Sir David King lambasts Treasury for preventing green economic recovery

Former chief scientific adviser and head of Oxford University's Smith School says ideology rather than common sense and courage is driving policy at the heart of government
David King
Sir David King: "Inertia is the big problem. We do what our grandfathers did rather than thinking forward." Photograph: Martin Godwin

There are not many things that render Sir David King, the former UK Government's chief scientific adviser, momentarily speechless.

But all he can do is raise his arms and shrug when asked to find a compelling reason for the UK Treasury's continuing refusal to support the green economy.

On reflection, he says the only explanation for their opposition to what he considers a "no brainer" is that government economists are blinkered by a laissez faire ideology which he believes will inevitably drive the UK further into long-term economic decline.

Re-enforcing this is the government's fundamentalist approach to deficit reduction and lack of political leadership and courage to develop a new and resilient economic model, rather than trying to do the equivalent of putting Humpty Dumpty back together again.

"Inertia is the big problem," King tells the Guardian. "We do what our grandfathers did rather than thinking forward."

King says the government needs to understand that at a time when one narrow form of logic dictates that we should be slashing budgets to deal with the deficit, the more courageous path is to recognise that this is the very moment to invest.

Facing up to social, environmental and economic challenges

While the government is not for turning on ideological grounds, King is hopeful that it will be forced to change its policies on the basis of political expediency as voters become increasingly frustrated at the austerity drive.

"We have to do something apparently paradoxical," he says. "Our economies are in deficit, we have a financial and debt crisis along with the financial demands of a transition into an economy which is much more resource efficient, which is taking opportunities to market that de-couples us from oil dependence.

"My solution is that we need the financial community, which is sitting on large sums of money, coming together with government to create stimulus funding to move us out of the crisis and use government direction to head us towards transforming the economy. This has got to be phrased as a massive opportunity. If we sit on our hands and invest in gold, which is a way of not making good use of funds, this will continue to worsen.

"To switch from an oil-based transport sector to an electricity-based transport sector, we need to de-fossilise our electricity. The private sector needs to see that this is the biggest missed opportunity for wealth creation in our economies."

While King, who is director of the Oxford-based Smith School, points to a growing number of companies that have understood the need to face up to social, environmental and economic challenges, he says the "more difficult thing is overcoming the position of power of economists.

"The Treasury civil servants are heavily driven by traditional dogma that we do not support winners but let them emerge in the market place. This is one time when we can no longer let this philosophy dominate and that is a tremendous job to be done. I know, just look at the scars on my back from my time in government."

He contrasts the UK with South Korea which has become a technological powerhouse, with global companies emerging because of government intervention.

He likes to point out that Rolls Royce, which we hail today as one of the great British engineering success stories, would have gone out of business had it not been for public support when it was bankrupt.

Funding the green economy

King says that the difficulty in funding the green economy is not a lack of money but a lack of confidence. Record gold prices are an indication that investors are fleeing to safety because they do not feel governments are providing the necessary long-term regulatory frameworks or incentives to give them the confidence to invest in emerging new technologies.

He believes this can be countered by the government taking a more proactive role in creating public private partnerships.

"Venture capital companies focused on sustainable investment are finding it difficult to make money and we are fully aware of this," he admits.

"But I think the solution is for governments to set out a clear pathway and to invest in that pathway as then the finance will follow through."

He gives the example of the Energy Technologies Institute he set up when he was in government. He convinced Gordon Brown to invest £500m on the basis this would be match-funded by the private sector. He found the other half within six months.

To move this partnership agenda forward, King is using his position at the Smith School to next month bring together 250 of the world's most influential politicians, investors and business leaders from developed and developing countries to debate how to re-direct funds into the green economy. Those who have already registered for ReSource 2012 represent more than $4tn in assets.

Transition from an oil based economy

King says that the government needs to particularly focus on resource efficiency because commodity prices are rising rapidly, with no sign of a let up, and this will push the UK and other developed countries further into debt unless urgently addressed.

"We have a western financial crisis and what is fundamentally different from the 1920s and early 30s is that the downturn is not global," he says. "We've still got the emerging economies growing rapidly so demand for commodities is pushing prices sky high. A growing population, now at seven billion, is also putting pressure on prices. It is crisis time.

"If we do not address this, there will be a continuing destabilisation of the global economy and western economies that are already in debt will come out worst as their balance of payments deteriorate. Countries like China can afford to soak up these costs. The Eastern spring is coupled with a Western autumn."

While the price of food and minerals is of concern, what particularly worries King is our continuing dependence on oil.

He points out that the Italian balance of payments was in the black in 2000 but has now gone 38 billion euros in the red, of which 34 billion is due to the increased cost of imported oil since the turn of the millennia.

With the UK moving towards increasing oil dependency from imports due to the fall in North Sea oil production, he sees a time in the none too distant future when we are hit by an extra annual bill of 40 billion euros for oil imports, at today's price.

He is despairing of the attitude of the Treasury, which he says "is unconvinced about the argument that the solution for the energy sector is to provide energy within the nation. There has been a tremendous hoo-ha in government about the agreement with Norway to provide gas and oil to the UK.

"That is a good idea to have a secure gas supply but the notion is that we can import all the oil and gas as much as we need? Our economy cannot afford it."

He recalls the last time he discussed with one of the Treasury chief economists about the need to reduce our oil dependency.

"The chief economist challenged me by saying Italy is not Britain, and we can control the value of the pound on the currency markets but I pointed out that devaluing the pound will improve our export capability but as soon as we do that we increase the import cost of oil. That was the end of the discussion."

The power of big money

King recognises that the power of the fossil fuel lobby is making it hard to make progress but he believes their power is at a high point and will soon start to wane.

"The power of big money has been incredibly successful in destabilising the transition, even more successful than the doubt that was sown between smoking and cancer," he says.

"The scientific community felt very battered by the University of East Anglia climate revelations but they continue to beaver away showing predictions for the next 20 years ago are even worse than predicted and we are faced with a human existential crisis.

"That will be the force that will bubble through. There is only so long you can deny that cigarette smoking is not linked to cancer until it becomes absurd."

For the UK, he believes that developing our nuclear power capacity has to be the way forward but King vents his frustration at David Cameron, the prime minister, and the Chancellor George Osborne for not showing more leadership in developing new nuclear capacity, given the fact that we have enough stored uranium and plutonium to power a new generation of reactors.

A long term vision is required

He also believes it is imperative to fund other major infrastructure projects, such as the Severn Barrage, which would provide three gigawatts of electricity and still run in 200 years with minimum maintenance.

"The problem is that the longest time an economist will work on investment returns is 25 years. We need to look at taking a much longer view. What is missing is clear direction from number 10 and 11.

"The Climate Change Committee was asked to set up carbon budgets out to 2025 precisely to give confidence to investors was meant to give an assurance that if you invest in alternative energy – this will be an investment that will pay back. That needs the Treasury to back that up but I fear that we are seeing back sliding."

King is famous for saying shortly after 9/11 that climate change was more challenging than terrorism.

He says he created that "sound bite" because he felt climate change was not on the public agenda and wanted to create interest in the media and says we need many more people in positions of authority to raise their voices and create a stir.

While he sees many challenges ahead, he remains optimistic that change is possible: "Human ingenuity is the answer. We created the science and engineering technological revolution on which all our wellbeing is based.

"That same keen intelligence can point to the solutions to the hangover challenges and this requires nothing less than another renaissance. Rampant consumerism for the goal of status is not fit for purpose."
