Written evidence from Dr John J. A. Cullen (PGG08)


The Public Administration and Constitutional Affairs Committee

Propriety of governance in light of Greensill inquiry


From Rotten Apples to Motorway Pile-Up?


I am a British citizen, a private individual (now retired) who has developed an interest in (non-party) politics since it seems that, in the UK and the West in general, politics now largely ignores the interests of ordinary people, namely the electorate that legislators are supposed to serve.


Section 1.              Lobbying versus Democracy

Section 2.              The Corrosive Effects of Lobbying

Section 3.              Lobbying in Practice – the example of the Renewable Energy Industries?

              Section 3.1              Rent-Seeking and Iron Triangles

              Section 3.2              The Sums Involved

              Section 3.3              The Analyses of Professor Dieter Helm

              Section 3.4              The Analyses of Professor Gordon Hughes

Section 4.              Further Misgovernance the example of Climategate

Section 5.              Conclusions

Section 6.              References


  1. Lobbying versus Democracy

Greensill is but the most recent public example in the long history of political influencing.  To understand the possible effects of the usually hidden lobbying practices on British political life, the book by Cave & Rowell [Ref. 1] is most helpful.  A quote (page xi) describes our current predicament graphically, “These are not rogue operators, bad apples or isolated cases. They are the establishment. The barrel is rotten.”

Cave & Rowell are not against lobbying per se.  After all, to be effective government needs to know what is happening in the rest of society.  The authors are, however, in favour of more open and democratically accountable government, whereas (page 24) the lobbying industry has developed to remove the risk posed to industrialists by democracy.

  1. The Corrosive Effects of Lobbying

As the lobbying industry appears to have become more influential many ordinary people have felt increasingly disconnected from politics.  This development has been described in detail by two British academics, Eatwell & Goodwin [Ref. 2], who, in the context of national populism, highlight the Four Ds” stalking current politics (although they make no explicit mention of lobbying).  National populism prioritizes the culture and interests of the nation by giving voice to people who feel they have been neglected – or worse – by distant and self-interested elites.

The “Four Dsare:-

DISTRUSTMany voters distrust established political parties and economic elites because ordinary people no longer have a meaningful voice in the national conversation that is politics.

DESTRUCTION This is the feeling that rapid ethnic change is generating strong fears about the possible destruction of the national group’s historic identity and established ways of life.

DEPRIVATION This is the sense that the wider, established group of citizens is being left behind relative to society’s newcomers who, it is perceived, are the chief concern of culturally liberal politicians, the media, and celebrities.  Deprivation in this sense (i.e. of losing out relative to others) is central to national populism because it acts as a bridge between culture and economics.

DE-ALIGNMENT Many voters are no longer strongly attached to the major, long-established political parties.

In light of the Four Ds above we should, perhaps, add a fifth:  Stop DOING DAFT things to the British electorate – our elected representatives are supposed to be working for us rather than repeatedly beating us with a stickFor example, it is conducive to democracy to keep all topics within democratic debate.  By contrast, we risk yielding to policy capture and groupthink (plus strengthening any Iron Triangles) when our major political parties agree a pact amongst themselves to remove a subject from political discourse (e.g. Ref. 9).

  1. Lobbying in Practice – the example of the Renewable Energy Industries?


3.1              Rent-Seeking and Iron Triangles

The concept of rent-seeking is outlined below.  The Iron Triangle is a well-known phenomenon related to policy making and is described in written form by Endress [Ref. 3].  It is worth quoting at length from the latter.  After describing the first- and second-best levels of policy making, Endress continues …

Third-best is the world of political economy, wherein costs and benefits directly influence the formation of coalitions that compete for political and economic advantage in society.  The pursuit of such advantage is called “rent-seeking” in economics and typically involves activities such as lobbying, public relations campaigns, political contributions, and, sometimes, outright bribery.  Unfortunately, the expansion of government that accompanies intervention on second-best grounds can facilitate rent-seeking at the third-best level … A particularly powerful type of rent-seeking coalition, long studied in political science, is termed “the iron triangle” because of the strength of the collaborative relationships among a triad of actors: politicians who seek campaign contributions, votes and reelection; government bureaucrats who aspire to expand fiefdoms and budgets; and private sector interest groups who seek special privileges in the form of political access, favourable legislation, subsidies, protection of monopoly positions, and lucrative government contracts.  The iron triangle is durable and impenetrable because it functions as a highly efficient, three-cornered, rent-seeking machine.


“Nowhere (except perhaps in healthcare) do third-best politics sink first-best and second-best economic considerations as deeply as in the realm of energy policy.  In assessing energy policy in Europe and the United States, Helm (2012) is especially critical of policymakers’ obsession with current technology renewable energy, which is not yet commercially viable without government subsidies and mandates … Consequently, renewables have remained ineffective in lowering energy prices, creating green jobs, and reducing carbon emissions worldwide.  The result is high costs for little gain.  In a review of [the 1st edition of] Helm’s book, ‘The Carbon Crunch,’ The Economist … highlights Helm’s observation that the entire renewable sector has become an ‘orgy of rent-seeking.’  This outcome is not compatible with the sustainability criterion.”


3.2              The Sums Involved

The sums involved in subsidies to UK renewables industries are enormous amounting to billions of pounds every year – see, for example, Ref. 10 for the annual subsidy (approx. £800 million) just to Drax power station, Ref. 11 for the subsidy (approx. £280 million) to the Beatrice wind farm, and Ref. 12 for what all these subsidies cost on a per household basis (£340 per year … and rising!).


3.3              The Analyses of Professor Dieter Helm (Professor of Energy Policy at the University of Oxford)

Turning now to the revised edition of the aforementioned book by professor Helm [Ref. 4] we find several criticisms of lobbying and related issues which I now quote [with page numbers]:-

[page xii]. “Climate change policies are a magnet for rent-seeking lobbyists and vested interests – especially those associated with current renewables and nuclear.”


[page xiii]. Indeed the only players in the climate change debates who appear to ‘know’ the answers are those who are certain that their chosen – subsidized – technologies are the right ones.  Unfortunately there is a climate change ‘pork barrel’ and there are lots of snouts competing for a share of the spoils.  The scale of their lobbying is awesome.”


[page xvi]. “I saw at first-hand how Brussels works.  It was not always a pretty sight … My experience of the conduct of the lobbyists – particularly the green politicians and green NGOs – was very disillusioning to someone who is both deeply concerned about green issues and who has been deeply pro-European, …”


[page 7]. The British decided to push on with one of the most expensive ways of generating low-carbon electricity known to man – intermittent offshore wind – and, copying the Germans, found an even more expensive option: rooftop solar and solar ‘farms’ for its northern climate … how could such expensive options be chosen first – and made all the more expensive as and when fossil fuel prices fell back?  Moreover, what is the question to which offshore wind and rooftop solar are supposed to be the answer?  It can’t be global climate change – wind farms in the North Sea will make no difference to climate change.  They will not even make much difference to Britain’s carbon footprint.


[page 17]. “When they [the public] are told that ‘scientists say … it is not unreasonable to ask: what are their interests?  Have they got ‘skin in the game’?  The grants, the money, and indeed the career prospects and the status go to those who conform to the paradigm.  Those following the scientific consensus tend to control the key journals; they are the heads of the departments, and they are members of the grant-giving bodies … Aided and abetted by the green groups and lobbyists for particular technologies like wind, the way to undermine those who challenge the conventional wisdom is to question their motives, discredit the individuals, create a ‘them and us’ division, and never to question the mote in their own eyes.”


[page 80]. “The press releases of the wind lobby tend to be regurgitated by the media with few caveats and little questioning.”


[pages 102 – 103]. “This is how Europe got its short-term 20% renewable energy target.  But it would be too great a compliment to the green political movement to give them all the credit for the Renewables Directive.  They have been aided and abetted by industrial interests for whom renewables represent a very large carbon pork barrel.  Subsidies attract industry, and with guaranteed contracts and political support, major European companies began to sing the greens’ tune.  Siemens led the way in Germany … The renewables lobby groups grew in size and influence, and the lobbying became overt, loud and very effective, funded by the companies that stand to gain most from the subsidies.”


[pages 246 - 247].  “Economists tend to be very keen on introducing a carbon price … It allows the market to find the cheapest ways of reducing emissions, free from all the lobbying and vested interests; and it bears down on governments when they are foolish enough to try to pick winners.”


Professor Helm also undertook the Cost of Energy Review [Ref. 5] in October 2017.  Points 1 to 3 from the report’s Executive Summary include the following:-


“This review has two main findings. The first is that the cost of energy is significantly higher than it needs to be to meet the government’s objectives and, in particular, to be consistent with the Climate Change Act (CCA) and to ensure security of supply. The second is that energy policy, regulation and market design are not fit for the purposes of the emerging low-carbon energy market, as it undergoes profound technical change ... Margins should be falling as competition should be increasing. Yet in this period, households and industry have seen limited benefits from these cost reductions. Prices have gone up, not down, for many customers ... These excessive costs are not only an unnecessary burden on households and businesses, they also risk undermining the broader democratic support for decarbonisation. In electricity, the costs of decarbonisation are already estimated by the CCC to be around 20% of typical electricity bills. These legacy costs will amount to well over £100 billion by 2030. Much more decarbonisation could have been achieved for less; costs should be lower, and they should be falling further.”


Is not the average taxpayer or energy bill payer entitled to wonder what Helm might have found if lobbying in UK energy markets had been less secretive and/or less marked?


3.4                 The Analyses of Professor Gordon Hughes (former Professor of Economics at the University of Edinburgh)

It is clear from reading professor Helms work that lobbying in UK energy markets may have had some upward effect on energy prices and some dampening effect on decarbonisationHelm’s work has been complemented by the work of Professor Gordon Hughes; Hughes has made a forensic examination, based on audited accounts, of more than 350 wind projects in the UK and Denmark [Refs. 6 - 8].


Hughes’s reports are detailed and a full summary of them would take us too far from the theme of governance.  However, since it raises further questions of governance, it is germane to quote a little from Hughes as follows:-

[Ref. 6]. In the UK and most of Europe, both policymakers and investors have adopted the rhetoric around renewables as the basis for very costly transformations of our economy and society to meet the goal of low or zero carbon emissions. In doing so, they have accepted the claims of dramatic improvements in costs and performance made by wind operators for new projects now and in the future. Unfortunately, the propensity of both governments and companies to understate the costs and overstate the performance of new projects has a history that is long and inglorious. The ongoing record of HS2 – and, indeed, the whole history of railways in the UK – should be sufficient warning not to believe the rhetoric.


[Ref. 6]. “The reality of what will happen to the costs of key renewable energy and other low carbon technologies is critical. The UK Government’s strategy for meeting its Net Zero target at an affordable cost rests on the core assumption that the costs of wind power have fallen - and will continue to fall. There is, however, a major problem with all of the projections produced by official agencies, academics and other organisations. Put bluntly, they are the product of wishful thinking applied to notional projects in the future with little or no connection to commercial reality.


[Ref. 6]. “There is a core idea that is crucial for proponents of renewable technologies across a wide range. This is that costs – or specifically capex costs – will decline as installed capacity grows due to what are called economies of scale and learning. The issue then is how rapid the decline, usually measured as the % reduction for each doubling in capacity, is likely to be. There is no doubt that such a decline in unit costs has occurred in specific cases ... However, the pattern is far from universal … In the case of offshore wind, the parallel experience of offshore oil & gas is not encouraging.


Hughes then uses the published accounts to show that, typically, both capex and opex costs per installed megawatt of power have increased as offshore projects have moved into deeper and deeper water.  Furthermore, the average load factor of offshore wind turbines decreases year by year at a rate 1.5 times more rapidly than it does for onshore turbines!  The net result has very serious consequences, both now and in the future, for investors and for the public purse - Hughes calls it a motorway pile up in a fog of ignorance [Ref. 7, page vi].  However, it is the issue of governance that concerns us here since, as Hughes says [Ref. 6], “… the assumption made by BEIS and many investors that the expected operating life of new wind farms will be 25 or 30 years is completely at odds with the underlying economic reality.


Hughes continues [Ref. 7, pages 39-40], “Reviewing the deficiencies of the UK government’s latest estimates of generation costs we are left with a puzzle. The assumptions which underpin the BEIS estimates of the cost of generation for wind and solar power are fanciful, and do not withstand even cursory scrutiny; under close analysis they disintegrate. Indeed, they are so far from the actual costs incurred by current operators and recorded in audited accounts that they are not worth further consideration. The question is how a government department in a major economy can have strayed so far from the real world.” Hughes ends his UK report by asking, What is going on here?; should those concerned with good governance be asking a similar question?


  1. Further Misgovernance – the example of Climategate


To illustrate that misgovernance is not solely about the malign effects of secretive lobbying, it is useful to recall (albeit briefly) the Climategate affair from 2009.  This sorry tale is analysed at length in Andrew Montford’s book, ‘Hiding the Decline’ [Ref. 14].  The final paragraph of this book ends as follows, “Climategate was … a tragedy born of misunderstood motives.  The response to it was an extraordinary failure of the institutions and of the people who are paid to protect the public purse – a failure of honesty, a failure of diligence, a failure of integrity.  Their failure to seek the truth and to speak the truth condemns them utterly.”


  1. Conclusions


At a time when the electorate feels increasingly disconnected from and disenfranchised by the current democratic settlement, it seems that lobbying in favour of the current generation of renewables has assisted their accelerated roll-out leading, both now and in future years, to higher direct and indirect costs for consumers, taxpayers and, importantly, for other forms of electricity generation.  Additionally, decarbonisation has been adversely affected [see Ref. 13 for a recent occurrence].  In particular, the cost of electricity is being driven upwards which in turn is adversely affecting household bills and the international competitivity of British commerce and industry.  We should, perhaps, echo Hughes’s question, “What is going on here?”


Secretive lobbying (leading to policy capture, the creation of Iron Triangles and rent-seeking) is just one of the many challenges facing modern democracies – others include, for example, post-normal science, policy panic under heightened media pressure, plus many facets of the internet.  However, lobbying is amenable to a measure of control by national parliaments whereas some of the other challenges will require a more international approach.


Furthermore, tackling secretive lobbying would help to reconnect the political classes with the electorate (i.e. with the people that politicians are supposed to serve)Legislators are the only people that can begin to solve this and related problems of governance.  But will they try?


May 2021


6.      References

  1. Tamasin Cave & Andy Rowell, “A Quiet Word - lobbying, crony capitalism and broken politics in Britain”, Vintage Books, 2015.  See especially the preface and chapters 1 and 2.  Chapter 2 deals with lobbyists versus democracy.
  2. Roger Eatwell & Matthew Goodwin, “National Populism – the revolt against liberal democracy”, Pelican Books, 2018.  See especially pages xxi, 30-39 and 271-283.
  3. Arsenio Balisacan et al. (editors), “Sustainable Economic Development - resources, environment and institutions”, Academic Press, 2014, especially section 3.4.2 by Lee H. Endress, ‘Public policy - prosustainability or not?’, pages 57 -58.
  4. Dieter Helm, “The Carbon Crunch”, Yale University Press, revised and updated 2015.
  5. assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/654902/Cost_of_Energy_Review.pdf
  6. Hughes’s overview ref.org.uk/ref-blog/365-wind-power-economics-rhetoric-and-reality
  7. Hughes’s report on UK wind power costs ref.org.uk/Files/performance-wind-power-uk.pdf
  8. Hughes’s report on Danish wind power costs ref.org.uk/Files/performance-wind-power-dk.pdf
  9. green-alliance.org.uk/resources/Leaders_Joint_Climate_Change_Agreement.pdf
  10. notalotofpeopleknowthat.wordpress.com/2020/05/04/drax-subsidies-cost-789m-last-year
  11. notalotofpeopleknowthat.wordpress.com/2021/04/12/beatrice-wind-farm-received-281-million-subsidy-last-year/#more-50389
  12. notalotofpeopleknowthat.wordpress.com/2019/10/14/current-costs-of-british-renewables-subsidies-per-household
  13. https://www.thegwpf.com/how-to-and-how-not-to-cut-uk-electricity-bills/
  14. A.W. Montford, “Hiding the Decline – a history of the Climategate affair”, Anglosphere Books, 2012.


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