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Rishi Sunak has urged investors to back defence companies amid concerns that they are being spurned by environmental, social and governance (ESG) funds.
In a statement accompanying a rise in military and industrial spending, the Prime Minister stressed that supporting western arms companies was compatible with so-called ethical investing practices.
He said: “There is nothing more ethical than defending our way of life from those who threaten it.”
At the same time, a joint statement was released by the Treasury and Investment Association on Tuesday which added that the defence industry “contributes to our national security, defends the civil liberties we all enjoy, while delivering long-term returns for pensions funds and retail investors”.
It added: “Investing in good, high-quality, well-run defence companies is compatible with ESG considerations as long-term sustainable investment is about helping all sectors and all companies in the economy succeed.”
It comes after ESG funds showed reluctance to invest in arms companies or nuclear energy producers.
F*ing hypocrites!
In France, state spending is a massive 58pc of GDP, while the US, even with President’s Biden’s huge increases in welfare payments and industrial subsidies is still only at 36pc. A country which has usually been closer to Washington than Paris is now starting to drift the other way.
This is happening across the economy. As Tuesday’s shocking figures for public borrowing showed, even with punishing tax rises the government is still nowhere close to balancing the books, with a deficit running at 4.4pc of GDP compared with 5.5pc for our neighbour. And of course, growth is miserable.
France is expected to expand by only 0.7pc this year, on IMF forecasts, while the UK will only manage 0.5pc. The USA, on the other hand, is projected to roar ahead at 2.7pc.
The problem is that while we’re increasingly mimicking the French public spending strategy, we don’t seem to get anything like the same results. If you are going to have a huge, intrusive state – and of course at least a few of us would prefer that we didn’t – then at least you might as well have the French version.
For all its faults, it certainly seems to have one redeeming feature. It is effective. On almost any measure you care to look at the French government machine easily outperforms the British one.
Such as? France has a far better health system, combining social insurance with state provision, and while the French are angry that average waiting times to see a GP have risen from four days before the pandemic to 10 that is far better than this country, where the waiting time for a routine appointment is 19 days, if you can get to see a doctor at all.
We have huge levels of government spending. We have punitive taxes. The state micro-manages the economy, offering lavish levels of welfare, while constantly racking up more and more debt.
True, we don’t have a boulangerie on every corner, and we don’t have riots every weekend – or at least, not yet. But in almost every other way, however, as Indermit Gill, the chief economist of the World Bank, pointed out this week, the British economy has slowly turned into a French tribute act.
There is just one catch. While France at least gets results from its sprawling state, the UK seems to get almost nothing. We face a fate far worse than our neighbour on the other side of the Channel – French levels of tax and debt, combined with practically third-world levels of investment and public services.
It is one of the ironies of the last half decade that instead of turning into Singapore on Thames or mimicking American dynamism after leaving the European Union, the UK has turned into France instead.
As Gill put it, “the country that used to be most like the United States in all of Europe was the UK. And you guys decided to go and become a lot more like continental Europe. You look like France, not like the US.”
UK economy is turning into a French tribute act – without any of the hits
Matthew Lynn
24 April 2024 • 6:00am
Matthew Lynn
4
Sunak Macron
While France at least gets results from its sprawling state, the UK seems to get almost nothing Credit: Simon Dawson/No 10 Downing Street
We have huge levels of government spending. We have punitive taxes. The state micro-manages the economy, offering lavish levels of welfare, while constantly racking up more and more debt.
True, we don’t have a boulangerie on every corner, and we don’t have riots every weekend – or at least, not yet. But in almost every other way, however, as Indermit Gill, the chief economist of the World Bank, pointed out this week, the British economy has slowly turned into a French tribute act.
There is just one catch. While France at least gets results from its sprawling state, the UK seems to get almost nothing. We face a fate far worse than our neighbour on the other side of the Channel – French levels of tax and debt, combined with practically third-world levels of investment and public services.
It is one of the ironies of the last half decade that instead of turning into Singapore on Thames or mimicking American dynamism after leaving the European Union, the UK has turned into France instead.
As Gill put it, “the country that used to be most like the United States in all of Europe was the UK. And you guys decided to go and become a lot more like continental Europe. You look like France, not like the US.”
It’s hard to disagree. Public spending in the UK rose from 39pc of GDP in 2019 to 50pc during the pandemic, and it has now settled at 44pc.
Aying up for the bills. £87 billion a year – by the start of 2030 for defence, decarbonization of the grid will cost a few billions, where will they get all this money? Big deficits, more and more debt, growth almost non-existant....The tanks will drive with solar panels i guess....If we as civilians would be spending like Governments, we would 've been bankrupt decades ago.
https://www.telegraph.co.uk/business/2024/04/24/britain-faces-a-fate-much-worse-than-france/
The US House passed new sanctions on Iran’s oil sector set to become part of a foreign-aid package, putting the measure on track to pass the Senate within days.
The legislation would broaden sanctions against Iran to include foreign ports, vessels, and refineries that knowingly process or ship Iranian crude in violation of existing US sanctions. It would also would expand so-called secondary sanctions to cover all transactions between Chinese financial institutions and sanctioned Iranian banks used to purchase petroleum and oil-derived products.
The legislation, which is set to be included in a $95 billion package providing funding for aiding Ukraine, Israel and Taiwan, passed by a vote of 360-58 on Saturday. It was pre-negotiated with Senate Majority Leader Chuck Schumer, and the White House said it supports it.
About 80% of Iran’s roughly 1.5 million barrels of daily oil exports are shipped to independent refineries in China known as “teapots,” according to a summary of similar legislation.
While the sanctions could impact Iranian petroleum exports — and add as much as $8.40 to the price of a barrel of crude — they also include presidential waiver authorities, according to ClearView Energy Partners, a Washington-based consulting firm.
“President Joe Biden might opt to invoke these authorities, vitiating the sanctions’ price impact; a second Trump Administration might not,” ClearView wrote in a note to clients.
US Treasury Secretary Janet Yellen in October rejected a widely-held notion that the US had gradually relaxed some sanctions enforcement on Iranian oil sales as part of efforts for a diplomatic rapprochement.
https://www.bloomberg.com/news/articles/2024-04-20/new-iran-oil-sanctions-passed-by-us-house-in-foreign-aid-package
Ergy.
Second, US inflation would prove even more stubborn at a time when progress in reducing price pressures has already disappointed this year, thereby acting as a bigger counter to early rate cuts by the Federal Reserve.
Third, the strong dollar would get a further appreciation boost, undermining trade and financial intermediation.
And finally, with worsening economic and geopolitical situations, risk premia would increase. This would lead to higher borrowing costs than might have prevailed otherwise.
Such considerations assume greater urgency when factoring in what did not happen in the most recent tit-for-tat between Iran and Israel.
Whether by design or otherwise, neither party has inflicted considerable human and physical damage on the other. Also, Iran did not materially deploy its regional proxies in what could easily have been a more comprehensive attack on Israel. Meanwhile, Israel did not go after Iranian nuclear sites in its response. It also did not succumb to pressure from its closest allies, most notably the US and UK, for a greater degree of restraint and de-escalation.
All this points to a significant shift in the dynamic between these two countries, Most importantly, this has changed from a relatively stable disequilibrium, in which each party refrained from direct attacks, to a more unpredictable and unstable disequilibrium in which dangerous precedents have been set and each side has more reasons to escalate tensions further.
When comparing the reaction of markets to the views of most national security experts, I am reminded of the story of the frog in boiling water.
There is no doubt that the latest round of Iran-Israel hostilities has crossed many lines and durably raised the geopolitical temperature in the region. Yet markets seem keen to brush this aside, comforted by the fact that we are yet to reach the boiling point of significant human casualties and physical damage in these retaliation rounds — a point that would cause significant economic and financial dislocations. Given that this is a region that is vulnerable to errors of judgment, insufficient understanding of adversaries, and implementation accidents, that could well prove too complacent a reaction.
National security experts and financial market traders seem to disagree on what will follow the recent escalation of tensions between Iran and Israel. The question of who turns out to be correct will have significant consequences not only for an already unstable Middle East but also for the wellbeing of the global economy and the stability of its financial system.
The notion of a “new Middle East” has often come up in the national security camp’s characterisation of what has transpired following Israel’s attack on the Iranian consulate in Syria at the start of this month.
Specifically, multiple lines have been crossed by both parties. For the first time in history, the two countries have attacked each other directly rather than through the use of proxies and targets in third countries. Iran has directed a once-unthinkably large number of missiles and drones at Israel, responding to the Israeli attack in Damascus that killed a number of Iranian senior officials. Friday’s Israeli retaliation came on the heels of an explicit warning from Iran’s foreign minister that it would immediately respond should it be attacked directly.
Despite all this, the markets’ reaction has been relatively tame and contained. Rather than price the market implications of a durable escalation in geopolitical threats and a fatter tail risk of substantially higher oil prices for long, traders have been quick to fade the initial moves in many asset prices.
This includes oil, by far the most sensitive international price, which is today well below where it closed before Iran first retaliated for Israel’s consulate attack. These prices have also failed to maintain their initial move up on the latest news of Israel’s response.
This contrast in market vs expert views could have consequences well beyond regional stability. It relates directly to four themes that the IMF identified this week as important for global economic wellbeing and financial stability: insufficient growth, sticky inflation, the lack of policy flexibility and the pressures associated with greater international divergence in economic outcomes and policy setting.
While the global economy is able to handle a transitory bump, it is already too fragile to handle a large new economic shock. Specifically, a further round of military escalation between Iran and Israel would undermine already low and fragile global growth, push up goods inflation at a time when services inflation is still too high, and impose demands on fiscal and monetary authorities that have already used up much of their policy flexibility and have limited operating space.
Meanwhile, the distribution of this stagflationary shock would amplify the economic and financial divergences that are already imposing some stress on the global order.
First, two of the potential engines of global growth — the already-stressed Chinese and European economies — would be hit relatively hard given their high dependence on imported ene
Https://www.ft.com/content/53f64b6b-3151-46b3-ad83-3a4732c35d41
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https://www.ft.com/content/352b38a7-f298-4b54-adc2-f4cc1b17444b
The world needs a “reality check” on its move from fossil fuels to renewable energy, JPMorgan has warned, saying it may take “generations” to hit net-zero targets. In a global energy strategy report sent to clients this week, the US investment bank said efforts to reduce the use of coal, oil and gas had been set back by higher interest rates, inflation and wars in Ukraine and the Middle East. “While the target to net zero is still some time away, we have to face up to the reality that the variables have changed,” Christyan Malek, JPMorgan’s head of global energy strategy and lead author of the report, told the Financial Times. “Interest rates are much higher. Government debt is significantly greater and the geopolitical landscape is structurally different. The $3tn to $4tn it will cost each year come in a different macro environment. Malek predicted that the levels of investment required would put pressure on governments to step back from more aggressive energy policies. The Scottish government on Thursday scrapped its ambitious plan to cut carbon emissions by 75 per cent by 2030, conceding that the target was unachievable. In its report, JPMorgan said changing the world’s energy system “is a process that should be measured in decades, or generations, not years”. It added that investment in renewable energy “currently offers subpar returns” and that if energy prices rose strongly, there was even a risk of social unrest.
Malek noted that it was not guaranteed that demand for oil and gas would peak in 2030, as predicted by the International Energy Agency, as the populations of developing countries begin to buy more cars and take more flights. JPMorgan forecasts that the world will need 108mn barrels of oil a day in 2030, and that building more wind, solar and electric vehicle capacity could add a further 2mn daily barrels to this total. “We are at a tipping point in terms of demand,” Malek said. “More and more of the world is getting access to energy and a greater proportion want to use that energy to upgrade their living standards. If that growth continues it puts huge pressure on energy systems and governments."
https://www.ft.com/content/352b38a7-f298-4b54-adc2-f4cc1b17444b
In our haste to not be seen as on the wrong side of history, we failed to make conservative arguments for environmental improvement – arguments centred on property rights, individual and family endeavours and the free market. Instead, we empowered our ideological opponents and accepted much of their extremist agenda.
Britain should aim to be energy independent by 2040 using oil and gas as well as nuclear and renewables. We are in an excellent position to become a net energy exporter, given the amount of sea by which we are surrounded where offshore wind farms can be located, as well as our expertise in nuclear power. The use of North Sea oil and gas is crucial, so there needs to be investment in that too. There also should be fracking in the UK. We are in the ludicrous position of importing fracked gas from the US that has been liquefied to -180˚C but refusing to frack ourselves. Meanwhile, Brits are paying twice as much for their energy as Americans.
The number one threat to the environment and our freedom and security is the rise of authoritarian regimes and the decline of democracy. Therefore, we need to cancel failed multilateral structures and work with allies that share our values. We should abolish the Climate Change Act and instead adopt a new Climate Freedom Act that enables rather than dictates technology.
We should protect our environment by protecting property rights and allowing enterprise to develop new green technologies. We should call out the green lobby’s brazen anti-capitalist agenda. They are the extremists in today’s politics and should be labelled as such. They say they want to reduce carbon but oppose nuclear power. They say they want less pesticide use but oppose genetic modification. They organise their protests on iPhones, devices that came into existence through free markets.
“Liz is the Grinch who wants to stop Christmas!”
That was the response in Cabinet from Michael Gove, the Environment Secretary, to my eleventh-hour attempts to ditch COP26, the UN climate change conference that the UK was bidding to host in 2020.
It was late 2018 and I was Chief Secretary to the Treasury, charged with keeping a tight grip on public spending. With an estimated price tag of over £200 million, I strongly questioned whether organising this jamboree should be a priority for the Government.
Had I believed the conference was likely to make any difference, I might have been more sympathetic. But I could see no prospect of that. World leaders would fly in on private jets to pontificate about the environment and reaffirm their aspirations to reduce emissions, while the biggest culprits would continue to do nothing. More than anything, bidding for COP26 was about appeasing the green lobby by making a grand gesture aimed at gaining short-term popularity without changing the fundamentals. It was environmental virtue signalling, with the taxpayer picking up the hefty bill.
But the rest of the Cabinet was in the grip of climate fever. When they weren’t posing for selfies with Greta Thunberg, they were busy trying to ban wood-burning stoves and plastic straws. After David Cameron’s ‘hug a husky’ phase, we’d done nothing to reverse Labour’s statist climate change policies. By the end of Prime Minister Theresa May’s government in 2019, we had committed ourselves to binding climate change targets with very little discussion of the consequences.
We have dumped costs on families with no regard for whether they can afford them and we have failed to plan for the long term. Meanwhile, there is little discernible impact on overall environmental outcomes. Many programmes, such as the switch from petrol to diesel in cars or the use of electric vehicles, have either harmed the environment in other ways or empowered our polluting adversaries elsewhere in the world by making us dependent on imported gas and coal and Chinese solar panels.
There are also ludicrous claims that pursuing a net zero agenda will boost the economy and drive growth. This is patently not true and wishful thinking. Additional environmental regulations have already hampered growth. For example, the National Grid estimates a cost of £3 trillion for decarbonising the electricity system.
The zealous drive to net zero is undeniably making business less competitive, hitting taxpayers through the cost of additional subsidies and hiking energy bills for consumers and industry alike, all of which is acting as a drag on economic growth.
The Climate Change Committee was established by the 2008 Climate Change Act passed by the Labour government, legislation that has not been reversed or reformed by the Conservatives.
The zealous drive to net neutrality is making business less competitive, hitting taxpayers, and acting as a drag on economic growth.
https://www.telegraph.co.uk/news/2024/04/19/unaccountable-net-zero-elite-has-seized-control-of-britain/
The rest of Europe, Remainers like to tell us, is forging ahead into a glorious green future while Brexit Britain is stalling, the government backsliding one by one on its net zero commitments.
It is hard to square that narrative with what’s really going on across the channel. In March, according to data from the European Automobile Manufacturers’ Association, registrations of new electric vehicles plummeted by 11.3 per cent. In Germany – the grown up country that’s supposed to show childish Britain how it’s done – the drop was even more precipitous at 28.9 per cent.
Apparently it’s not just Britain where motorists have gone distinctly cool on electric cars. The electric vehicle industry appears to going the same way as one of its own products when the battery charge lowers: it’s slowing rapidly to a crawl.
And it’s plain to me that the reasons in Europe are the same as they are here: electric cars are too expensive to buy, and too fussy to recharge. They have a niche as local runabouts for people with their own off-street recharging facilities, but little appeal otherwise. Enthusiasts will point to te example of Norway, where the vehicles have a 90 per cent share of the market, but that exception merely demonstrates what has been clear for a while: people buy electric cars when the government rigs the market in their favour
In Norway, buyers of EVs pay less VAT, are given access to bus lanes or free parking in various regions, pay lower road tolls and are given the right to charge their vehicles if living in apartments. Add to that the government mandating that cars purchased in public procurement need to be zero emissions, and it’s not hard to see why sales are high.
Elsewhere, however, takeup is more moderate, and the EU’s dislike of cheap Chinese imports certainly isn’t going to help. The European Commission is currently considering whether to jack up import tariffs. This is necessary, it says, because the Chinese government is plastering the industry with unfair subsidies.
In other words, the EU is telling motorists that it wants them to go electric, but when cheaper imported products arrive on the market making it slightly more affordable for them to do so, it it cracks down on those imports.
It isn’t just electric cars, though. The EU is full of bluster when it is setting net zero targets, but arguably no more enthusiastic than we are about hitting them. Less so, even. Germany has a net zero target date of 2045, five years earlier than Britain, yet it has reopened coal mines.
Moreover, it’s wriggling out of its electric vehicle targets. Thanks to German carmakers, internal combustion engines will still be acceptable so long as they are capable of running on bio- or synthetic fuels. And thanks to German homeowners, the ban on gas boilers were also watered down. The problem, in other words, is not that Brits are lousy environmentalists. It’s that once again, Net Zero is collapsing as t
Https://www.telegraph.co.uk/business/2024/04/18/charts-show-scale-europe-electric-car-crash/