deal bilaterally ...

It looks for all the world as though Trump, against all his self-vaunted reputation as a dealmaker, has rather publicly gone into bilaterals with Putin on a basis that may be designed to achieve something for "America First", but nothing whatever for Ukraine.  And maybe that's exactly the correct summary of the situation.

But even if he has, Putin has also made some capital errors in this process: he's wetting himself with such pleasure at being talked to again by someone other than China and NK, it's not clear he can help himself.

Just count his well-advertised desiderata:  I'm not sure which, if any, count as Red Lines, but just look at the list.

• Russia gets all of the oblasts of Crimea, Luhansk, Donetsk, Zaporizhzhia and Kherson (Kharkiv has sometimes featured on this list, and we know what he really wants is Odessa, for a free crack at Moldova and total blockade of Ukraine from the Black Sea)
• Ukraine to undergo regime change (we must assume he has a List of Names), and a programme of 'denazification' which is a long list of demands in itself
• Ukraine substantially to disarm
• NATO to withdraw from X, Y, Z (list varies), and deploy no forces whatever to Ukraine
• Ukraine never to be admitted to NATO (sometimes demand extends to EU) 
• end of all sanctions etc
• return of all assets (no doubt "+ interest" etc)
• end of all blacklistings, charges of war crimes etc etc
• return to the comity of nations in all dimensions, G8, sports, etc etc: (we may guess he has a list of specific showy performative demands to seal this)
• tickets to the Oscars, Wimbledon, Pope's funeral 
• I have probably forgotten a few

So: how many of these could Trump conceivably deliver?  (without at very least expending every last drop of personal credibility in the RoW, and US political capital with the EU.)

So Putin won't get all this (that's putting things mildly): so he risks looking like he's spent a helluva lot of blood and treasure for equivocal results.  May not go down well back in Moscow.

OR: he simply wants to set Trump at the throats of Europe.  Now that, he might achieve.  But not all of Trump's merry men are knaves or fools, by a long shot.  And not necessarily the bombastic, unequivocal, easily-understood 'victory' Putin would be hoping to celebrate in Red Square, even though it might be epoch-making in the long run.

This ain't over by Xmas. 

PS, I didn't miss the interesting BTL suggestion from Mr Cowshed that Trump wants to set Putin up against Xi.  Nice theory!  Even more difficult to imagine, though.

PPS:  Forgotten a few?  Didn't even mention return of the small Kursk salient held by Ukr since last August!

ND

Weekend Reading: Drax / Womens Rights vs Trans

Couple of worthwhile MSM press articles here - unusually good; and for the final one, an unusual source, too.

Drax - the papers are full of Drax at the moment as Miliband has partially caved in to the Starmer / Reeves growth-fixation.  OK, he's reduced the annual amount of subsidy for the Yorkshire tree-consuming monster, but he's extending our payments to undeserving Drax by another 4 years, on spurious grounds ("TINA": well, Ed, there are better alternatives), all for the sake of keeping options open for Drax to build a 'BECCS' plant, maybe, some time in the future of its own choosing, if it gets given even more £££, no commitments made at this time.  That's one helluva costly option, without any certainty of ultimate delivery.  Madness.

Several of the MPs taking a broadly anti-Drax line in Parliament of late, have actually screwed up in what they've said on this fairly technical topic; and the press have not been much better.  Even the FT is all-too-frequently disappointing in such BAU matters, silently and implicitly siding with, errr, BAU (and ad revenues?)  This, though not 100% accurate, is many times better than usual.  Oh, and quite a neat, perky little snipe from Nils Prately in the Graun, too.

Trans - also from the Graun is this, from the increasingly confident feminist pen of Sonia Sodha.  Here's a flavour (my emphasis): 

No woman should be forced to change her clothes in front of a male colleague... Peggie shared her account of what happened with the tribunal last week ... Dr Beth Upton, the [trans] male doctor in question, walked into the [changing] room while she was partially undressed... Upton put in a formal complaint, and Peggie was suspended for bullying and harassment... The greatest responsibility lies with Peggie’s employer, who, instead of making separate accommodations for Upton, expected female colleagues to ignore the fact he is male [sic!]... The attempted justification is that everyone must adopt the minority belief system that someone’s sex is not a scientific fact but a matter of their gender identity, or some sort of gendered soul.  As a personal worldview, that’s someone’s own business, but it is wrong – and, in a work context, unprofessional – to try to force it on others in relation to single-sex spaces, services and sports...

The idea that a man who identifies as female is literally a woman, and must without fail be treated as such, has become a cherished principle for some progressives. Politicians and women’s rights activists speaking against this have been excommunicated from the left. Slowly, but surely, this is starting to change ... Abandoning basic common sense for unpopular policies that put women at risk does not go well for the left.

'Misgendering' the doctor, by name, in print!  Go Sonia, Go Graun!

ND

US / Europe / Defence: some early thoughts

We had it coming.

1.  Trump's demand for increased European defence spending is (a) no surprise, and (b) totally reasonable.  So: what, in general terms, is Europe going to sacrifice, in order to move towards him on this?  Its freedom?  Because if Putin makes his next territorial move while Trump is in the job, that's what is at stake.  

I'm guessing it'll be Net Zero etc.  That particular policy desideratum is already proven to take second place to growth in most countries, when confronted directly with the trade-off.  I reckon it will come a poor third, when Russia actively raises dust in the Baltics / the Polish border / the Balkans.

2.  Bringing this issue home to a Parliament near you: will Starmer dare to continue holding back on his minimalist 2.5% GDP defence spending "aspiration"?  There's no timetable for that, beyond "by the end of the Parliament"; and thus far the MoD is in the firing line for Reeves' upcoming departmental cuts like all the rest.  

3.  Looking just a little further from home: when is the EU going to tell the Irish they need to pull their weight on defence??  They've been shamelessly free-riding forever, and some day it has to stop.  I know they have neutrality built into their Accession Treaty, but they can damn' well start paying cash for the defence they've been enjoying for free. 

Loads more to say, of course, so have at it BTL.  

We had it coming.

ND

War to the knife with Greens: Starmer going for broke

Going for growth?  There's every sign Starmer is going for broke - a slew of deeply controversial decisions either made already, or being readied, all in a rush.  Someone's told him it'll be a compelling, critical-mass message for all those would-be investors in UK plc that he's really open for business and will trample down all nay-sayers into the building-site dust.  (And presumably McSweeney has told him that 'all at once' is the best tactic.)

• Support for Heathrow third runway (already signaled explicitly)
• 'Nothing to stand in the way of new nukes' (yesterday)
• 'Likely to grant Rosebank etc oil/gas production licences' (yesterday)
• Extension of subsidies for Drax (Monday, by all accounts)

Everyone has their favourite 'hate' - mine is Drax; & I approve of Rosebank - and there is many a Green (and Red-Green) who hates them all with equal passion.  Perhaps there is someone other than Reeves who loves them all?  The construction industry, I guess, although they get nothing from the Drax announcement because Drax won't be committing to it's putative, ridiculous next-phase project "BECCS" in the near future - in fact, maybe never.

Wow.  Has McSweeney decided there'll be a month of massive sound & fury, followed by the usual amnesia?  Are the lefties who've just had the Whip restored so pathetically grateful, they'll take the required vow of silence?  Will the construction unions come swinging in with big support?

And Miliband ..?  Ah yes, we've mused about him several times.  He's swallowed LHR3.  He is in favour of nukes, and can probably swallow Drax (with much sophistry).  But Rosebank?  Lots of pundits are tipping him to quit over this, but I reckon otherwise: check his performance at the ESNZ Select Committee last month (linked to in an earlier post) - he very studiously repeated the exact wording of the Labour manifesto pledge: no new exploration licences.  Rosebank et al don't need an exploration licence, just a production permit.  I reckon he's swallowed it already, but we may soon find out.  His substantial cred with the greeny-lefties is going to be stretched to breaking-point soon.  What spectator sport this is!

Interestingly, only the nukes on that list above involve government money - and even that has (thus far) been limited to the ill-judged, probably ill-fated Sizewell C.  Everything else will either be private money and/or subsidies levied on energy bills.  So none of these 'announcements' is anything more than permissory.  Performative policy, on the cheap.  May never happen (aside from Drax grabbing the new subsidies with both hands, of course).

So:  let's see if there's a lasting political cost.  Maybe, maybe not.

ND

_________

Sorry, no links on this post - not easy from a 'phone.  You'll need to google it all yourselves!

Wouldn't normally quote Jake Sullivan, but ...

The Biden administration didn't in any way distinguish itself on foreign & security matters (well, on anything really) but here's a great quotation from the outgoing National Security Adviser Jake Sullivan. 

If I had told you three years ago that Joe Biden was going to announce a special military operation to take Ottawa in a week and three years later that he was in the wheat fields of Manitoba losing thousands of soldiers a month with inflation over 10% and interest rates in America over 20%, 600,000 Americans either dead or wounded, and we're inching out little Canadian town by little Canadian town, you wouldn't sit here saying, 'Wow, America's really winning this war in a big way, that’s great for America'. You would never say that. But somehow we're saying, 'oh the Russians there doing great'. They are not doing great:  They set out on a strategic objective … and they have failed in that.

It's from an interview here.  He wants to be careful not to give Trump any ideas ...

ND

Trump's trade war may give us a new data-point

Trump seems to have fired the first salvos of a new global trade war.  Does he imagine, as did Putin with his shooting war, that opponents will rapidly fold and it'll all be over in days or weeks?  Well, maybe.  But Colombia might not have set the pattern.

Old Pa Drew was in the international foodstuffs game and, having been a WW2 soldier in his time, brought me up to the slogan "trade is better than war": and I'm a free-trader.   Well, but it was never a cure-all, as I readily admit.

On the other side of the account, history records nations who viewed sea-faring merchant activity as the work of the devil, and sought to ban trading altogether.  Which is a debate we perennially return to here at C@W in rather more subtle form: what's the appropriate degree of dependency on trade, as opposed to national self sufficiency?  There's no scientific way of resolving this question, even though there are metrics one might try to deploy.  

In any event, some trade-dependencies are faut-de-mieux:  I was once posed a deliberately provocative question in a seminar by a Chinese energy economist, relating to Europe's dependency on cross-border electricity trade to keep our highly interconnected grids functioning: this was surely a major strategic weakness and a Very Bad Thing, she demanded.  I politely replied that, yes, sometimes import dependency can work against you, and that *ahem* some countries were dependent on imports for their oil ...

Anyhow: the rationale for trade is, of course, that it engenders efficiencies.  The Trump Trade War might just give us some hard data on just how costly are the inefficiencies his stymying of free-flow might bring about.

Then again, maybe everyone hastens to do his bidding...

Looking forward to hearing from some of you supporters of mercantilism and self-sufficiency out there.  (I'm caricaturing a bit, I know.)

ND  

DeepSeek: capitalism at its finest!

Trump is right that DeepSeek is a wakeup call.  For a very long time many on the capitalist side of the argument (including myself) have taken a degree of complacent comfort in the highly derivative nature of Chinese technology.  One of out BTL commenters even went so far as to say that reports of a Chinese stealth fighter couldn't possibly be true.  Of course, we've long noted the undeniable, gargantuan successes of China's mercantile strategy, but hey, that's how Japan, S.Korea and Taiwan joined the club. 

And now, DeepSeek!   Assuming it isn't a fake - and I think we may - it represents an all-time classic example of capitalism at its finest:  people with strong commercial motivation, creativity, and sufficient political freedom - highly qualified, but sufficient - to give rein to it;  and the innovations flow!

And of course in a frontier space like LLMs, random disruptions and breakthroughs are to be expected.  We just need to recognise that a western cultural backdrop is not the only fertile context.  

So 'wakeup call' is all we need to say.  Provided that those who hear it are not just the complacent, comatose denizens of Silicon Valley.  Now, what was it about that stealth fighter again?

ND

Labour headed for serious internal strife

The Starmer government has been trying the patience of Labour members from MPs downwards, ever since the 2-chid allowance and winter fuel payment things, not to mention the freebies.  Their mealy-mouthed stance on Gaza enrages further tranches of their base.  Kow-towing to Trump - and who knows what that might entail - won't go down at all well in many quarters.  But now Rachel Reeves seems to have cut loose altogether, and must surely be moving onto a whole new patch of extremely thin ice.

Growth as a panacea for, well, everything, has a moderately respectable economic pedigree (even if achieving it has seemed to be beyond UK politicians - and there are respectable theories about that, too).  Months ago we noted that the Starmer regime seemed to have come to it fairly late, and there's no doubt it's the only thing that matters now - to Reeves, at least.  It's also top of Starmer's rhetoric just now, but soon he may find he has a few competing priorities to juggle.  And ahead of any ultimate, actual growth-derived economic benefits arriving - a long-term prospect, at best - manic growth-stimulating policies come with a lot of near-term political downsides.

This all comes to a head when, last week, Reeves explicitly said growth takes priority over Net Zero etc.  Well, in that case, we can suggest several cost-saving measures right away!  That's after weeks of "the Cuts are Coming!", which is hardly music to the ears of the rest of the Cabinet - and the Party.  Then, to cap it off, LHR3 seems likely to be given the thumbs-up.  

Apparently, Miliband says he won't resign over LHR - and we know how exceptionally "loyal" he is.   OK, LHR might not technically be within his brief, so he might feel able to let it go.  But, seriously, if NZ is to be downgraded as a priority, there really are several material savings to be made there: Sizewell C is a current cash drain for no immediate gain[1], and numerous other smaller, stupid projects too (hydrogen for heating, this includes you - and many more besides).  Reeves' axe must surely swing in his direction as well as every other.  These cuts and blunt Go-for-Growth bulldozer measures will be pissing off Labour swing voters and NIMBYs everywhere on a big scale - and there's one helluva big, restive, worried labour backbench cohort.

Now I may be getting ahead of myself here, but I feel we see some of the bigger players starting to position themselves for genuine internecine strife.  Streeting is the one who caught my attention last week with his big, heavily-trailed "battle of ideas" speech - a sure sign; and of course Khan is always on the lookout for cues to work his passage back into Parliament and the leadership he fondly imagines is his by right.  They say Lammy is boundlessly ambitious.  Rayner is a joke, of course, but for completeness I feel it must be noted that Miliband is seriously radiating dynamic confidence & competence (that's "radiating", not "actually delivering"), and looks like leadership material [2] if anyone was in the market for it.  In a country like France, he'd have no difficulty in being a candidate to go round again.  Mandelson, of course, is always on expert manoeuvres and his favours are fairly fickle. 

Popcorn time, then.  And sooner than we might have expected.

ND

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[1] Not in energy terms, anyhow.  Of course, many say the underlying purpose of the whole civil nuclear programme is to subsidise the military nukes.  And I persist in viewing it as part of the overall craven France-mollifying strategy which of course involves the Small Boats issue.

[2] If you want to judge for yourself, view his performance at the ESNZ committee in Parliament two weeks ago - masterful stuff.

Does Trump know how to play Putin?

He's already winding him up mercilessly.  The context is that Putin's very substantial and prickly pride has been deeply wounded by being flatly ignored and personally banned by the entire western world for several years, and that his travel and international interlocutors are constrained to China, Iran, North Korea and, errr, back to China again.  He is absolutely desperate to be out on the World Leader circuit again, as fast as possible.  And in his optimistic moments his hopes are high.

Now, nationalist Russian sentiment is aggrieved - and is certain Putin is also angry - that Trump has failed to recognize with sufficient gratitude that Soviet Russia won WW2.  They say Putin will assuredly give Trump one of his "history-lesson" rants whenever they do finally get to talk.  He is given to rants of this kind: lengthy and rambling with a mind-numbing effect on audiences.  Nobody outside of the aforesaid China, Iran and N.Korea is trained to "listen attentively" to these things any more: the days of Fidel Castro at the podium are a distant memory.  

And in Trump, they have truly misread their man.

For all his gargantuan failings in many departments, Trump has a colossal amount of low cunning in the matter of personal encounters and human psychology.  Both he and Putin have made vast capital from their differing abilities in human engagement, so they both operate psychological theories of a kind.  But mano a mano?  When dealing with anyone other than meet-the-people walkabout audiences, Putin self-evidently relies on pure menace and intimidation - he even considers this a matter for pride and the TV cameras - a very Russian thing.  Look at the merciless, gleeful, premeditated way he literally set dogs on Angela Merkel, a well-known cynophobiac.  It'll be water off Trump's back: the man doesn't give a toss for such things (and probably won't even grant a face-to-face meeting).  But having already been baited, can we see anxious, urgent Putin going for everyone else's Plan A, viz abject flattery?  Really?

Both Putin and Trump are of course themselves the subjects of endless psychological analysis and speculation, professional and amateur.  But you know who can play them both?  Well, maybe Xi, who has the luxury of considering his chess-by-post moves very carefully, and never needs to make a move he's not totally comfortable with.  But Xi is unlikely to hold the key to restoring Li'l Volodya's fortunes in the Big World of Global Prestige.

The relevant answer is ... Zelensky.  If you've seen one or other of the lengthy TV documentaries on the man, you'll be in no doubt whatever that the little comedian / showman / war leader is absolutely masterful in his personal dealings - with whole crowds of foreign politicians as well as one-on-one encounters.  He, too, has had a very long time to ponder the arrival of Trump, but his conclusions and plans for this critical juncture will have been a lot more adroit than the twisted frettings of Putin.  I'd rate Zelensky's chances quite highly of making a bit of strategic hay over the next couple of months.

On the other hand I doubt very much that Putin's upside scenario  - Transactional Trump the famous isolationist, wants a quick PR win, and gives me everything I want - will play out anywhere other than in his most optimistic dreams.  The downside - still in the global naughty corner come summer, Ukrainian drones still falling nightly on my oil refineries, and another trip to Pyongyang in the diary - looks a lot more likely.  

And Zelensky will still have a ghastly, grinding war on his hands.  Perhaps with a few more weapons in the armoury, though.  And Xi will continue to sit there quietly at his own global chessboard, planning his Taiwan campaign.

ND

"50 new gas-fired power plants for Germany" - and UK?

"German opposition leader vows to build 50 gas-fired power plants if elected", the story goes.  This is Merz, leader of the CDU and potentially Germany's next Chancellor (although see the 2025 Predictions compo).  50 is hyperbolic[1], but the point remains: Germany is hugely lacking in natural energy resources and, having bizarrely closed all its nukes on Merkel's whim, can't remotely rely on its large but actually not very impressive fleet of solar and wind power.  (Solar?  This is N.Europe.  Wind?  It has only a very small coastline, and that's in the wrong place.  Coal & lignite?   In abundance - but not "green", of course.)

So where would the gas come from?  Well, "imports": but lack of detail on this is just one element of the hyperbole, and his statement isn't any kind of practical plan.  But the point remains: the more wind & solar in a power fleet, the more strategic, long-term[2] backup power is required.  Right now, batteries aren't even remotely candidates for this, and won't be within a realistic planning period.   Pumped-storage hydro is great but in limited supply.  Imports of electricity are what Germany relies on right now but the Scandinavians are getting pretty testy about this - it plays havoc with their own markets - and may well pull the plug. 

Which brings us to our own shores.  Large-scale build-up of solar and wind - check.  Growing electricity demand (after more than a decade of decline) - check.  Declining nuclear capacity[3] - check.  Reliance on imports which might not be a practical proposition indefinitely - check.  So: continued, nay, growing need for gas-fired backup - check.  Even Little Ed Miliband realised this before the election, and now plans to retain the full 30-35 MW of our existing fleet[4] in his feeble "100% decarbonised by 2030, oops, make that 95%, it's what I always meant, it's the same thing" non-plan.

Here's the thing: these things are easy for a politician to say but that's not enough.  Capital plant can't equally easily be made to stand around doing nothing all year, but spring into life with ultra-high reliability on the odd, unpredictable occasion it's needed to be in action for a week or so.  That's not how the world works.

To be fair, HMG has gone one step further and has come up with a new subsidy for which backup gas-fired plants would qualify - but that's only the financial aspect.  The practical and physical aspects are legion, not least because if Mili's plans for decarbonising home heating progress[5] the overall scale of gas infrastructure[6] will be diminishing materially, and it would be comprehensive extant infrastructure paid for by someone else (as it is at present) that a rarely-used gas-based backup system would parasitically depend upon.

Yet another facet of the infeasibility of Miliband's plan.  He gave a very upbeat (and in fact, rather good - in political terms) performance in front of the Select Committee last week, and one can easily see how Labour MPs who don't understand the subject matter (evidently including Starmer and Reeves) would be inclined to view him very favourably and trust him implicitly.  But it's all destined to hit the rocks of hard reality at some point.  When?  I'm not sure.  Meantime, a heap of subsidy-contracts are gonna get taken by some players - and paid for by us.

ND

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[1] ... but music to the ears of hard-pressed Siemens!

[2] In this context, 'long-term' means weeks.  Batteries are only good for hours - which is very useful for some purposes, but not for Dunkelflaute

[3] Hinkley Point C start-up is a distant prospect, and the existing fleet is in decline, even if its life is prolonged to the max and the ONR throws safety considerations to the winds

[4] Numbers vary from document to document

[5] His targets won't be met, of course, but the gradual replacement of gas boilers with heat pumps is inevitable, even if at infinitesimal pace.  Ditto EVs

[6] By 'infrastructure' I mean not only the pipelines, storage facilities and LNG import terminals, but also the commercial and 'soft' aspects associated with there being a vast amount of gas sloshing around the UK all the time & particularly in winter:  lots of long-term supply contracts, gas traders, commercial, engineering & tech expertise, market liquidity etc etc - in other words, a thriving, extant gas industry of critical mass.   

Trump: using the levers of his very great power

A longstanding strategy which is often attributed to (e.g.) Israel is to nurture the reputation of being outright crazy, with the 'benefit' that everyone else thinks:  they're crazy enough, they really might do it!

Re-enter Donald Trump, who is already claiming - probably with justification - to have been instrumental in the (putative) ceasefire in Gaza.  It's pretty obvious his influence is already being felt elsewhere too, such is his hard-earned reputation for maverick behaviour, no guesswork required.  What interests me most is that over the past few weeks he's been showing some serious understanding of just how far this could take him, and just how extensive are the levers of (indirect) power he will enjoy.

Long-time readers will know I often praise Mandelson for having a genuinely broad and creative approach to what can be done with power.  There aren't so many with that degree of lateral thinking.  We been given glimpses now, as to just how widely Trump is casting his gaze and, allied with his "tariff is my favourite word" weapon, it's pretty revolutionary.

Start with his designs on US territorial expansion, a topic possibly considered dead since the Alaska purchase of 1867.  Greenland.  Canada!  People are already sketching out how it might be done.  Then think about Europe.  "Unless you guys increase your defence spending, NOW, to 3% GDP, I'm withdrawing from NATO.  You have three months to pass the legislation."  And so on - no need to give the man ideas.   

Perhaps Mandelson isn't such a bad choice for Ambassador after all.

ND

WFH "costs nothing". WTF? Polly Toynbee is a fool

WFH  -  "It’s free, it’s sensible and it makes workers happy. The government needs to accept that this is the new normal"

Guess which idiot wrote that?  Well, no prizes, it's Polly Toynbee, in a Graun piece entitled Labour has been sucked into the WFH culture war. It should know better. 

We'll let her make her case, as she bewails what she detects as government reverting to neanderthal office-bound working practices. 

... many workplaces have thrived because of it ... A perverse strain of rightwing thought opposes almost any social progress that improves other people’s lives ... Zoom meetings save time and wasteful travel, employers are free to hire talent from anywhere in the country, and employees have escaped escalating property prices in London and steep commuting costs. WFH has been a boon for the climate, too; according to one US study, two to four days of remote working a week lowers carbon emissions by between 11% and 29% ... hybrid working policies [are] key to attracting talent ... people value the ability to work from home two or three days a week about the same as they would an 8% pay rise.  Does [the government] want to be nice to employees, or nasty? ... new employment rights will help civilise working life. Growth-boosting plans to get “economically inactive” people with disabilities or caring responsibilities into jobs will only succeed with maximum flexibility. And WFH, remember, is free, which makes it look like a very sensible policy in a year when large pay rises seem unlikely. 

Setting aside the ridiculously hyperbolic conclusion one is supposed to infer from that deliberately misleading sentence on climate benefits, we can assess the force of what she's saying, before entering the counter-arguments (which, true to her miserable form, she does not acknowledge at all).

Efficiency:  yes, and nobody disagrees, Zoom etc as a facility is a fine thing to have and can make for all manner of efficiencies.  So what?  The telephone has been around for well over a century.  I attended my first "teleconference" in 1986: the resolution of the mug-shots wasn't great, but even then the sound was fine and it had the ability to switch to doc-display mode.  Presumably Toynbee inhabits a tech-free world of Graun chatterers who imagine it was invented in 2020.

And ...  and?    Well, excepting only the "costs nothing" point which we'll return to, everything else in her case is basically "staff like it".  Well, staff say they like a lot of things: more money, extra holidays, free childcare, slap-up canteen lunches, company car, health insurance, non-contributory pension, golfing away-days ...   and they all take their place in a businesslike assessment of how the trade-offs are going to work out.  So let's get to the trade-offs, eh, Polly? 

It's really odd because I would have thought lefties, softies and tree-hugger types would have been the first to acknowledge the absolutely critical importance of direct human contact.  Actually, many of them would.  Humans are designed for face-to-face interactions, it's utterly intrinsic in our makeup.  Whenever this breaks down, inhumanity takes hold.  That's an extreme statement of the case, but in a less dramatic form: you try negotiating a complex deal, or making an important new hiring, by any other means than regular over-the-table contact, F2F.  And over the coffee-break - and over a beer afterwards.  I guarantee that in direct competition with companies that insist on a solid percentage of time spent face-to-face with colleagues and counterparties alike, the company that says OK, WFH, sounds fine to me, just check in online a couple of times a week will lose out very significantly over the long run.  And everyone who is serious about getting things done is coming back to this view, albeit belatedly.

What we are running into is the world of people who advocate that anyone can self-diagnose with PTSD or ME and be "supported" by the state as they skulk in their bedrooms.  That any child who doesn't like school or isn't top of the class needs an individual SEND plan + tutor at school, or can be "home-schooled".  Contrary to what people with this mindset believe, there can't be a high percentage of staff who are truly more productive "WFH" four days a week.  For the avoidance of doubt, there will of course always be some people with genuine PTSD / ME / SEND problems / high unsupervised personal productivity etc etc.  But percentage-wise, not many.  Toynbee is extrapolating from her own working practices and assuming the rest of the world runs like hers: a self-motivated journalist tripping around from home-office keyboard to restaurant-lunch-on-expenses, and back to keyboard again.  The woman is a fool.

So:  "WFH is free"?  Nope, it comes at a serious cost:  net efficiency /  productivity / effectiveness at its most functional and cash-oriented; and erosion of face-to-face human contact at its most elevated.

As with many issues, the key is resolving the trade-offs.  Toynbee, pathetic polemicist that she is, doesn't even acknowledge them.  She is a fule and I diskard her uterly, as Nigel M would say. 

ND

_________________

PS, this is all in the same week as Toynbee writes "Ignore Musk, ignore the critics – you’ll feel the benefit of Labour’s policies in your pocket before long".  What more do we need to say?

AI and government: what could go wrong?

That's about it, really.

Blair has obviously got at Starmer.  "AI Superpower"?   Well, if government has anything to do with it, AI Superpower, my arse.

Civil servants are crap at tech stuff (inter multa alia) and picking winners - look how many iterations of 'government portals' etc they go through, before eventually they get websites that actually work.  Then, they put everything online and make applications for stuff self-certifying, so that the slick system they've come up with is robbed blind by scammers.  We know this.  Do we need to rehearse the PO scandal, NHS databases, etc etc etc?

We also know that the UK is capable of being a superpower in all sorts of techie arenas: FI cars; computer games; FinTech;   ... errrr ...   And we haven't jumped with both feet to hobble AI with regulations, unlike the EU.  But electricity, there's the thing: the next generation of data centres will be ferocious power-hogs.  The US will take this in its stride (well, maybe not California) but we are looking shaky right now: Jan 8th was nearly blackout time, and data centres can't be doing with that.  Starmer has obviously been told about this one because he's muttering about SMRs - maybe he hopes the Big 7 will pay for his energy policy at the same time as gladdening his heart with multi-billion AI-related investments here.

The answer has to be: (a) facilitate it, planning-wise; (b) leave it alone; (c) buy, for government use, good products when they become available and are fully tested.  But for pity's sake don't pay for the DWP to be the beta site for some piece of premature vapourware.  Because that's what this all looks like.

ND

Middle-class morality tale: 'Rogues' ... continued

Having moved on from Jailbirds I have Known to mere Rogues, here's the story of a man we'll call Desmond.

I met Desmond via my in-laws, who lived in a classic and very respectable English market town.  A tubby, bustling, jovial fellow, Desmond was well known to all in the Rotary / Conservatives / Probus circles (Freemasons too, I'm guessing).  He had been brewery manager at a well-known county firm, and was now comfortably retired with his wife in a smart bungalow, very much playing the latter-day country squire.  When he wasn't out shooting, he attended every good lunch and dinner going - and that's quite a lot in a town of that sort.  He was easy to like, but behind his back there was a lot of cheery laughter at his expense, because at every meal, his roving eyes were on the lookout for extra helpings: "... If you're not going to eat those parsnips ...", and he would brazenly help himself to his neighbours' (plural) unwanted scoff.  This is not at all the done thing in these circles, but Desmond was shameless.  And tubby.

The other aspect of note was that Desmond plus Mrs were always off shopping in the smart stores in the bigger county towns, and would invariably lunch there too.  This small-scale but relentless extravagance was also widely commented upon - even well-off county folk tend to abstain from conspicuous over-consumption - and one day it came to a juddering halt.  The consumerist couple had, it transpired, taken out all the equity from the bungalow, spent themselves into the ground, handed the keys back to the bank and, accurately presenting as homeless and penniless, threw themselves on the mercy of the local authority.

By some miracle, they were immediately found a small but comfortable flat at minimal rent in a sheltered housing complex based around a smart 18th century town house in pleasant grounds, not two miles from where they lived before.  Doubtless, several other welfare benefits flowed: if means-testing was involved, they qualified!  After the immediate disbelief had worn off, the reactions of their many acquaintances were critical, but by no means terminally outraged: nor were Desmond & Mrs shunned from polite society.  Somehow in all this they had managed to keep the shotguns & car - and proceeded to continue with life much as before, less the shopping and lunching expeditions.  Well, there was nowhere to put new purchases any longer.  Amazing stuff.  Over time, the commentary perceptibly shifted from "feckless bugger" to "not sure why we don't do that, too!"  As periodic visitors to this saga of everyday county life, Mrs Drew and I were possibly even more surprised by the widespread eventual acceptance of Desmond's dissolute doings than we were by the deed itself.  We even half-wondered if we were detecting a faint new hint of "oh well, eat, drink and be merry, eh?" in the general attitude of Desmond's circles.

Anyhow, notwithstanding his shameless insouciance there was probably some stress involved in all this for the portly Desmond, and some months later he suffered a heart attack.  He lasted but a few days in hospital and suffered a fatal relapse after lunch one day.  Fittingly, his last words were reliably said to have been: "I never did get my pudding..."   Middle-class entitlement, eh?  

He would have wanted to go that way, everyone agreed.

ND

At last, the 2025 Predictions Compo!

OK, here we go for 2025.  In keeping with tradition, answers on a postcard BTL, if you please.

*   *   *   *   *

1.  Name of first sitting MP defecting to Reform

2.  Date of Starmer's first Cabinet reshuffle, as defined below.  One bonus point for each correctly-named departure or clear-cut demotion.  Two bonus points for any complete change precisely identified (named outgoer and named replacement)

3.  Anything you care to predict about the German Fed elections

4.  Composition of German government coalition by year-end (if none finalised by then, say 'none')

5.  Dollar / rouble exchange rate on Christmas Eve

6.  Oh, all right then: FTSE100 on Christmas Eve

(For masochists)  Bonus wildcard essay question : at headline level, what will be the state of play in Ukraine at year-end?

Go for it!

ND

________

"Cabinet reshuffle" = two or more changes to the Cabinet roster, unforced by resignation or death.  Splitting of an existing Cabinet post into two or more new positions doesn't count per se - only if accompanied by reshuffle as defined above.

Ukraine in Kursk: quick assessment

The 2025 Predictions compo was coming along - but has to wait!  Because ...

A short while ago we suggested here that Putin was prone to forgetting that the enemy gets a vote; and that Ukraine, already shown to be adept at springing surprises, was likely to have a couple more up its sleeve before Trump convenes any kind of sit-down around a table somewhere.  Yesterday saw the start of one such: a significantly renewed Ukrainian effort on Russian soil in the form of several attacks from their Kursk salient and elsewhere in that vicinity.

The Russian milbloggosphere is in characteristic turmoil over this, and with a new twist.  Previous big surprises - the Wagner 'mutiny' of last year and the Kursk incursion in August - caught them with very little information to go on, and they floundered.  This time, because the Kursk salient was already an area of active operations and an issue that exercised patriotic milbloggers greatly, they have a lot of contacts on the ground feeding them detailed, if extremely patchy and chaotic information.  They also have the usual kneejerk drivel from the Russian MoD, but they know that's always going to be mendacious and wildly complacent.  All in all, they haven't known what to make of it all, and initially resorted to parroting the official "all tidied up, nothing to see here, move along" stuff.  But they knew that wasn't right.

As of this morning, they've settled for a handful of agreed conclusions:  

• what's been seen so far isn't the main Ukrainian thrust, which is yet to come;
• even this "diversionary" activity has met with some success;
• Ukraine is deploying electronic warfare measures that are neutering Russian drones, along with some seemingly effective all-arms coordination in depth.

None that I've seen have made the obvious comment, which would be to liken this winter push to the Battle of the Bulge:  though one has suggested it is a "blow of last hope", which maybe amounts to the same thing.

Finally, the most knowledgeable blog-writers have held back from drawing preliminary conclusions altogether (and of course Putin, as ever in such circumstances, remains entirely silent and missing from the public sphere), which is wise because the Ukrainians are just as good at chess as the Russians and have had many months to plan this move.  The date of Trump's inauguration has, after all, been known for quite a while.

Am I going to fall into the first-draft-of-history-trap here?  No: just a handful of points.

• this "blow of last hope" should have been blatantly obvious to Putin et al, both in general and in detail: yet again, his ability to be thrown by tactical events seemingly knows no limits: we can adduce half a dozen such unforced errors around his sphere of (notional) influence since the Syrian debacle alone.  He may have a brutal 'theory of (long-run) victory', but if he trips up and falls flat on his face in the meantime, it might still not work out.
• plenty of time between now and Jan 20 for more ...
• this year has seen some deeply impressive mil-tech advances from Ukraine's still highly capable defence-industrial base.  I've been expecting the electronic warfare anti-drone breakthrough for 18 months - they really needed it for their 2023 summer offensive, but better late than never.  There may be more to come on this front, too: and while tech advances tend to be countered by the other side after a while, the issue right now is the next couple of months. 

On paper, Putin shouldn't even be worrying about Kursk - he'll get it back for sure in due course, one way or the other - but I'll bet he is.

ND

The Campbell Betting Syndicate: really, really funny

An important C@W morality tale

If you haven't caught it amongst all the holiday excitement, there's a remarkable story afoot of how Alastair Campbell's son Rory allegedly took a load of high-rolling mug punters for several million quid, and has now disappeared - along with the money, naturally.  It's said he's suffering from the mental stress of it all, naturally, and must be left alone.

If these allegations are true, this is really, really funny.  It merits coverage on C@W because (as well as being hilarious) truth be told, mug-punter "investments" are a perennial source of finance for capitalist ventures the world over.  This is an important morality tale.  It is every adult's job to ensure that they don't themselves join this gravy train, and that they do raise their children to recognize the danger signals.

And the biggest danger signal of all, flashing away in lurid neon lights, is - "I've got this infallible system ..."!  For Pity's sake, a betting syndicate!!  Or, as we should correctly term it, just another Ponzi scheme.  With the outside chance that things work out in the short term, but are guaranteed to crater when, as always, betting against the house doesn't work out in the long run.

Making things more delicious than usual, the endlessly entertaining, worldly-wise Campbell senior (+ Mrs C) seem to have sunk quite a bit of dosh into it[1] themselves.  We all hope they got out in time ...  *Ahem*. 

Was Campbell Jnr betting against the house?  Well, details are scant, but I think that's what we must infer: he and his oh-so-mathematical "system" [2] thought they knew better than the big Asian bookies, where liquidity is such you can go large without moving the market.  Well, it is indeed sometimes realistically possible to know better than the odds on offer in a big market[3].  But if you're so damn' smart, the risk-free approach is to arbitrage, not simply to indulge in naked speculation[4].  And then ... there's credit risk on top!  Not only might you not know better than the market - when you do come out ahead, the bastards might not pay!  Which is what, we are told, happened here.  I mean, an online bookmaker in the sub-continent?  Well well well.

Just to round off, read the last couple of paras in that story - the pugnacious press release.  This story, we are angrily told, is one of outrageous breaches of confidence by Master Campbell's investors, which naturally causes the former to withdraw his offer to compensate the latter.  It's all their fault, as anyone can plainly see.  

I wonder who on earth drafted that?  The old master is losing his touch, methinks.

We'll have our own fabulous C@W speculative venture here in a day or so ... the 2025 New Year's Predictions Compo!  Watch this space.

ND

______________________

[1]  It's not wrong - indeed, it can be truly honourable - for friends and relatives to back their nearest and dearest, of course: I've done it myself several times.  But only on businesslike terms that delude nobody, and satisfy everyone before, during and after.

[2] 'Mathematical' systems are the worst.  Very few people really understand probability.

[3] I have a friend who genuinely makes serious money on the horses - or did, until he was no longer physically mobile enough to work his energetic system, which is as follows:

1. study the form, exhaustively.  There's plenty of good data
2. go to the track on the day, and check out the horseflesh for yourself in the paddock.  It doesn't take much experience to spot a horse that is lethargic, skittish, spooked etc
3. arbitrage[4] the on-course odds (knowledgeable) against the Tote (mug punters watching a TV screen hundreds of miles away; sentimental betting on names that sound nice etc etc)
4. rinse, collect, and repeat.

This does entail a very busy afternoon scurrying around, however - plus a little bit of instant arithmetic.  And the credit risk at UK race meets is pretty low.  Incidentally, my man is always willing to be completely transparent: if you can keep up, he'll give you a precise running commentary as he puffs up and down, and you can emulate his every move - if you're quick enough.  Sadly, his puffing days are over.

PS:  the very fact that such a method can be successful, suggests to me that UK horseracing isn't particularly bent.  The dogs - ah, now that's another matter ...

[4] Pure arb in horse-racing is quite difficult for anyone except a bookie (or someone in league with a bookie) to do.  So I must accept that  'risk-free' here is too glib.  
 

What will 'President Musk' decree?

Stuff his new best friend won't much like, we have to guess - based on his attachment to EVs and immigration and the like, not to mention rogue outbursts in public whenever the mood takes.  

Where and when do we see this all coming to grief?  Overweening "superstar advisers" (Rasputin, Cummings, Gray, etc) rarely work out, even for a short while.

We can add this to the list of New Year prediction questions.  Coming soon.

ND