The Policy Makes the Party

Chris Cook is a ball of energy - and an expert in it. He worked at high level in the belly of the global energy market beast as a regulator and market developer for much of his professional life (and still advises governments - just not the UK government). He is now devoting his skills to new forms of community empowerment and resilience - helping them realise the power of the land beneath their feet, and the network of trusts between them. Chris's mum is Danish and his middle name is Jens, so he's already well-disposed to The Alternative!

Here, Chris pursues his theme of the moment - that communities can seize and enact good policy themselves, and not wait for political parties to deliver it to them. He calls this "reality based policy".

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“Reality is defined by the questions we put to it”

J A Wheeler

Universal Basic Income (UBI) 

Universal Basic Income (UBI) is exactly as named: a radical policy to distribute a basic income to everyone.

My surprise at finding such a radical policy discussed in mainstream media soon passed when I saw that the UBI guru - left-wing LSE academic Guy Standing – had been summoned to brief the Masters of the Universe at their Bilderberg 2016 gathering. There is a dawning realisation among the 1% that the exponential rise of automation is leading to the Rise of the Useless Class?

So in that context of an idea whose time has come a couple of hundred people gathered at an event hosted by Fife Council at the former coal-mining town of Kelty to discuss a possible local UBI trial. That the panel of politicians included Labour (controlling Fife Council); SNP, Greens and Conservatives demonstrated that UBI transcends the conventional Left/Right divide.

Discussion was robust, and while some Baby Boomers saw UBI as an undeserved 'something for nothing' others said the benefits enjoyed by landlords, shareholders and others from privileged property rights over commons was equally undeserved. 

Perhaps the most interesting contribution came from the Conservative, a pragmatic engineer who approved UBI for its simplicity and elegance as a solution. He observed that it bypassed government bureaucracy and the degradation of means testing, and it was generally agreed that UBI empowers recipients by placing trust in them.

Of course, the devil of UBI lies in the detail of taking it from a policy in principle to practical implementation. But for me this well-attended Saturday event was particularly interesting because UBI is a policy which appears to be gathering a following independent of any political party.

Resilience

In the October 2008 financial meltdown, the UK came two hours from the ATMs being switched off, and the scary prospect of people without money going shopping without it.

I have researched policy internationally and historically to identify what policies and instruments work best towards social and economic resilienceSince my background is in energy (I was for six years a director of what became the biggest global energy exchange) I first addressed energy resilience, being keenly aware that the fuel strikes of September 2000 showed the crucial role of energy in keeping the lights on and food on supermarket shelves. As Churchill said, society is just three meals away from anarchy.

Denmark & the Oil Shock

In 1973 the Oil Shock – the 400%  oil price increase from $3 to $12 per barrel - exposed Denmark's 90% reliance on fossil fuels. The Danish reaction was pragmatic and politically consensual: they simply mandated that for any given use of heat, transport, power, light and other energy service the use of oil & gas would be minimised.

This organising principle of Least Resource Cost drove Denmark's energy policy thereafter towards energy independence and resilience, being applied across all energy services. Development of renewable energy to substitute for oil saw the Danes acquire Scottish wind turbine technology and build turbines across Denmark, while creating the biggest global wind turbine manufacturer (Vestas) in a country with a similar population to Scotland.

Heat infrastructure such as combined heat and power; district heating and heat storage (infinitely cheaper than electricity storage) was installed throughout Denmark, through fiscal policies discouraging car use and enabling a switch to public transport and bicycles; and finally through massive public investment in energy efficiency in buildings, and in zero waste generally.

Since 1973 Denmark's GDP doubled while energy use declined and fossil fuel use (and CO2 production!) fell significantly. This image strikingly illustrates how Denmark's centralised National Grid evolved into a decentralised Natural Grid.

Meanwhile in the UK a very different organising principle – Least £ Cost – saw a massive oil and gas windfall wasted - becoming dole to the unemployed and a feeding frenzy for rent-seekers. As this windfall ebbed away the remorseless least £ cost logic of energy commodity markets saw the National Grid become increasingly fragile as uneconomic spare capacity closed. How may the UK energy crisis be addressed?

Reality-based Policy

Reality-based policy starts from a desired outcome, such as decent housing, food, warmth, mobility, good health, energy and so on delivered as a service and then identifies the correct organising principle, policies and detailed procedures to deliver that service.

Energy as a Service

No one uses oil, gas or even electricity: what we use is light, heat/cooling, transport/mobility and so on as services.  If we work back from electric powered heat used in the home we see energy losses in the heater or bulb; energy transmission losses when electricity is distributed from power stations; massive energy losses at fossil fuel power stations; and energy losses in producing and transporting fossil fuels to the power station from the well. So the reality is that for every unit of heat saved, a multiple of maybe five to ten units of fossil fuel is saved at the well.

The pre-1973 days of cheap oil are long gone and the economic rationale has now – at over $50/barrel – passed an inflection point.  Simply put, the more expensive oil & gas becomes in $ or £ then the more profitable it is to save energy as a service.

The problem faced by the renewable energy industry is a business model problem. Renewable electricity is sold as a commodity to the Big Six at the wholesale price of 5p/kWh which is then sold on to consumers for 15p /kWh.  The problem is that the Big Six's aim is to maximise £ profit.  They therefore have no interest in reducing consumption of their product and no interest in simple solutions which reduce their regulated returns. 

Because the wholesale price received by renewable energy producers is so poor, subsidy is necessary to fund the cost of renewable energy infrastructure. The solution is for renewable energy to be supplied and used locally as far as possible so that it may be sold at a retail rather than wholesale price.

But as will be seen above, the greater prize – where the UK has barely scratched the surface – is to reduce energy consumption through the use of what is called the 'Fifth Fuel' (ie intellectual value), embedded in smart technology and solutions. In fact, an example of the necessary reality-based energy policy may be identified - back to the future- in 1778, when James Watt supplied the use of his new steam engine to Cornish tin mines to pump out water in return for a third of the coal saved: Pumping as a Service.  Such savings of energy as a service are made at the retail price and this often gives rise to a compelling conventional economic case.

So in a nutshell, I believe one of the great reality-based trades of the 21st Century will be the exchange of smart/intellectual value (the Fifth Fuel which the UK possesses in abundance)  for the value of fossil fuels and other finite resources saved – the Transition Trade.

Housing & Care as a Service

The property price boom which resulted in the 2008 crash has seen the Baby Boom generation benefit from massive windfall gains. So this generation is now land-rich but increasingly care-poor (both for themselves and their properties) while the younger generations are care-rich but land-poor.

Clearly, some kind of swap – a Resolution Trade – needs to be made betweenthe generations, which cannot be made within our conventional market paradigm of land and care bought and sold as a commodity for £ profit to the detriment both of the land and the carers. This reality-based policy proposal to resolve housing and care crises is simple but radical.

Step One: impose a local Care Levy based upon land rental values (ignoring the value of buildings and improvements). This levy could be collected by reinstating at local level the long disused Schedule A Income Tax whereby people were taxed on imputed income from property ownership – ie the rental value of occupation. The valuation agency needed to implement this levy still quietly operates, since it is necessary to assess rental values to calculate housing benefit. The Care Levy creates a Care Pool fund in £ sterling.

Step Two: issue a Care Dividend to all qualifying (eg ignore second homes) occupiers equally, but the innovation is that this dividend would not be paid in £ sterling but would rather be paid by creating and issuing £ levy credits.

Owner occupiers would be able to pay their own levy using these credits, while tenants would be able to pay their rent with levy credits, since landlords would use them to pay their own obligation. The outcome is of a net transfer from those with above average use of the land commons to those with below average use.

So by way of example imagine a property with a care levy of £2000 pa and a care dividend paid to each occupier of £100/month (£1200 pa) . Owner occupiers with two or more people would be in surplus, while empty properties, second home owners and single owner occupiers would be in deficit. If the same property was let to tenants at £7200 pa then the Care Levy would be used by occupiers to pay rent, and would free up – pound for pound – their other income to spend on other things.

Such a levy/pool/credit dividend approach is complementary to a UBI, and in fact would act to ensure that UBI does not simply get eaten up in rent increases. The resulting pool of £ sterling collected would be available to fund investment in care provision through networked care co-operatives and also investment in retiring and refinancing the massive burden of debt on care homes and PFI health care.

In this way a new policy mechanism may be created through which younger generations may be rewarded in credits they may use towards housing and homes while creating the means to fund care for people and places. Conversely, the older generations may draw down windfall equity gains without giving up massive unearned profits to financial middlemen.

Finally, in passing, note that the same levy, pool, dividend and investment approach could also be applied to natural resource commons such as renewable energy, and fossil fuels and even to the creative commons of music, art and film.

Protocols & Promises

In conclusion, I believe the UK – indeed the global market economy – is at a historic turning point. The era of the middleman – whether Public = State or Private = Plc – who operates on the principle of 'least £ cost' - is coming to an end. A new networked era of direct, instant Peer to Peer economic connection based upon least resource and human cost is beginning.

To address the objections of cynical bean-counters, this seemingly Utopian vision has a basis in hard conventional economics. Whereas middlemen need lots of financial capital to cover market and credit risk, smart service providers need to invest only the intellectual value of Know How and Know Who.  As the world runs up against the constraints of finite resources it no longer makes sense to compete purely for monetary profit. The rational approach becomes competition on quality and co-operation on costs and the rational economic decision becomes to accept a smaller percentage of something - rather than 100% of nothing.

In order to create and enact bottom up reality-based policy, communities need only two tools in the toolbox: Promises (credits) and Protocols (simple risk, revenue, cost and production sharing agreements between consenting adults).