Monday, 22 March 2010

Pelamis may float

The Edinburgh-based tidal energy manufacturer is considering a float as the wave and tidal energy industry booms
Jane Bradley

The turbine maker Pelamis Wave Power is considering a possible flotation to fund expansion as the wave and tidal energy industry takes to the water.
The Edinburgh-based company, which makes the snake-like wave energy converter, needs to raise up to £50m to fund the next stage of its development, Neels Kriek, the chief executive, said.
Last week, the Crown Estate announced the successful bidders for the world’s first wind and tidal energy commercial leasing round. Ten wave and tidal energy sites will be created around the Orkney islands and the Pentland Firth.
Pelamis is behind the technology to be used at three sites — Marwick Head, West Orkney South and Armadale, which are expected to be running by 2020.
Pelamis’s 180m-long device writhes on the surface of the water. The wave-power drives hydraulic motors which, in turn, power generators.
The company has 16 shareholders, ranging from the global energy firm Statoil Hydro to Swiss venture capitalist Emerald Technology Ventures, and Scottish Enterprise.
Over the past 10 years, a range of investors have put in £45m for research and development. Krieks said that Pelamis’s cash position was strong enough for the next 18 months, but the company would need to fund expansion in 2012.
“We are in talks with our shareholders over the best way to raise funds. A flotation is something we will consider,” said Krieks.
The company, which plans to double its workforce to about 150 by 2020, already has three units at the Agu├žadoura wave farm off northern Portugal, and is developing a 26-unit farm at a site in Shetland in partnership with energy firm Vattenfall.

Britain. A breath of foul air

The UK faces £300m in fines after failing to meet EU pollution targets, but Britons also pay the price with heart disease, asthma and cancer
By Nina Lakhani
Sunday, 21 March 2010
More than 50,000 people are dying prematurely in the UK every year, and thousands more suffer serious illness because of man-made air pollution, according to a parliamentary report published tomorrow. The UK now faces the threat of £300m in fines after it failed to meet legally binding EU targets to reduce pollution to safe levels.
Air pollution is cutting life expectancy by as many as nine years in the worst-affected city areas. On average, Britons die eight months too soon because of dirty air. Pollutants from cars, factories, houses and agriculture cause childhood health problems such as premature births, asthma and poor lung development. They play a major role in the development of chronic and life-shortening adult diseases affecting the heart and lungs, which can lead to repeated hospital admissions. Treating victims of Britain's poor air quality costs the country up to £20bn each year.
Nearly 5.5 million people receive NHS treatment for asthma, and more than 90,000 people were admitted to hospital as a result of the disease in England in 2008/09. US research has found that the lungs of children who live in highly polluted areas fail to develop fully.

Poor air quality is caused by three key pollutants – nitrogen oxides; particulate matter and ozone – where Britain fails to meet European safety targets.
Britain is Europe's worst emitter of nitrogen oxides and exposed 1.5 million people to unsafe levels in 2007, according to the World Health Organisation (WHO). Long-term exposure can cause breathing problems, worsen asthma and bronchitis in children and aggravate allergies. They are by-products of burning fuel, and contribute to acid rain and make plants more susceptible to disease. Despite almost halving emissions since 1990, Britain is widely expected to fall short of the 2010 EU target for nitrogen oxides, which are a precursor to particulate matter (PM), the most dangerous of all pollutants. They play a major role in the development of chronic obstructive pulmonary disease in adults which will affect more people than heart disease by 2020.
Particulate matter is airborne and comes from materials ranging from sulphates, ammonia, carbon and water to mineral dust. Sources include coal burning, exhaust emissions, tyre wear, quarrying and construction. There is no safe level of PM; some people are affected by very low concentrations over a long period. It is also linked to heart disease and cancer.
Reduced coal use in the 1990s led to a 20 per cent reduction in PM, but a big increase in diesel vehicles on the road has seen progress stall since 2000. Eight areas, including Greater London, Swansea, and Yorkshire and Humberside have exceeded 2005 EU limits at least once. Last December, the EU rejected an application from the Department for Environment, Food and Rural Affairs (Defra) to give Greater London more time to meet the target after it was unable to prove the city had worked hard to meet the target.
Britain is also doing badly on ozone in the lower atmosphere, a toxin formed from chemical reactions between various air pollutants and sunlight. Ozone concentrations are rising in UK cities, though, generally, rural areas and sunnier climates fare worse. Ozone causes eye and skin irritations, reduces lung function and damages airways and can be deadly; ozone-related summer smog caused an additional 800 deaths in 2003. There is no legally binding EU limit but, in 2007, nearly 90 per cent of the UK population were exposed to levels above WHO recommendations.
The Commons Environmental Audit Committee (EAC) will tomorrow issue damning criticism of the UK's failure to prioritise air quality despite more than a decade of pressure from scientists and the EU. Ministers from all departments will be told that our air quality is "shameful", and they must "drive this from the top... and accept responsibility for policies that conflict with air quality".
The Government will also be asked to explain why millions of pounds have been spent raising awareness about obesity, passive smoking and alcohol, but not air quality – even though the costs to human life and the NHS are similar. The Government will also face pressure to instigate immediate cross-departmental action to address the country's air quality, in order to meet EU pollution targets, avoid spiralling fines and ultimately reduce the unnecessary deaths and illness that disproportionately affect people from lower socio-economic groups.
Frank Kelly, professor of environmental health at King's College London, who gave evidence to the committee, said: "We have been banging this drum in the scientific community for 10 years and it now must be taken more seriously by the Government because this really is a damning report.... We must have an immediate major education campaign, because if people had an inkling about the impact of poor air quality on their children, then they would stop sitting outside the school gates in their big cars and would be much more likely to help. Maybe the threat of enormous fines from the EU will finally get the Government's attention."
While the air quality in the UK has improved significantly over recent decades because of cleaner fuels, vehicles and improved industrial processes required by national and European laws, these improvements have levelled off or slowed down.
Londoners live with the worst air quality in Britain. Eight million people live amid millions of vehicles and close to several airports. But some policies targeted at improving air quality have been scrapped or delayed since the election of Boris Johnson as Mayor of London. These include plans to charge £25 per day for the biggest, heavy-polluting vehicles, and a westerly extension of the congestion charge.
Professor Kelly said: "Instead of tightening up our policies, they have been dismantled instead."
Environmental Protection UK, an influential campaign group, condemned what it called the Government's "wait and see" approach to air quality, which has meant pinning too much hope on the impact of European standards for cleaner vehicles.
Ed Dearnley, the group's policy officer, said yesterday: "Resources dedicated to air quality have been tiny in comparison to other areas of public health work such as obesity and passive smoking. Defra has struggled to get other departments, such as transport and health, to understand the problem and to act. The failure to get to grips with [more] vehicles on the roads, and the well-intentioned but counter-productive policies that have encouraged more diesel vehicles, means their 'wait and see' policy has failed."
A Defra spokeswoman said the EAC report described fines as "potential" not "expected". She added that the Government intends to avoid them by asking for more time to meet the limits. "Over the last few years there have been a range of measures introduced which demonstrate close working between departments. These include substantial investment in public transport and incentives through vehicle excise duty for less polluting vehicles," she said. "Of course, we accept that further measures are needed, and discussion is continuing on some of these."
In the air: The UK's clean-up success rate
Where we do well
Britain has never exceeded the EU lead target since it was set in 2007.
The introduction of unleaded petrol in 1986 eradicated the main source of the highly toxic chemical.
Carbon monoxide emissions have decreased by 75 per cent since 1990, largely as a result of catalytic converters in machinery and vehicles.
Britain produced 16,800 tonnes of the cancer-causing benzene in 2007 – a 72 per cent decrease since 1990. The EU target was met well in advance of the 2010 deadline.
Where we fail
Nitrogen oxides levels in some cities are 20 per cent higher than the European average. The 2010 target will not be met unless new national and local strategies are introduced.
Although EU ambient air targets for ozone have been achieved, nearly 90 per cent of the country is exposed to levels considered too high by the World Health Organisation.
Polycyclic aromatic hydrocarbons increase risk of cancers. High levels were found in Scunthorpe in 2007, but the rest of the UK meets targets.

Solution to a thirsty world: sea water without the salt

Neil McDougall of Modern Water says taking seawater and making it drinkable could be the answer to a looming shortage
Ben Marlow

MIDDLE East government officials spent last week in Vienna, discussing oil at a meeting of Opec, the producers’ cartel. In Oman, however, another dwindling resource was top of the agenda.
In the coastal town of Al Khaluf, Oman’s minister for water turned on a desalination plant that will provide the area with 100 cubic metres of fresh, clean water every day — enough for 80,000 people.
The plant was sold by Modern Water, a British company that claims places such as Oman will become increasingly reliant on desalination — taking seawater and making it drinkable — as the world’s water resources are depleted.
In less than 20 years, 5.3 billion people — two-thirds of the world’s population in 2025, according to UN estimates — will face a shortage of water. London could be among those places. Governments are increasingly worried about water scarcity. It will be one of the issues discussed at UN World Water Day this week.
“The world’s population tripled in the 20th century while water consumption grew sixfold. Depleted water resources have implications for global security, health and life expectancy,” said Neil McDougall, Modern Water’s chief executive.
“The earth’s surface is made up of 70% water. However, 97.5% of that is salt water, so we need to work out how to make it drinkable,” he said.
With 70% of the world’s population living within 50km of the sea, desalination could provide the solution.
Modern Water, based in Guildford, Surrey, claims its technique differs from most desalination procedures. They rely on high pressure, needing huge amounts of electricity, to push salt water through an enormous filter. The company’s patented “manipulated osmosis” technology uses a chemical reaction to separate the salt from the water — a process that uses far less energy. “It reduces energy consumption by as much as 30%,” said McDougall.
The technology was pioneered by Adel Sharif, a professor at Surrey University. But it wasn’t until McDougall, who had founded and sold Mid Kent Water, sat in on a demonstration, that the idea took off. “It was the most exciting invention I had ever seen,” said McDougall. He bought the technology and set up Modern Water with backing from IP Group in 2006. A year later, it floated on the Alternative Investment Market and today has a value of £42m.
The company expects spending on desalination in the Middle East to increase by £13 billion by 2016. Last year, Modern Water made a loss of £3.6m but with £38 billion expected to be spent on desalination in the next 10 years, McDougall believes it won’t be long before the profits are flowing.

Feeble wind farms fail to hit full power

Jonathan Leake Environment Editor
THE first detailed study of Britain’s onshore wind farms suggests some treasured landscapes may have been blighted for only small gains in green energy.
The analysis reveals that more than 20 wind farms produce less than a fifth of their potential maximum power output.
One site, at Blyth Harbour in Northumberland, is thought to be the worst in Britain, operating at just 7.9% of its maximum capacity. Another at Chelker reservoir in North Yorkshire operates at only 8.7% of capacity.
Both are relatively small and old, but larger and newer sites fared badly, too, according to analyses of data released by Ofgem, the energy regulator, for 2008.

Siddick wind farm in Cumbria, now operated by Eon, achieved only 15.8% of capacity, the figures suggest. The two turbines at High Volts 2, Co Durham, the largest and most powerful wind farm in Britain when it was commissioned in 2004, achieved 18.7%.
Turbine efficiency is calculated by comparing theoretical maximum output with what the farms actually generate. The best achieve about 50% efficiency and the norm is 25%-30%.
Experts say the figures for individual wind farms have to be treated with caution as output can vary sharply because of factors such as breakdowns.
The revelation that so many wind farms are performing well below par, however, will reinforce the view of objectors who believe many turbines generate too little power to justify their visual impact.
Britain has 245 onshore wind farms. Although wind power is expensive, the industry has boomed because of the “renewable obligation” subsidy system, under which consumers pay roughly double the normal price for energy from wind.
Michael Jefferson, professor of international business and sustainability at London Metropolitan Business School, who is also a former lead author for the Intergovernmental Panel on Climate Change, has cited the efficiency figures in peer-reviewed papers. He says the subsidy encourages the construction of wind farms.
“Too many developments are underperforming,” he said. “It’s because developers grossly exaggerate the potential. The subsidies make it viable for developers to put turbines on sites they would not touch if the money was not available.”
Nick Medic of Renewable UK, which represents the wind industry, said Britain’s ambitious targets for clean power meant the country needed “every bit of green energy it could generate”.

Gabon's green ambition for Africa

Africa has taken its place on the world stage but its future security depends on equitable, green development

Ali Bongo Ondimba, Sunday 21 March 2010 13.00 GMT
This month Gabon holds the presidency of the UN security council. It has given me cause to reflect on the state of peace and security in the world today. The more I have thought about it, the more prominent I view the position of Africa within the global community.
The continent has been synonymous with armed conflict for more years than I care to remember – seven of the 17 current UN global peace and security missions are in Africa. If we analyse the origins of these conflicts, we see that illegal exploitation of renewable and non-renewable natural resources lies at the heart of most of them.
Africa has always been rich in natural resources, but that richness takes on additional significance today as competition among industrialised and emerging nations intensifies for access to food, water, energy and mineral resources. Recent land acquisitions by foreign companies for the purpose of growing food in Africa have been well publicised; so too have the mining and gas licenses acquired by Chinese companies.
More than half of the world's cobalt, manganese, coffee, cocoa, palm oil and gold are to be found in Africa, as well as vast quantities of platinum and uranium, and close to 20% of all the petroleum traded on the world market. Hardly a month goes by when new deposits of oil and gas are not uncovered somewhere in Africa. Uganda and Ghana are set to join the club of major oil producers in the next couple of years. The US plans to source almost 25% of its annual crude oil imports from Africa over the coming years.
Effective resource management is fundamental for realising the full value of this global interest in our continent and its riches. We must ensure we manage our resources well. We must establish the right regulatory systems to maximise our returns and ensure equitable development. Without development, there can be no guarantee of security. Where there is poverty, there will always be a greater risk of conflict. The need to build strong institutions of state and to develop and maintain professional and disciplined security forces is of paramount importance. We must avoid the illegal exploitation of Africa's resources, which inevitably results in a spiral into conflict.
Africa will be the continent most affected by climate change, and we must do everything in our power to mitigate its impact while urging the rest of the world to work alongside us in recognition of the fact that their carbon emissions affect us the most. African countries host 16% of the world's forests. 80% of my country, Gabon, is made up of tropical rainforest. We have designated 11% of this as national parks and a further 3% as other protected areas, and have more FSC certified sustainable managed logging concessions than Brazil. Avoiding deforestation in my country and the wider Congo Basin region, which is the largest carbon sink in the world after the Amazon, provides one of the most effective means available to minimise carbon emissions and combat climate change.
Furthermore, in 2009, the Africa Progress Panel predicted that dramatic climate change will result in armed conflict in 23 African countries in the next 10-20 years, and political instability in a further 13 nations. Global mechanisms must be put in place to reduce carbon emissions in all countries, including incentives rewarding nations for conserving their forests. That's why it's so important for us to agree a legally binding framework to govern emissions and address global climate change. Clear incentives will free up capital for investments in new clean energy technologies, conservation and afforestation. Alternatively, I can envisage a day when UN peace keepers – the "casques verts" of the future – are engaged not in maintaining the peace in Africa, but charged instead with protecting vital biodiversity and stopping deforestation.
The cohesion and common position achieved by African countries at the Copenhagen summit on climate change has awoken Africans and the world to the potential power of a collective African vote. If we as Africans can continue to find common positions on significant global issues, we can wield a lot more influence in multilateral institutions such as the United Nations and the World Bank, something which has hitherto eluded us.
Peace and security are at the heart of Africa's future. The African Union has played a leading role in addressing them since its launch in 2002. The number of violent conflicts has been significantly reduced, and important advances, while still fragile, have been made. Our international partners have contributed in no small measure, and we owe them our thanks. The task before us now is to ensure that we do not bequeath the burden of conflicts to the next generation of Africans. Africa's future is at stake, and so too is the prosperity and security of the entire world. It is our collective responsibility to make peace happen.

Speaking up for scientists

We can be arrogant and nerdish, but overall scientists do not set out to deceive themselves or the public

Philip Strange, Sunday 21 March 2010 17.00 GMT
Last weekend on Cif Nicholas Maxwell accused scientists of "deceiving us and themselves about the nature of science". As an experimental biomedical scientist with 30 years of research experience, I looked for my own experience of science in his critique, but could not find it.
His main criticism is against the use of evidence to support scientific knowledge. He rejects as "nonsense" the idea that "nothing is accepted permanently as part of scientific knowledge independently of evidence". He cites subjects such as physics, where he says unified theories are accepted independent of evidence.
In the biomedical sciences, things are rather different. Research is conducted on the basis of a hypothesis and experiments are designed to probe the hypothesis. The results are analysed using statistical tests to decide whether the data agree or disagree with the hypothesis. Even if we are convinced by the results ourselves, we still need to convince our peers through the peer-review publication process.
This sort of science is not big science; it is incremental science. Each increment in knowledge may seem small, but it contributes to a body of knowledge which may eventually lead to an overarching theory. This evidence-based approach is fundamental to the biomedical sciences and has also transformed the practice of medicine. Maxwell believes scientists see themselves as "seekers after truth". In my view, this is a misrepresentation of the way science works; I prefer to see the scientific process as providing descriptions of natural phenomena that are consistent based on current evidence.
Maxwell goes on to consider "value" in the aims of science. Here I believe he is asking whether experiments performed are worth doing in terms of their outcomes. Most biomedical scientists would consider their work to be of intrinsic value as, by its very nature, biomedical science investigates topics related to human health and disease. But this is not enough and researchers do need to question continually the value of work performed. Some research will lead to high-value outcomes and some will not, but it is difficult to predict this at the outset. One important control of value comes from the peer-review process embedded in publication of results and in the grant review process.
Finally, Maxwell refers to "knowledge of valuable truth", which I believe relates to the dissemination and use by humanity of the results of useful research. Publication is one way of disseminating results, but it does not ensure the results are used well or widely known. High-quality reporting of science in the press (of which there is almost none) would help to disseminate scientific findings. There is also a political dimension as the use of results for the greater good depends in some cases on governments. Climate change is a good example: the scientific results about the effects of anthropogenic global warming are known but governments are sitting on their hands rather than taking difficult decisions.
Finally, let me speak up for scientists. In my experience, the vast majority of scientists are honest, sometimes slightly nerdish people who are grateful to be able to work on something about which they have a passionate interest. Scientists can be arrogant: but overall they do not deceive themselves, or the public.

Wind contributing to Arctic sea ice loss, study finds

New research does not question climate change is also melting ice in the Arctic, but finds wind patterns explain steep decline

David Adam, environment correspondent, Monday 22 March 2010 07.00 GMT
Much of the record breaking loss of ice in the Arctic ocean in recent years is down to the region's swirling winds and is not a direct result of global warming, a new study reveals.
Ice blown out of the region by Arctic winds can explain around one-third of the steep downward trend in sea ice extent in the region since 1979, the scientists say.
The study does not question that global warming is also melting ice in the Arctic, but it could raise doubts about high-profile claims that the region has passed a climate "tipping point" that could see ice loss sharply accelerate in coming years.
The new findings also help to explain the massive loss of Arctic ice seen in the summers of 2007-08, which prompted suggestions that the summertime Arctic Ocean could be ice-free withing a decade. About half of the variation in maximum ice loss each September is down to changes in wind patterns, the study says.
Masayo Ogi, a scientist with the Japan Agency for Marine-Earth Science and Technology in Yokohama, and her colleagues, looked at records of how winds have behaved across the Arctic since satellite measurements of ice extent there began in 1979.
They found that changes in wind patterns, such as summertime winds that blow clockwise around the Beaufort Sea, seemed to coincide with years where sea ice loss was highest.
Writing in a paper to be published in the journal Geophysical Research Letters, the scientists suggest these winds have blown large amounts of Arctic ice south through the Fram Strait, which passes between Greenland and the Norwegian islands of Svalbard, and leads to the warmer waters of the north Atlantic. These winds have increased recently, which could help explain the apparent acceleration in ice loss.
"Wind-induced, year-to-year differences in the rate of flow of ice toward and through Fram Strait play an important role in modulating September sea ice extent on a year-to-year basis," the scientists say. "A trend toward an increased wind-induced rate of flow has contributed to the decline in the areal coverage of Arctic summer sea ice."
Ogi said this was the first time the Arctic winds have been analysed in such a way.
"Both winter and summer winds could blow ice out of the Arctic [through] the Fram Strait during 1979-2009," she said.
A number of other factors were also responsible for ice loss, including warming of the air and ocean, she added.
According to the National Snow and Ice Data Centre in Colorado, Arctic sea ice "is in a state of ongoing decline". Since 1979, the ice has shrunk by about 10% a decade, or 28,000 square miles each year. The ice reaches its minimum extent each September, when it begins to reform as the freezing Arctic winter takes hold.

Take on the City with a 'people's budget'

Alistair Darling has a chance to start tackling the deep structural problems of the economy

Larry Elliott
The Guardian, Monday 22 March 2010 01.34 GMT

Budget day has its own ritual. The battered old red box, the photo call in Downing Street, the tension in the Commons as MPs wait for the chancellor to pull a rabbit out of the hat – all are part of a peculiarly British occasion. It was never quite the same when the Conservatives moved it to autumn in the 1990s, and a relief when Gordon Brown moved it back to its proper place in the calendar.
Tradition and pageantry can deceive. The budget box may give the impression of enduring solidity but the economy is weak and the public finances are shot to pieces. More worrying, perhaps, is that plans for attacking the deep structural problems of the economy remain inchoate as the third anniversary of the financial crisis approaches.
Alistair Darling said yesterday that this week's speech would flesh out the government's plans for growth. There would be no giveaways, he told Andrew Marr, no pre-election sweeteners. He thinks voters would be more impressed by a budget that he promises will be "sensible and workmanlike".
But this is what chancellors always say. You would struggle to find a second lord of the Treasury who promised a flashy and opportunistic budget. To be truly "sensible and workmanlike", the budget needs to contain five elements.
Firstly, it should facilitate, rather than impede, economic recovery. Darling will rightly reject George Osborne's calls for immediate tax rises or cuts in public spending to reduce the budget deficit but he should consider filching the shadow chancellor's proposal for an Office of Budget Responsibility, only with a different mandate from that proposed by the Conservatives. The Opposition would like an independent OBR to produce forecasts for the public finances ahead of the budget, assess their long-term sustainability and suggest steps to hit the fiscal objectives.
But this, as a forthcoming paper from the Progressive Economics Panel rightly notes, is putting the cart before the horse. In the current circumstances, with a marked risk of a double-dip recession, the strength of the recovery should take precedence. "Certainly," the paper argues, "a credible strategy is needed to address the budget deficit but this strategy must be flexible and based on the strength of the recovery and not on rigid timelines and/or ideological opposition to budget deficits."
Secondly, the budget should lay the foundations for structural reform. As Britain has discovered to its cost all too often in the past 40 years, the nature of the recovery matters and pumping up consumer demand through a booming housing market is no long-term solution. The government's challenge is to create a supply-side environment that will rebalance the economy towards production and exports.
Baby steps
There is now all-party agreement that the City will have to pay more to the exchequer, either through a financial transaction tax or through an insurance levy. The Conservatives and the Liberal Democrats say this can be done unilaterally; Darling insists that a go-it-alone strategy would put the competitiveness of the UK financial sector in jeopardy.
But since the aim is to reduce the economy's dependency on the City as a source of growth, it makes sense to use the money raised from the City to fund the rebalancing through a national investment bank and a system of German-style job subsidies to protect skilled labour during downturns. Britain's competitors have better educated workforces, more predictable flows of capital to industry, and stronger supply chains.
Thirdly, the budget should recognise that Britain is falling behind in the race to develop the low-carbon industrial sectors of the future. Darling has hinted that he will announce a £2bn green infrastructure fund on Wednesday, but this is a baby step when giant leaps are needed. Recessions inevitably result in the environment slipping down the political agenda but the long-term challenges of climate change and more expensive fossil fuels remain.
Governments in other countries have recognised that backing environmental industries through a mixture of subsidy, taxation and procurement makes sense because there will be monopoly profits for companies that can secure first-mover advantage. Far more ambition is needed in the UK to make the Green New Deal more than a soundbite.
Fourthly, it has to be recognised that any economic rebalancing will prove stillborn unless there are important changes to the way the financial sector operates. Over the past few months it has become clear that the Bank of England and the Financial Services Authority are both ready to embrace radical reform; Mervyn King has openly raised the question of whether there should be a legally enforced split between "safe" utility banks and "risky" investment banks. The governor has warned, repeatedly and almost certainly correctly, that leaving the banks broadly unreformed will lead to a fresh and perhaps even more serious crisis.
Strong stuff
Adair Turner is not a fan of legislating for a Glass-Steagall approach to breaking up the banks, but the FSA chairman has been voicing previously unthinkable thoughts. Turner made three points in a lecture to the Cass Business School: that the authorities needed specific controls on credit for the housing market; that the benefits of complex financial instruments had been hugely overstated, and that it should not be assumed that ever-greater market liquidity was "axiomatically beneficial".
This is strong stuff. Keynes was always sceptical of what he called the fetish of liquidity, arguing that the point of capital markets was to channel savings into productive investment rather than create casinos. Turner agrees, calling for a "bias to conservatism in setting capital requirements against trading activity; it reinforces the case for limiting via capital requirements the extent to which commercial banks are involved in proprietary trading, and it may argue in favour of financial transaction taxes".
The problem is that the third leg of the tripartite system, the Treasury, is far less open to new thinking. Years of the City lobbying Whitehall has paid off; government machinery has been captured by financial interests and conservatism is entrenched. One way to break the logjam would be a Royal Commission – on no account to be chaired by a City grandee – with a mandate to propose reforms of the financial system by the end of 2011.
Finally, a far greater proportion of UK savings should go into productive investment rather than bricks and mortar. The reason Britain has destabilising bubbles in property is simple: this is a small island with a large and growing population, tough planning regulations limiting new housing developments and a tax system that encourages owner-occupation. Reform is fraught with political difficulties; concreting over swaths of the green belt is just as unpopular as slapping capital gains tax on a prime residence. Nobody has yet come up with a better solution than that of David Lloyd George in his "people's budget" of 1909: a land valuation tax.
These then would be the bare bones of a sensible and workmanlike budget. Darling needs to get the economy moving again; he needs to build-up its long-term productive capacity; he needs to invest in a long-term future, and he needs to tackle the two roadblocks to reform: the City and the housing market. All he has to contend with are a record peacetime deficit, powerful vested interests and deep-rooted cultural inertia. Easy peasy.
Testing times: Addressing the Deficit Without Risking the Recovery,