Boris’s economic botch job

The Organisation for Economic Co-operation and Development is, despite its grand name, no better at forecasting than many other economics organisations, but its international status and prestigious Paris address guarantee wide coverage of its thoughts. This week it was at its favourite sport of savaging the UK economy, forecasting that growth here would come to a stop next year, with only the Russian economy faring worse.

Unfortunately, on this occasion it may be right. It is not hard to see why the OECD has reached its conclusion. As the state pays more and more to people who are contributing little or nothing – however deserving they might be – while simultaneously pursuing capital projects that destroy wealth (see below) it’s hardly surprising that the engine of growth is stuttering.

Many studies have shown that high state spending is no recipe for a growing economy, even when the money is spent rationally. This administration has shown beyond reasonable doubt that its spending is driven by the next crowd-pleaser rather than by any underlying strategy. Reviving Help to Buy, to allow many more renters to purchase their homes, is one. The first iteration, under Margaret Thatcher, was wildly popular with tenants who were effectively given bribes worth thousands of pounds to buy assets which were clearly going up in value.

It may be too pessimistic to suggest that this version of the policy (assuming the idea ever gets to the statute book) rings the bell for the top of the house price boom, but falling living standards and rising mortgage rates are a baleful combination, especially after such an extraordinary bull market.

This week’s other wizard wheeze is to talk of tax cuts, presumably to be paid for with more debt, in the forlorn hope that the prospect will somehow generate the growth that is so desperately needed. Tax Freedom Day, the moment in the year when we can start working for ourselves instead of for the state, fell on Wednesday this week, the latest date in the year since the 1980s. Even the £870bn raised is expected to fall £100bn short of the amount spent by the government.

The UK’s problem, as the OECD is too polite to point out, is that we have a prime minister with little understanding of and no interest in the dismal science, together with a chancellor whose popularity has plummeted despite doing nothing as hard as an actual restraint on public spending. Confronted by looming double-digit inflation, it’s hardly surprising that those employees who can protect themselves by causing public misery are taking the chance to do so.

Turning moonbeams into gold

Of all the weird, wonderful and wacky ways being dreamed up as energy substitutes for burning hydrocarbons, carbon dioxide capture from the air is surely the most way out. The process involves filtering air to extract the 0.04 per cent of CO2 that it contains, and then putting the gas somewhere so it doesn’t sneak back into the atmosphere.

If this sounds like turning moonbeams into spun gold, apparently there is a fund in Switzerland with $650m to spend doing just this. More ambitious still is a $1bn plant from Occidental Petroleum in the Permian basin, the land of the fracked well. Rather like extracting gold from seawater, direct air capture can be done, but at a cost that makes $100 oil look like a bargain.

A guess from the UK Centre for Ecology and Hydrology puts the price between £150 and £700 per tonne extracted, which essentially says “don’t know.” However, even the lowest estimate is far above all other ways of trapping CO2, other than carbon capture and storage from a conventional power station, something that has never been done commercially.

The shareholders in Occidental might reasonably ask whether this is a wise use of their money. Just as the executives at Shell and BP have committed to appeasing the climate catastrophe lobby, spending billions on energy projects unconnected with oil and gas looks like a sure-fire way of destroying capital for no discernible gain – and which is unlikely to prevent the catastrophists from making the executives’ lives as miserable as they can.

We’re sorry to announce…

Does anybody still seriously believe that the HS2 railway line will ever go beyond Birmingham? In a fine week to bury bad news, the scheme has been pruned a little more, as the proposed link to connect the new track with the existing west coast main line south of Wigan was quietly scrapped.

The savings are a comparatively modest £3bn, and the news was accompanied by the usual pretence that it was somehow a positive development. One Andrew Stephenson, who has the miserable job of HS2 minister, had to insist that “we’ve left no stone unturned when it comes to working with our Scottish counterparts to find a solution that will best serve the great people of Scotland.”

He added that HS2 plans to run up to Scotland would be “unaffected” which rather begs the question of why the spur was ever on the drawing board. The whole £100bn project is a hangover from another era, and as it gouges its way through some of the most attractive landscapes in England, stands as a value-destroying monument to political hubris. Worse still, for our dear prime minister, he won’t even be in power when the first trains finally make their heavily subsidised way up the line to cut those terribly valuable minutes off the journey to Birmingham.