Electric cars line up in Newton Abbot

Newton Abbot’s first electric vehicle (EV) roadshow held on 25th September was well attended, with lots of people stopping to chat to members of the South West EV Owners Group and others who had brought their cars along.

The event, organised by Action on Climate in Teignbridge (ACT) and ChargeWorks, a local electric vehicle consultancy, lined up 11 EVs by the clocktower.

Some of the cars were almost new, others already up to six years old. Those on parade included Nissan Leafs, Tesla Models S and 3, a Renault Zoe, Hyundai Ioniq, Kia e-Niro, VW ID.3 and a VW e-Golf – just a small sample of the EVs available today.

One Tesla owner, John, had come from Bridport in Dorset for the day to share his enthusiasm for the joys of going electric. He bought his first Tesla in 2016 and recently switched to  a newer model. He decided to buy an electric vehicle to be greener, he says. He also has solar panels, runs a wood chip range for his central heating, and is investigating a solar thermal panel for hot water.

John’s Tesla (the burnt orange one in the picture) has a range of 300 miles, but he confesses on long journeys he has to stop every 150 miles for personal reasons, and the car only takes around 15 minutes to charge on a rapid charger anyway.

David, another Tesla owner from Plymouth, says his running costs are much lower than on his old diesel car – £250-£300 a year for his 12,000 mileage, down from £1,500. Another advantage is the lack of any scheduled maintenance. Electric vehicles still need servicing regularly, to replace windscreen wipers, change brake fluid, etc, but with no emissions test and fewer parts, repairs are minimal. “You can expect to do 300,000 miles without any problem,” says David.

His enthusiasm was infectious as he talked about the technicalities of charging and the price of new cars. He says EVs may appear expensive but hold their value better than petrol or diesel cars, and as they have more space inside you can consider a smaller model than you might otherwise have done.

Emma Fancett of ChargeWorks estimated around 800 people walked past the cars and stopped to chat throughout the day. “Some hadn’t previously talked with others about the electrification or decarbonisation of private transport,” says Emma. “Others had, but were keen to find out more and debunk some of the myths they had been harbouring.

“Some walked the length of the line up, chatting to each owner to quiz them on their experiences, tips and tales, some went straight for a car they were interested in to scope it out for a future purchase or lease. Others enjoyed more general conversations around carbon emissions, the fuel crises, technology or fast cars.”

Julian Stringer of ACT says: “The selection of available EV models is expanding all the time, so we are thinking of arranging another event in the future, and would be particularly interested to hear from owners of other types of EVs at the more affordable end of the range who would be interested in sharing their experiences.”

Cars weren’t the only vehicles on show – some electric bicycle owners were also around to spread the word about the joys of two wheel travel. Richard from Newton Abbot uses his Cube bike, with a powerful 500w motor, to commute to work in Ashburton. It has cut his journey time by 10 minutes compared to his regular bike and allows him to arrive at work cool, calm and collected instead of in a lather from pedalling hard.

Richard still goes out for leisure rides on his ordinary bike, and has persuaded his partner to accompany him on the electric one. She was so impressed with the ease of cycling on it they ended up in Moretonhampstead when they had planned on just going to Bovey Tracey on the cycle path.

Electric bikes are often an addition to the household collection of bikes rather than a replacement. Once you have made the switch to an electric car, though, it seems there is no going back. “You will smile every time you get in the car,” says Tesla owner David.

Wildlife Warden September Newsletter

This month’s newsletter covers a talk on Cirl Buntings by Cath Jeffs, a conservation officer with the RSPB; information about upcoming webinars; the Great Big Green Week events held in Dawlish and Newton Abbot; plus a summary of the projects Wildlife Wardens have taken on around the district.

September Newsletter

After a Summer break a bumper September Newsletter is now ready and waiting covering the following topics:

  • The Great Big Green Week 18-26 September
  • The IPCC’s 6th Assessment Report
  • Lottery funding for communities to take action on climate change
  • Air Pollution
  • ACT Wildlife Wardens
  • The Fossil Fuel industry’s hidden failsafe
  • An economy for climate & nature
  • #Back the future – support local projects through crowdfunding
  • Government releases its Hydrogen Strategy
  • Why is climate and nature getting the short straw with government spending?

Why are climate and nature getting the short straw with government spending?

1. Introduction

When considering how to mitigate the effects of the climate and nature emergency, or what has to be done to adapt to the effects we can’t mitigate sufficiently, the talk will mostly involve a myriad of practical things like switching to renewable energy, electrifying transport, changing the way we grow and consume our food or retrofitting homes for both insulation and to cope with hotter outside temperatures.

In the majority of these changes and solutions there will be an upfront cost, ongoing costs as well as savings.

How and when money is spent therefore is the one aspect that connects all the these disparate things together. It is pointless to discuss and plan for house retrofits or even speculative technologies like carbon capture unless someone, at an early stage, is prepared to put up some money to start things off, or commit to longer term risk-taking where it’s needed.

In its 6th Carbon Budget report, the Climate Change Committee produced projections for the capital costs and operational savings for all of its recommendations to achieve net zero by 2050, as shown in Figure 2.

Within 15 years the graph projects that we, as a country, must be investing over £50bn pa, and also shows increasing savings, eventually offsetting most of the investment. However, neither the report, nor graph, attempt to show how these sums should be split between the government and private sectors as this will be determined by government policy.

As has been the case for decades, and as we saw with the Covid vaccines, if innovations and new technologies or sectors are to make it to market, or be part of fixing a problem, the original risk investment is almost always shouldered by government in the form of funding for say research and development, viability trials etc.

In this case, however, the government is holding back from publishing its own financial projections in full and is likely to start small and to involve what it sees as constraints in terms of what it can tax and borrow to cover the costs. 

The following pieces therefore provide a summary of how money is created and flows around the economy in a way that suggests that in the real economy, of people and resources, these constraints are fictitious and indicate political rather than financial obstacles to government investment in the climate and nature emergency.

1. Introduction

2. The banks, the government and that Money Tree

3. The mythical government purse

4. Government “borrowing”

5. So what is Quantitative Easing (QE)?

6. Further reading

Why are climate and nature getting the short straw with government spending?

2. The banks, the government, and that Money Tree

Back in the late 1970s, after qualifying as an accountant, I went to work for a large city practice. I was told by those who had experience of them that, if I valued my will to live, I should avoid bank audits. Whilst training I had seen hundreds of clients’ bank statements, for all types of account, and so felt I knew all I needed to know about banking.  

Up until recently I believed the conventional wisdom that, when my bank lent me £500 to start my own practice back in 1981, it could only do so because it was backed up by the money sitting in the accounts of other customers. 

I received the first bank statements for my business loan and current accounts, seeing £500 credited to the latter and debited to the former, but even as a wizard bookkeeper, I never appreciated that this was the end of the story, one credit, one debit, nobody else was involved.

Last year I watched a 2014 video on the Bank of England’s website explaining that 97% of the money available to us in the economy is created by what I describe above. In other words, my bank created that £500 out of thin air and I spent it out into the economy. Then, when I finally repaid the £500 loan, the money was effectively destroyed. 

Along with the video there was a debate in Parliament about this money creation and it turns out that, in a poll, 90% of MPs had no idea that it worked like this. Like me, they believed banks were constrained by the amount held in customers’ accounts. 

My retired auditor’s brain then dug deeper and I learned that as well as high street banks being  licenced by the Bank of England (BoE) to create this new money it too has a similar role in relation to government spending. So when the government tells the BoE to pay the NHS £4bn, the bank credits the NHS’s bank account with £4bn and debits the Treasury’s overdraft account with £4bn. That’s it, nothing else.

The surprise was that this overdraft is created anew every day, the BoE doesn’t turn to the Treasury and say, “hold on there’s only £3bn of taxpayers’ money sitting in your account”, it just spends the £4bn into existence on overdraft, rather than loan.

So, the Government instructs the BoE to create money for its own spending and commercial banks create the rest whenever they lend to anyone. 

The above view on government spending reflects a new way of looking at how governments, like the UK, who issue their own currency, control the money flowing around their economies. There are several threads but, in general, it’s known as “Modern Monetary Theory” (MMT) and this is explored further in the following pieces.

1. Introduction

2. The banks, the government and that Money Tree

3. The mythical government purse

4. Government “borrowing”

5. So what is Quantitative Easing (QE)?

6. Further reading

Why are climate and nature getting the short straw with government spending?

3. The mythical government purse

Back in the 1970s & 80s, my prime function as an accountant revolved around the concept that tax was an overhead not an obligation and so, according to clients and my bosses, it was my job to keep their tax bills as low as possible.

As I developed my own practice and tax regulation became more sophisticated I got fed up with this pressure and started trotting out the line that, “as you are using the roads, police, schools & the NHS, it’s my job to make sure you pay the right amount of tax”.  In other words, as we still hear today, tax pays for government spending.

So all these years later how does this hold up to scrutiny under the realities of money creation and through the lens of MMT?

Tax is collected into a government account with the BoE but there’s no matching or correlation with government spending. In other words, rather than “tax & spend” it’s “spend & tax” with the policies for both sides being independently decided and processed. 

To sum up, similar to my bank loan, the government tells the BoE to spend money into existence and then the tax system claws back some of the money, effectively destroying it.  There is no “government purse”, no “taxpayer’s money” and certainly no household type budget that you or I have to operate. Unlike the government, we are limited by our income, we can’t create new money.

The best analogy for all of this is air miles. You fly and earn air miles and then later you reclaim some or all of them against future flights. The operator records both sides for you but doesn’t keep its own stock of air miles to hand out, it just creates them as you fly (spends), and destroys them as you reclaim them (taxes).

Every month, the government adds up what it has spent and deducts the tax collected, reporting the difference as that month’s shortfall, referred to as a deficit*.  It does this because that’s what it has always done; from 50+ years ago when there was a hard limit on new money. The government deficit isn’t lost money, as it would be in say a business, it merely reflects the net amount of money created that month that the government has left out with us. It’s our surplus sitting in millions of bank accounts.

At this point there’s an obvious question. If the government spends out more than it collects, month after month, this will just accumulate a larger overdraft with the BoE. Surely, as an independent public body, the BoE will want the overdraft cleared?  

The government does actually clear the overdraft by “borrowing” (more in the next piece) but, as the BoE is owned 100% by the Treasury, even if it didn’t, the Bank could never send around the bailiffs to collect. To keep it simple, just think of the BoE as part of government.

So my line to clients bemoaning their tax bills never did hold up to scrutiny.  When the government decides to spend on something, be it the NHS or free school meals, despite what it says, it’s not a “who’s going to pay?” or “what public spending will we need to cut?” decision. It’s a political decision. The government can always pay for anything in pounds sterling it needs to, it can’t default or run out of money.

That’s not to say that the government should just keep spending (printing) money without limit. If too much money is allowed to flow into the real economy, ie more money than can be absorbed by the available people, goods and resources needed to do the work, the spending might spark inflation. Excess government money flowing out would compete with the private sector, already employing the people etc, resulting in increased wages and prices. Through the lens of MMT therefore, taxation’s prime role has nothing to do with spending, rather it’s needed to make sure that excess money is not left out in the economy.

With the above in mind, when the government’s advisors say that billions need to be spent on retrofitting our homes or clawed back in fossil fuel subsidies to help deal with climate change, the government may well ask, “who is going to pay for it?” But it’s more likely to be the case that, unlike Covid or the 2008 financial crash, in which that question was never asked, the government doesn’t yet view Climate Change as an emergency.

*In 8 of the previous 60+ years the tax exceeds the spend and so the “surplus” is deducted from historic deficits.

1. Introduction

2. The banks, the government and that Money Tree

3. The mythical government purse

4. Government “borrowing”

5. So what is Quantitative Easing (QE)?

6. Further reading

Why are climate and nature getting the short straw with government spending?

4. Government “borrowing”

As an accountant I was reasonably cautious in advising clients over their finances, but was anything but cautious with my own. I spent several years accumulating maximum balances on credit cards and overdrafts only to resort to what were known as “consolidation loans” in which various banks would lend me the money to pay off all the expensive debts, so that I could start the process all over again.

Similarly, as mentioned above, the government works out its deficit for the month, represented by what it’s spent less what it’s taxed, and borrows money to settle its overdraft with the BoE. This is why the terms “government deficit” and “borrowing/debt” are often interchanged in the news whereas it’s important to appreciate how monthly deficits create a monthly overdraft with the BoE, which is then paid off by adding to accumulating government borrowing/debt.

The government borrows, partly because that’s what it used to do before 1971, when there were outside limits on the number of pounds the government could have in circulation, and partly because, like tax, borrowing is another way for the government to control money circulating in the economy. By offering somewhere safe for people and organisations to save their spare money, ie by them “lending” it to the government, money is effectively clawed back out of circulation.

Think of it this way: when you or I save with our bank we know that about £85,000 in any one banking group is safe, because it’s covered by a government guarantee, and the government can always pay its sterling debts, it can’t go bust.  Corporations, banks, financial institutions and pension funds have much  more than £85,000 needing a safe home and so they go straight to the horse’s mouth and invest in government debt, in the form of bonds called “Gilts”. They know that this is the safest place for their money, they know the government can never default when it comes time to repay, plus they get some interest on their savings.

Technically this looks like government “borrowing” but, changing spectacles, maybe it’s more realistic these days to see it as others’ savings. In effect all the government is doing is taking back the original pounds it spent into the economy, or authorised the banks to create, swapping them for Gilts, carrying a gold border, a repayment date and interest. In other words, the government is just taking back one form of money it created and exchanging it for another it created. 

And when those Gilts fall due in say 10 years time? The BoE creates new money to redeem (repay) them, increasing the government’s overdraft, resulting again in the government creating new Gilts to pay it off. And so it goes on, a constant recycling of debt with the outstanding balance at any time representing the total sum of money that’s been pumped into the economy, and not taxed back,  since records began.

So when politicians talk about having to reduce government debt, they are thinking in terms that are now 50 years out of date. The bailiffs will never knock at the door and, even if they did, the government can just create more money to pay them off.  Reducing the debt can be seen as paying back the savings that institutions rely upon or, at the extreme, paying back my Premium Bonds and National Savings Certificates.

Rather than the level of debt being a problem, it’s more important to concentrate on the levels of interest the government pays on that debt. For many years now this has not been a concern as interest rates have been at record lows. In some cases, government debt has even been issued at negative interest rates.  This is a difficult concept to grasp but, for the purpose of having somewhere safe to save its money, an institution is prepared to pay the government for the privilege.

1. Introduction

2. The banks, the government and that Money Tree

3. The mythical government purse

4. Government “borrowing”

5. So what is Quantitative Easing (QE)?

6. Further reading

Why are climate and nature getting the short straw with government spending?

5. So what is Quantitative Easing (QE)?

Before describing the process, whilst MMT sees QE through a different lens, proponents of MMT are not generally in favour of it.

As mentioned above, before 1971, the quantity of pounds the government could put into circulation was limited. This was because, following the Second World War, sterling, and many other currencies, were established with a fixed rate of exchange against the US$, which was itself limited by the gold reserves held by the USA, using a fixed price of $36 for an ounce of gold. 

That framework was finally dismantled in 1971 and so the UK and others went their own way meaning that, without a hard value limit, the number of £s in circulation are now limited “softly” by what the UK economy can use productively and by BoE policy. 

Last century, during the world wars and the financial crisis of the early 1930s, the government needed to spend, or otherwise inject, huge extra sums into the economy and financial systems, to keep everything and everyone going. This century, during the financial crash in 2008 and the Covid 19 pandemic, the government has had to do the same thing.

As already described, when the government spends it is effectively putting more new money into the economy but, if there’s nothing substantial to spend on, and the economy needs a large injection of new money at short notice, what it does is to tell the BoE to again create new money but use it to buy back some of the bonds previously issued by the government.

This process of the BoE buying government debt is “QE” with the main difference over creating money by spending being that, when spending, the money goes into the economy as a whole, eg to the NHS, Green Home incentives or furlough payments, whereas with QE the money goes to the financial markets to keep the financial system going with the hope that some will trickle down to the rest of us.

So, on paper, the total amount of government borrowing doesn’t actually change when this happens. It’s just that now, rather than all the bonds being held by (and money owed to) corporations, financial institutions and pension funds, some are now owned by (and the money owed to) the BoE.  

Most economists and politicians see this as the BoE directly funding government expenditure with new money, sparking memories of Germany and Zimbabwe “printing money” last century without limit, with resulting huge rates of inflation and devaluation against other currencies. 

They fear that unlimited printing of money will send the UK down the same road. However, they ignore the fact that those economies were already deeply in crisis before the excess printing took place with other countries able to take advantage in reparations, trade and finance. The risks of  international trade are always present, regardless of how you look at the domestic economy, making it more important to ensure that the domestic economy is kept healthy and, as we do at the moment, keeping borrowing in foreign currencies low. 

Those who fear QE also fail to acknowledge that today the creation (printing) of money actually takes place every time the government spends, way in advance of any QE.

Looking at QE from a different angle, with the BoE being wholly owned by the government, when it buys government debt it has effectively cancelled it; the government has paid itself back. 

To put some scale to this, during 2020/21 the government spent hundreds of billions on Covid 19, increasing its debt, but then the BoE bought about 90% of this via QE. Around that time the government’s total debt was a little over £2tn (£2,000bn), a seemingly scary sum, representing a year’s worth of the country’s GDP, but then £900bn (45%) of this was owned by (owed to) the BoE, so perhaps not so scary. 

Returning to fears of QE creating inflation, it’s worth pointing out that the current QE balance still includes the sums pumped into the financial systems a dozen years ago following the financial crash, yet inflation has remained at, or below, the BoE’s 2% target. Also, as mentioned, QE puts money back into the markets, not our pockets, and so inflation is more likely to occur, as it has, in increased prices of stocks and shares and property. This is one of the reasons why QE is not favoured by supporters of MMT, as most of the money never gets to where it’s needed, the real economy, going instead to stagnate with high-wealth corporations and individuals and so being more difficult to claw back.

A dozen years ago the coalition government got panicky about all of this and said it needed to reduce the debt created after the financial crash of 2008 and so started 10 years of austerity, drawing back cash previously injected into the economy and cutting public spending. The trouble is that, as most of the original money injected into the economy had been spent and wasn’t sitting around in our savings accounts, clawing it back led to unnecessary hardship on most individuals and businesses. Let’s hope the current government does not take the austerity route to deal with the Covid “debt”.

So, what about the next emergency? Will the government of the day see the common sense of doing what’s necessary? Again, if the current government saw climate change as an emergency, and recognised the true power of the pound, we’d already know the answer to this.

1. Introduction

2. The banks, the government and that Money Tree

3. The mythical government purse

4. Government “borrowing”

5. So what is Quantitative Easing (QE)?

6. Further reading

Why are climate and nature getting the short straw with government spending?

6. Further reading

Banks really are magic money trees – an article by Positive Money

TED talk by Stephanie Kelton – on deficits not being a problem under MMT

Power of the Pound – a video explaining the concept of MMT for the UK

Government debt and Covid 19 – an article by Positive Money

Chair of the US House Budget Committee – promoting MMT for the $6tn budget proposals 

50 years without gold backed money – a talk by Richard Murphy

Money & QE – a talk by Richard Murphy

Hyperinflation in Germany and Zimbabwe – an article by Positive Money

Bank of England video – on money creation and QE

Guardian article – The US considering minting a trillion dollar coin to enable the government to keep spending (no it’s not April 1st)