ODI calls for VAT hike on energy bills (updated: ODI fights back)

In a brave move, the Overseas Development Institute – which bills itself as the UK’s leading international development think tank – has called for George Osborne to use his Autumn Statement to announce plans to quadruple the rate of VAT on household energy bills.

Despite sustained pressure for bills to be lowered to address a ‘cost of living’ crisis, ODI believes the Chancellor should raise VAT from 5% to the standard rate of 20%, bringing more than £4 billion into Treasury coffers.

According to an ODI spokesperson:

It is unconscionable that a young man should have to pay 20% to buy a copy of Grand Theft Auto 5 in order to wind down after a hard day in the City by slaughtering virtual representations of old ladies, when real life old people are able to pay only 5% to heat their homes.  This ‘warmth subsidy’ must end now.

If successful, ODI plans to campaign for the abolition of the Winter Fuel Allowance, saving another couple of billion. It will then call for a flat rate of VAT on all products, ending subsidies for reading and eating (both books and food are zero-rated).

Supporting this move… Continue reading

Why Witchcraft Works

lakevUkerewe, the island in the Tanzanian half of Lake Victoria where I am currently spending a few months, is famous for witchcraft. Witches are found in every village, in every street. They earn a living by selling curses. If you want to punish a friend or destroy an enemy, you pay a witch to smite him with some misfortune – illness, injury, impoverishment, death. Because these things are so common anyway, it is easy for witches to claim that it was the curse that did the damage, and easy therefore for them to stay in business. And there begins the vicious circle – bad things sustain belief in witchcraft, belief in witchcraft absolves you (or your government) of any responsibility for your lot, so more bad things happen, and the witches grow ever more powerful.

US sets out big statement of global climate policy. Don’t hold your breath

US Special Envoy for Climate Change Todd Stern’s speech at Chatham House a couple of days ago is worth a look if you follow climate change. But don’t expect it to cheer you up.

It’s a thoughtful piece that clearly sets out where the US is coming from with regard to a new international agreement. But here’s the key part – which comes right after he acknowledges developing countries’ concerns about retaining space to develop as “entirely legitimate”:

The nationally determined structure of commitments we have already discussed should satisfy this pragmatic purpose, since countries would make their own decisions about what kind of mitigation commitments were appropriate given their own circumstances and capabilities.

Sigh – here we are once again with the same old pledge-and-review crap of countries doing whatever they figure they can manage, and then hoping it will somehow magically add up to the right global outcome. As though the atmosphere will award ‘marks for effort’.

And if you’re wondering where this kind of approach leads us, well, this year’s IEA World Energy Outlook  – published next month but extract available here – estimates that the net effect of commitments under the Copenhagen Accord will be 3.6-5.3 degrees Celsius of long term warming, most of it before the end of this century.

Oh, and despite the comprehensive nature of Stern’s speech, there’s one thing he conspicuously didn’t mention – the global target of limiting warming to 2 degrees Celsius. Go figure.

Someone explain to me again how the Obama Administration’s global climate policy is different from that of the Bush Administration?

What’s happening to global incomes

Now here’s an interesting graph, courtesy of the World Bank’s resident inequality guru, Branko Milanovic. It shows change in real incomes over the period of 1988 to 2008 at different percentiles of global income distribution (in 2005 dollars, adjusted for PPP).

Global inequality

Over at the right hand side, what you see is the mega-rich doing very well indeed: the real incomes of the top 1% went up by 60% over this period. (That’s about 60 million people, by the way – including the richest 12% of Americans, the richest 3% of Brits, Japanese, Germans, and French, and the richest 1% of Brazilians, Russians, and South Africans.)

But they’re not the biggest winners, as it turns out. To find them, look at that massive peak in the centre of the x axis, between the 50th and 60th percentile of global income. There you’ll find 200 million Chinese, 90 million Indians, and 30 million each from Indonesia, Brazil and Egypt. These are the people who’ve seen the fastest rise in incomes: an 80% real terms increase over 20 years at the median.

Over at the left hand side, you find the world’s poor. They’ve also done pretty well, for the most part, with real incomes rising between 40% and 70%. This is ground zero for the decline in the number of people living in extreme poverty in recent times (from 44% to 23% of the world’s population over these two decades). There’s an exception, though: the really poor people who are on the far left hand side, whose real incomes have remained stagnant. Want to ‘get to zero’ on poverty as part of the post-2015 agenda? These are the people you’re focusing on.

And that huge dip between the 75th and 85th percentiles? Why, that’s the squeezed middle in developed countries, plus a lot more people in Latin America and former Communist countries – watching their incomes stagnate while those just to the right of them hoover up globalisation’s winnings.

Overall, Milanovic calls this set of changes “probably the profoundest global reshuffle of people’s economic positions since the Industrial Revolution”. Read the whole paper (pdf, 27 pages) – it’s terrific.

Justine Greening’s interesting new core messages

Justine Greening has done a big interview with the Daily Mail, which concludes as follows:

Greening, to her credit, does not seek to back away from what she believes in. That includes making the best of the Tory commitment to keep Britain in the forefront of foreign assistance. 

The big difference is that she believes that the aid budget is not just about alleviating poverty, however, important that may [sic]. It is also about easing the passage for great British commercial firms in emerging markets and ensuring the resources are more carefully marshalled.

So that’s interesting.

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