Westminster – expert in economic camouflage

Sir Ian Wood (R) with the Secretary of State, Ed Davey
Sir Ian Wood (R) with the Secretary of State, Ed Davey
Opinion by Energy Voice

I recently had an e-mail from a friend of mine containing a link to an article which said “UK R&D funding is strikingly below rivals such as the US and Germany and could be increased by up to 50% to match them”.

This worrying statement was made by a chap called Graeme Reid in his first lecture as Professor of Science and Research policy at University College London.

Reid joined UCL after leaving the Department for Business, Innovation and Skills where he was Head of Research Funding and therefore responsible for around £5billion of research spending annually through Research Councils, the UK Space Agency, the UK Atomic Energy Authority and the Higher Education Funding Council for England.

My immediate reaction was one of “well, I could have guessed that” based on the research I’ve done into the state of publicly-funded energy R&D which is also “strikingly below rivals”.

But then I began to reflect on why a country that tries to stress its importance and stature in the world would place so little importance on supporting one of the most important building blocks of the economy.

I concluded that as with so many things with this and prior recent Westminster governments they practice the art of political illusion.

They talk a good talk but when it comes to genuinely important issues such as funding research they just hope nobody will notice what’s going on.

You see, a healthy R&D sector is a good indicator of the overall state of the economy. When government cuts back on R&D then you know the economy is in trouble. And the less R&D a country does the less competitive it becomes.

Making cuts in budgets is something this Government is very good at. However, judging which cuts are the right ones to make seems to be dependent on how they will be received.

So, as cutting R&D will only really concern people who a) find out about it and b) actually understand the implications or c) are directly affected then Westminster feels it can get away with it.

It’s only when people like Reid come along and pull back the camouflage net we can see what’s really going on.

This same approach is applied to how Westminster treats the oil and gas industry.

Remember the Wood Review? Of course you do. It’s not quite faded from our collective memories yet but perhaps part of its purpose has already been quietly covered over for the sake of saving a few quid.

On who pays for the new regulator, Wood said “industry understandably feels Government should pay at least some proportion of the costs” although Wood also said he believes industry will have to pay.

I don’t understand why he would have said such a thing unless he’d been told in advance that Government wouldn’t pay which it’s now said it won’t.

Let’s be honest. The implications of Government not coughing up a proportion of the costs are both telling and quite far reaching.

First and foremost, it goes against the whole spirit of one of the Wood Review’s main aims which was to establish a “tripartite” approach to regulation, stewardship or whatever you like to call it involving the Regulator, Industry and the Treasury.

The idea being that all three should work together to achieve the best outcome they can for the country and to try to avoid – for example – badly thought through tax changes such as George Osborne’s 2011 fiasco and his more recent decision to mess with the bare boat charter tax arrangements.

Sadly though, it would appear the Treasury has decided it doesn’t need any advice from industry or the Regulator. Or has it?

Could it be that this is just another example of the Treasury doing what it does best and cutting costs at DECC – which is already considerably undermanned and finding difficulty in carrying out its role – and to heck with the consequences?

This is a strong possibility because a recent story in the media suggests Government is looking at cutting up to a further one million jobs from the public sector following the next general election.

The strange thing about this particular cost-cutting measure though is that without the Government behind it the new Regulator’s ability to do the very job he or she needs to do to help the economy is significantly weakened.

What’s more, in the great scheme of things the money involved is peanuts. So why on earth is the Treasury playing hard ball?

Is this just another piece of economic camouflage trying to hide the fact that the country is well and truly bust or is it just another example of political ideology displacing commonsense?

What really astonishes me though is that Ed Davey – the Energy Secretary – has actually taken it upon himself to find a chief executive to run the new Regulator which, by the way, is going to be called the Oil and Gas Authority.

His or her job will begin with the delivery of an initial strategy which will be developed in collaboration with DECC and the Treasury. Let’s hope this process results in the right appointment and not just one of the usual suspects. There are a few people who have become available recently whom I would dread seeing in such an important job.

However, it seems very strange that while refusing to fund the organisation itself the Government is taking such an interest in who will run it.

I’m told DECC is paying for this exercise and the appointment will probably be made by the Civil Service Commissioners and endorsed by the Secretary of State.

I think it safe to assume then that they’re looking to appoint someone who will do as they’re told and can be relied on to support the Government’s point of view.

It also means surely that if the Government hires him or her, then only the Government can fire them even though it’s industry that will be paying the £200k-plus salary.

Frankly, I think the industry should be objecting strongly to this whole process but would there be any point given the state of the public finances? Probably not.