Labour’s Net Zero Mandate Presages Economic Failure

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Authored by Rupert Darwall via RealClearPolitics,

“We did it,” Sir Keir Starmer told cheering Labour supporters at a 4 a.m. victory rally. “Change begins now. And it feels good.”

Did what, exactly? is a question Britain’s new prime minister should reflect on as he enters Downing Street with a huge 176-seat majority in the House of Commons – because Labour’s mandate from the country is not what it appears. At 34%, Labour’s share of the national vote is the lowest for any governing party in the last century.

Overall, Labour’s vote share this year is five points lower than in the 2017 election under Jeremy Corbyn, Starmer’s much-derided, hard-left predecessor. Its share of the vote improved on its disastrous 2019 showing thanks only to a large increase in Scotland. In England, Labour’s vote was largely unchanged, and in Wales, it actually fell. Despite Labour’s landslide in terms of the number of its Members of Parliament, at the constituency level, seat majorities are tighter than at any point since 1945. On closer inspection, Starmer’s victory resembles Joe Biden’s in 2020 – a rejection of an incumbent rather than a positive mandate for change, the kind that Tony Blair could boast of in 1997.

Starmer’s challenge is compounded by Britain’s enfeebled economy. “Wealth creation is our number one priority. Growth is our core business,” he declared when he launched Labour’s election manifesto last month. “The only route to improving the prosperity of our country and the living standards of working people. And that’s why we made it our first national mission in government.”

This prioritization makes political as well as economic sense. In an important eve-of-poll article, Chris Giles, Financial Times’s economics editor, shows that only the bottom 20% of the income distribution saw any real gains after inflation since the 2019 election. “Everyone else was hit harder by high inflation.” In prior years marked by fiscal austerity, income gains were higher for poorer than richer households. “The outcomes for working-age household incomes since 2010,” Giles writes, are “exactly what you might expect a left-leaning government to produce. People hate it.” Generating economic growth should be Labour’s first, second, and third instinct, Giles argues.

But this approach would run counter both to Labour’s instinct to redistribute income and to its history. The British Labour party has never successfully turned around an ailing economy. Blair entered Downing Street with a strong economy, his economic adviser admitting that the economy Labour inherited was better than that of any incoming government in living memory. Blair was no Bill Clinton, whom the maestro of supply-side economics Art Laffer praises to the skies. “Big fan of Clinton,” Laffer told Chris Giles two months ago. “I voted for him and campaigned for Clinton because Clinton did cut taxes.” Nonetheless, Blair had a great facility in articulating economic ideas. Hearing Starmer, a human rights lawyer, talk economics is like listening to someone struggle to speak a foreign language.

Despite his manifesto pledge, Starmer knows that wealth creation is not his government’s top priority. As a matter of law, the Climate Change Act 2008 imposes on his government, as on its predecessor, a duty to reach net zero by 2050. If the courts are persuaded that individual policies interfere with that duty, they can overturn those policies. There is no corresponding duty to grow the economy. Neither should there be: Judicializing policy by creating cast-iron legal duties that require ministers to pursue certain policy outcomes replaces democratic accountability with the threat of judicial review. There is no “get-out” clause in the Climate Change Act, which was piloted through Parliament when Labour was last in power by climate and energy secretary Ed Miliband, whom Starmer has just reappointed to his old job. Starmer’s economic policy is a prisoner of net zero.

Apart from Nigel Farage’s Reform party, now Britain’s third-largest party in terms of votes won, politicians of all other parties subscribe to the fiction that net zero is the growth opportunity of the 21st century. In this, they are aided by the economics commentariat that either downplays, covers up, or outright denies the existence of any trade-off between net zero and economic growth. It is another example of what FT columnist Janan Ganesh, writing of Democrats and the media cover-up of President Biden’s mental impairment, calls “liberal denialism.”

In Britain, net zero denialism extends to official advice provided by the Treasury and the Office for Budget Responsibility. In its net zero review, the Treasury asserts that “additional investment will translate into additional GDP growth.” The data falsifies the Treasury’s assertion. Between 2009 and 2020, decarbonization of power generation with large additions of wind and solar has seen a 15.5% increase in nameplate capacity produce 17.1% less electricity – a decline of 28.3% in output per unit of generating capacity. It is why Britain has some of the world’s most expensive electricity, destroying the competitiveness of its manufacturing industry and contributing greatly to Britain’s cost of living crisis, which, as Giles shows, has left 80% of British households either worse off or no better off after inflation since 2019.

Globally, the International Energy Agency’s net zero pathway in 2030 requires the energy sector to have $16.5 trillion more capital, 25 million more workers, and extra land area amounting to the combined size of California, Texas, Mexico, and France – all to produce 7% less energy. More inputs for less output equals de-growth through resource inefficiency, making the planet and its inhabitants worse off. Whatever pro-growth economic policies Starmer enacts, the supra-political commitment to net zero condemns the British economy to low growth or no growth, an historically high tax burden, and prolonged public sector austerity. It is hardly a formula for enduring popularity.

As they go into Opposition, the one upside for the Conservatives is that they are now freed from being tethered to some of the foolish policy positions they had adopted. With a quartet of Reform MPs led by Farage, they also have an additional incentive to oppose the anti-growth economics of net zero. The way votes stacked up in this election demonstrates that British voters are highly adept at heaving out a government they feel has lost its way and deliver a lopsided result. In Thursday’s election, it took on average 23,510 votes to elect one Labour MP and 56,319 votes to elect one Conservative MP. Unfair the system might be, but it does have the merit of being brutal in its effectiveness. The sooner Conservatives start making the case to ditch net zero, the better their prospect of reversing their defeat in 2029.


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