Who's really ripping off drivers?
Plus: responding to an energy crisis, and yet more stagnation
In today’s newsletter:
No growth, again
Happy 250th birthday to The Wealth of Nations
Dubai derangement syndrome
Coming soon: Petrolescence, a gripping new drama by Jack Thorne that explains how in the midst the third Gulf War, with rising prices, and stagnant UK growth… The true villains of the piece are not the former Ayatollah, wind farm curtailment payments, or three decades of over-regulation…
No it’s Dorreen and Dave Scroggs, who offer a litre of diesel at £1.56 from their Chipping Sodbury forecourt on the A432. 4p per litre off if you buy a coffee, lardy cake, and some cheesy Nik Naks.
The heroine Chancellor of this surely BAFTA-winning epic has their number. She’s not going allow “rip-offs” or “profiteering” from the Scroggs. She will not “tolerate any company exploiting the current situation to make excess profits at consumers’ expense.” She’s “backing drivers and families” for “a fair deal at the pump.”
The Scroggs of course are part of a wider conspiracy of 5,500 ‘so-called’ independent forecourts, coordinated by a sinister agency known only as the Petrol Retailers Association (PRA). In league, we discover later with ‘shop front’-organisations for foreign-owned supermarkets, and worst of all… oil and gas companies… Oh the humanity.
They collude through a mysterious agency, known only as ‘competition’ and ‘the price mechanism’, driven by an ‘invisible hand’ of ‘supply and demand’ to cause suffering to those hunting an affordable ham sandwich and a tank of super-unleaded during a cost of living crisis. “It will bring tears to your eyes”, says the Guardian.
Regrettably, this work of fiction is not entirely fiction, and those comments are ones made by the actual Chancellor this week, alongside an echo-chamber of MPs who want the public to know ‘we are on your side’ against the alleged ‘war-profiteers’ hawking nylons and bananas on the very far from black market.
The willful ignorance of basic economics, or idea that prices in what amount to small shops, can be manipulated as described is bad enough. The real PRA dryly commented there is “clearly still a lot of work to do to help politicians and commentators to understand how the fuel market works”.
The consequences are worse, their members report being subject to abuse and intimidation. From members of the public presumably unaware that 7-8% typical retail margins, albeit higher than the 3-5% typical 10 years ago, are hardly the stuff of ‘robber barons’. They relate more to the need to deal with higher business expenses, crime, and tax risks, in part stemming from Britain’s economic malaise.
What causes weapon-grade offence however, is that there is one body that clearly does profiteer at the pump. That body is ‘the Treasury’ run by ‘the Chancellor’. They get just over half of all receipts on a litre from fuel duty and VAT, where VAT is also applied to the fuel duty. They raise more money annually from this than Lord Stern once opined would be necessary for the UK to tackle the costs of climate change, even when he doubled his estimate. And it’s still Government policy to raise this further in September, despite a chorus of voices urging a rethink.
You would be forgiven for thinking this is a department responsible for the economy, whipping up a hate campaign against economics, to deflect from the appalling consequences of heavy handed state-intervention in the very market being targeted; one fundamental to the functioning of the economy. This is not going to help the Chancellor get the country back onto the path of growth.
Andy Mayer
COO and Energy Analyst
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IEA Podcast: Director General David Frost is joined by Energy Analyst Andy Mayer and Editorial Director Kristian Niemietz to discuss the Dubai exodus, nuclear and broader energy policy, and free speech issues - IEA YouTube
Celebrating 250 Years of The Wealth of Nations
To mark the 250th anniversary of the publication of Adam Smith’s The Wealth of Nations, the IEA is today publishing a new paper revisiting the genius of the great Scottish economist and philosophy by Mark Skousen.
It argues that The Wealth of Nations remains one of the most important guides to prosperity ever written, and that Smith’s core model has been vindicated by modern evidence Governments today, with their high taxes, sprawling regulation and pandering to special interests, would have horrified Smith as a return to the mercantilism he spent his career dismantling.
“Smith’s unique achievement in perfecting this ‘invisible hand’ doctrine must be considered one of the greatest triumphs in modern history.”
News and Views
Taxed and regulated to a standstill, responding to the latest GDP figures, Julian Jessop said:
“The latest GDP data show that the UK economy is being taxed and regulated to a standstill. The “steady as she goes” Spring Statement now looks even more like a missed opportunity to change course.
“The monthly figures are not very robust and are often revised, but the recent trend is worrying. After growth of 0.2% in November, headline GDP increased by just 0.1% in December and then flatlined in January. The three-month on three-month comparison looks better and actually picked up, from 0.1% in December to 0.2% in January. However, this rate of growth is still feeble. Adjusting for increase in the population, quarterly growth in GDP per head probably remained close to zero.
“The weakest sector in the three months to January was construction, where output fell by 2.0%. This is a damning verdict on the government’s flagship pledges in several key areas, notably housebuilding and infrastructure spending.
“What’s more, these figures were recorded before the shock of the Iran war. The weakness of economic activity will at least make it easier for the Bank of England to look past the temporary impact of the jump in energy prices on inflation. But the spectre of “stagflation” has returned and this will dampen confidence further.”
Dubai Derangement Syndrome, Callum Price writes on Ed Davey’s downer on the ‘Dubai Deanos’ and why it’s such muddled thinking, ConservativeHome
“It is a sort of Dubai Derangement Syndrome; embracing decline because prosperity is gauche. The belief that having the gall to do something radical to improve your lot in life is an act of vile self-interest, and fundamentally un-British. Taking radical action to achieve something better is beyond the pale. We have it good enough and we should be happy about it. It is the same philosophy that leads politicians to crow about ‘1.5 per cent growth, the fastest in the G7’ as a major victory: a broad comfort with mediocrity. It is managed decline, with a patriotic spin; accepting a lesser lot to spite those who have dared stray from the accepted path.”
Is anyone actually fixing Britain’s growth crisis? Callum Price interviews Dr Lawrence Newport of Looking for Growth, IEA YouTube
Andy Mayer spoke to Times Radio about how to respond to an energy price crisis:
Should we ban u16s from social media? Matthew Lesh speaks to Callum Price on the latest proposals, IEA YouTube
£125bn Net Zero drive will see 30% energy bill surge, Andy Mayer quoted on GB News
Andy Mayer, of the Institute of Economic Affairs, said: “There is no upside to making the fundamental unit of the economy expensive. Steel becomes more expensive, ceramics become more expensive, food becomes more expensive to grow, services are hit, and so it goes on. “You end up being one of the most strangled economies in the world. There’s no win here.”
No case for energy bailout, Alistair Osborne reference IEA commentary on the energy price cap, The Times
“…the figures are nothing like 2022’s. Then Liz Truss spent an indefensible £80 billion — on Office for Budget Responsibility maths — on her “energy price guarantee” and other measures, holding the cap at £2,500 for two years. A fat lot of good it did her, too, as Starmer may have noticed, despite insulating all 28 million households from higher bills, even those of millionaires. It was, as the Institute of Economic Affairs rightly called it back then, “middle-class welfare on steroids”.”
Chris Snowdon wrote in The Critic about the mistakes in the public health lobby’s approach to '‘fat jabs’:
Thank you for the overdue backlash against Rache The People's Friend. Ripe remarks from her even by the high standards of Socialist cheese; but of course a by-election has just been lost to the far left. It might be a stretch too far to generalize from personal cost of living to companies' and sole traders' material costs: but does no-one see the similarity of those to household expenses?