Big environmental vote in the May 2013 English elections

Environmentalist candidates may gain votes in the 35 local elections to take place on 2 May 2013 if they publicise the little-known Growth and Infrastructure Bill. This note explains:

  • the environmentally-destructive aims of this Bill;
  • the errors that led to its introduction;
  • the role of environmentalist County Councillors in opposing its implementation.

The Growth and Infrastructure Bill.
Many people are aware that the governing coalition planned to relax planning regulations on the size of home extensions for a three-year period to boost economic growth. Fewer people know that they introduced a far more ambitious deregulation in the Growth and Infrastructure Bill in October 2012 which is already (February 2013) making good progress in the House of Lords. The fast progress and scanty publicity is due to the Bill being inserted in an unexpected gap in the Parliamentary workload caused by the abandonment of Lords reform, and to an all-party consensus that ‘growth’ is an urgent priority. Once it is widely publicised, the Bill will alienate Local Authorities and ordinary voters as much as it has already offended NT, CPRE, Ramblers, and RSPB, because it relaxes planning controls on a wide scale. For example:

  • It effectively removes some planning powers from local authorities and gives them to central government;
  • It makes it easier to close footpaths;
  • It contains some scary-sounding clauses, e.g. “14. Restrictions on right to register land as town or village green”;

The implication that planning controls, centuries-old footpaths, and village greens are holding back economic recovery will trouble many voters, not just environmentalists. They will want to know where these ideas come from. It will be easy for environmentalists to explain that they are caused by an error in the information given to Parliament.

The error in the GDP calculation
The UK economy is not ‘flatlining’. Belief that we are still mired in recession comes from known errors in the definition of Gross Domestic Product (GDP) which have suddenly become worse. To understand this, environmentalists must put aside their criticisms that GDP does not measure human or environmental welfare so they can see that it does not even do ‘what it says on the tin’. GDP is a measure of utilised industrial capacity, useful to government for indicating whether tax revenues are going to rise or fall and thus whether they will be able to service debts and provide public services. The known error in calculated GDP is that it does not measure some types of production because they are too hard to measure or because they were not significant at the time the national accounting standards were last revised. This is not a problem as long as the ‘uncounted industrial output’ is growing at the same rate as the measured quantity, because the error will not then affect the growth rate. The problem is that one part of this uncounted output has become very large (at least 10-12% of GDP) and has recently started growing at a much faster rate (at least 5% p.a.). This missing part is the production of ‘intangible assets’. To give an idea of the delays that occur in the complex international negotiations for updating the national accounting standards, the one intangible asset that is included is computer software. Software creation was only added in 2006, by which time it had been a large part of the economy for at least a decade.

The clue that the GDP calculation is now giving a false and pessimistic result is the fact that unemployment is not as high as it should be if the economy was flatlining. The Government and the Bank of England call this ‘the Productivity Puzzle’ and you can see more on the subject (including the most recent ‘unofficial’ calculations) from downloads and other posts on Why the Government prefers to believe a GDP calculation which is always at least a decade out of date rather than a more reliable employment figure is an interesting question. One reason may be that a pessimistic picture of the economy justifies the government’s commitment to austerity. Another may be that it seems to offer an opportunity to show that the highly centralised UK system of government can achieve something.

The omission of ‘intangible assets’ is important to environmentalists for many reasons. It reduces the visibility of this ‘green’ industrial output and reinforces Whitehall’s mistaken view that economic growth equals more construction and and machinery. The Growth and Infrastructure Bill will spend £50 bn of public money that has already been set aside, financing unnecessary and distracting projects like the second high speed rail line. If that money were instead spent on intangible assets it could boost the new economy instead of providing life support for a dying old economy. The relaxation of planning controls is designed to encourage more steel and concrete, the two materials whose production contributes more than any other to carbon emissions. But GDP is not meant to be sales, it is meant tobe financial value added,increasing if material inputs are reduced. Now that sales are flat the private sector is profitably investing labour in intangible assets aimed at reducing input costs, such as databases designed to identify the best-performing suppliers. These investments should be a part of GDP but are not counted in the UK GDP calculation.

Environmentalist Councillors will not be alone
The government believes that the private sector will take advantage of the new planning freedoms, adding to the construction boom. Private sector firms will certainly line up for their share of the £50 bn of public money, but with residential and office real estate prices falling are unlikely to add much investment of their own, neither are banks likely to lend. Our government cannot anticipate this because it is too centralised to have much understanding of business, a fact that Lord Heseltine made clear in his unwelcome report to the Cabinet, No Stone Unturned, in 2012. His is not the only voice casting doubt on the central government’s qualifications to be involved in the economy. The faculty of the London School of Economics, in the report of their Growth Commission, has proposed an independent Infrastructure Board which would take investment decisions out of the hands of the government. One of the most eminent of them, Nobel prize-winner Prof. Christopher Pissarides, wrote an open letter criticising the Chancellor’s Autumn statement for not considering the revenue resulting from investments. A team of economists at London University has shown in a detailed mathematical treatment how the inclusion of a few intangible assets would add 0.5 % to GDP growth for the last few years. This indicates to me that the 2012 ‘double dip’ may well have been imaginary. Austerity has been justified by what the LSE economics professors would ironically call ‘policy-based evidence’ (justifying austerity by using calculated GDP rather than on employment figures).

The attempt by central government to remove some of the few remaining powers of Local Authorities is the culmination of a century-long process of centralisation, unique to the UK. It may well mark the high water mark of that process. By opposing implementation of the Growth and Infrastructure Act, environmentalist councillors may begin the process of restoring to local authorities the powers they gained under the Local Government Act of 1871, which marked the beginning an era of unprecedented social reform.

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