Money-Go-Round

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I wrote about the divorce case involving Dale Vince the other day, but until I read this piece by Dominic Lawson in The Sunday Times I didn't realise that the boss of Ecotricity had donated £250,000 to the Labour Party.

Now that sounds a bit dodgy if you ask me, because it's yet another example of big money coming into politics and trying to influence public policy in a particular direction, in this case in favour of renewable energy. 

But I read elsewhere that Dale Vince has borrowed £3 million from Ecotricity to meet the costs of this ongoing legal battle including the £500,000 he's had to stump up so far. 

As far as I can see the only basis that Dale's ex-wife can have a claim is that he failed to support the child they had together after they went their separate ways, in which case I can see the mother's point although as I said in my post the other day the public purse should hold both parties to account.

Still it makes me wonder why Dale is willing to pay out hundreds of thousands of pounds to the Labour Party and the courts, yet digs his heels in over support for his former family in years gone by.  


Don’t feel too sorry for 'Mr Windy': that’s your money whirling about


By Dominic Lawson - The Sunday Times


Countless British men of a certain age will have spent the past few days in a state of outrage at the treatment of one of our number. You think I am talking about the suspension of my colleague Jeremy Clarkson by the BBC? No, that’s not what has got us shuddering with male-to-male empathy.

The bloke whose predicament has really disturbed us goes by the name of Dale Vince.

Last week his ex-wife, Kathleen Wyatt, won a ruling at the Supreme Court that she can bring a claim for financial support out of his fortune.

Why did such an apparently standard claim have to go to the highest court in the land before it could find some judges to say she had a case? Because the marriage had broken down all of 30 years ago and because the ex-couple had been penniless hippies during their two-year relationship in their early twenties. It was only long afterwards that Vince managed to build up an estimated £100m fortune.

When I heard his account on BBC Radio 4’s Today programme of how he had already paid out £500,000 in legal costs I thought: the state has not treated this man well. But then I slowly began to remember something else about the chap: the company he formed and runs, Ecotricity, is devoted to putting up wind turbines all over the countryside.

This may be nothing to be bothered about, unless you happen to have a home in the immediate vicinity of one of his wind farms: in which case your heart may bleed a little less for Vince’s potential loss at the hands of his very ex-wife.

When you add in the fact that his highly successful business model is based on farming the colossal subsidies the state gives onshore wind generators — electricity providers are currently obliged to pay more than double the open market rate for kilowatt-hours produced by this method — then you might begin to think that it’s not just Kathleen Wyatt with cause to feel piqued by Mr Ecotricity’s considerable fortune.

John Constable, director of the Renewable Energy Foundation, has the numbers to hand: “We estimate that Ecotricity’s wind turbines have cost consumers about £48m in subsidy since 2002 when the Labour government introduced the Renewables Obligation scheme. They are currently costing consumers about £6m a year in subsidy, but this will rise to over £10m a year when work is completed on the consented Heckington Fen wind farm, which will be one of the largest in England.”

Under pressure from Ukip the Conservatives last year announced that they would not subsidise new onshore wind farms if they won the 2015 general election. This galvanised Vince, who declared the policy was “an existential threat”.

He meant to the environment, I’m sure: but in reality David Cameron’s belated decision to “get rid of all the green crap” was a dagger at the heart of Vince’s business. So last month the Ecotricity boss declared that he was giving £250,000 to the Labour party and praised its leader, Ed Miliband, saying it was “a myth” that he was anti-business.

It’s true that Ecotricity is the sort of business that Ed loves. Other electricity providers: not so much. On Friday the Labour leader stepped up his campaign against the “big six” with a pledge that a government under his control would force through a new law which would give the electricity company regulator Ofgem “a legal duty to ensure fair prices this winter”.

As to how the regulator — or Whitehall — would know what “fair price” to impose for a commodity, Ed did not enlighten us. This is a pity, as no economist has yet come up with an answer to that conundrum and there might have been a Nobel prize in it for the Labour leader.

Well, there are those of us who say that governments can’t ever know what a “fair price” for any commodity is and that the answer is to have as much competition as is practically possible to establish the best deal for the consumer. But that’s what the deep thinkers around the Labour leader would dismiss as “neo-liberalism”, the word that has succeeded “capitalism” as the approved term of abuse for a market-based economy.

Still, Miliband needed to find some way of resuscitating his pledge, made at the 2013 Labour party conference, to “freeze energy prices”. This seemed a terrific vote-buying wheeze at the time since it was assumed that wholesale gas prices would move only in an upwards direction; and to be fair to the Labour leader, that was what all the so-called experts at the Department of Energy & Climate Change were saying when he was their boss, not least because it suited the official line that we would actually save money by switching away from fossil fuels.

Instead, the wholesale price has been falling, the classic market response to a glut. Yes, believe it or not, rising oil and gas prices worldwide had incentivised companies to develop new drilling techniques and look for much more of the stuff, which they duly did (in the form of shale gas).

It turned out that Ed’s threat to “freeze prices” was not just a less good offer than the market might soon have provided anyway — an actual reduction: the effect of his threat was, as the Financial Times reported, that the big six “stepped up their forward purchase of energy to avoid falling foul of Mr Miliband’s promise to freeze bills — locking themselves into relatively expensive deals”.

So when the Labour leader complains that the energy companies are failing to pass on the cuts in the current wholesale price of gas, he needs only to look in the mirror to find one of the people most responsible.

Miliband’s “price freeze” pledge was, however, completely consistent with his big idea. His constant theme has been “the cost of living crisis” — and it was a good one: there had been a five-year-long squeeze on standards of living, while prices rose in excess of any growth in average take-home pay.

However, quite predictably for a politician with the nickname of “Red Ed”, he seemed to think it was only through state action and greater regulation that the “cost of living crisis” could be alleviated.

In the real world it is the highly disruptive force known as markets that bring prices down. In the normal course of events, governments’ influence on prices is inflationary — unless they act to deregulate an industry as the Conservative administrations of the 1980s did with the air transport business.

Thus the high profit margins that had been enjoyed by Tesco, the giant of the UK supermarket industry, were dealt with not by Whitehall fiat but the assault of competition by the German discount stores Aldi and Lidl. Not so long ago the Labour party put out a poster with some groceries on it as part of its campaign over the “cost of living crisis”. That will now have to be discarded. Competitive forces have twisted the arm of the biggest retailers far more efficiently than any political pledge could have achieved.

The trouble is, Ed Miliband can’t see a market without wanting to fix it himself. Admittedly, he fixed things well for Dale Vince — but only by putting up the cost of living for the rest of us.

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