Taxman cashes in at Christmas

You can read in full at Telegraph.co.uk here.

Old Teaser

21 December 2011

The Daily Telegraph writes on stats released ahead of Christmas showing how much the taxman drives up the cost of Christmas.

Kerr Says Euro Woes May Prompt Return of Gold Standard

You can view the video of the interview on Bloomberg here. 

Old Teaser

19 December 2011

ASI author and founder of consultancy Cobden Partners, Gordon Kerr talks about banking industry risks and argues that the Euro collapse may lead to a return to the gold standard on Bloomberg TV.

Vaclav Havel and Kim Jong-Il: A tale of two systems

Published in full on ConservativeHome 

Old Teaser

19 December 2011

JP Floru writes in ConservativeHome on the deaths of Kim Jong Il and Vaclav Havel.

Banks use accounting loopholes to inflate profits and bolster bonuses

You can read the article in full at guardian.co.uk here.

Old Teaser

14 December 2011

The Guardian writes on the Institute's latest report calling for a reform of the accounting regulation system in banks. 

Media on renewable energy report

Below are some of the highlights:

Daily Telegraph - Britain 'faces power cuts' due to wind turbine plan

Sunday Times - Storm shutdown is blow to future of wind turbines (£)

The Times - Renewable energy is unreliable, says report (£)

Daily Mail - UK green targets get even tougher...but renewable energy 'still won't keep lights on'

Daily Express - SNP warned an energy crisis is just 5 years away

The Guardian - Think tank blasts wind power support

The Scotsman - Renewable energy 'mirage' could lead to a crisis

Press & Journal - Wind farm policy will lead to an energy crisis

BBC Radio Scotland, Good Morning Scotland - Martin Livermore discusses the report's findings (from 1h34mins in)

ConservativeHome - The Adam Smith Institute and Scientific Alliance predict an energy crisis if the government continues with its focus on renewable sources

Press Association - Renewables 'energy security threat'

BBC News - Green energy push flawed claims Adam Smith Institute

Old Teaser

12th December 2011

In print, broadcast and online

The release of the Adam Smith Institute's latest report 'Renewable Energy: Vision or Mirage?' received widespread media coverage, including front page coverage in The Daily Telegraph.

Bad regulation is inflating bank profits

14 December 2011

An Adam Smith Institute report released today (Wednesday) claims that the failings of the International Financial Reporting Standards (IFRS) allows banks to overstate their profits by recognising years of often very uncertain future income as current profit. As well as having the potential to deceive investors and lead to misallocations of capital, this overstatement of profits benefits company executives whose performance is typically measured and rewarded on this basis. Recent developments in accounting rules have encouraged, rather than tried to prevent this.  In addition, the latest developments of the Basel international rules specifying banks capital and liquidity minima only exacerbate the problem.

Though standardised accounting standards effect many sectors, any unintended consequences they throw up are especially problematic for banks, since such failures are magnified by banks taking exposure to each other. Moreover, in the case of banks attracting state bailouts, real transparency is clearly needed to protect the taxpayer.

The Adam Smith Institute report is structured around six shortcomings in the rules governing bank profit and capital reporting, which must be addressed:

• Uncertain future cashflows can be recognised as certain by purchasing a credit default swap (CDS) or similar “protection”, even though the supplier of the protection is likely to default if the insured event occurs;
• Profits can be recognised from the increased value of assets, or decreased value of liabilities, on the basis of a market price, even though the totality of revalued assets or liabilities could not be sold at that price;
• Profits can be recognised from the increased value of assets, or decreased value of liabilities, even when the revaluation of assets is estimated, not by market prices, but by a model built by bank employees. This is the so-called mark-to-model approach to valuation;
• The net present value of uncertain future cashflows can be recognised as profits even when they are estimated using implausibly optimistic forecasts. (This is a variation of the mark-to-model problem listed above);
• The EU’s IFRS accounting system, voluntarily adopted by UK and Irish banks at the banking company level, is inconsistent with UK law
• Banks need not make provision for expected losses when calculating their profit.

With much of the activity in the banking sector aimed at nothing more than exploiting these accounting rules, the report suggests the introduction Steve Baker MP’s bill to bring about simple legislation to reveal the extent of mark-to-market and mark-to-model banking activity.

Author Gordon Kerr adds: “Accurate accounting is at the root of the legal and scrutiny framework; without accurate accounts basic laws are incapable of enforcement. As this report shows, banks have been using loopholes in these rules to inflate their accounts and create illusory profits, which pay for bonuses and short-term gains for their shareholders, but give a very misleading view of their real financial health.

"The accounting regulation system needs radical reform so that banks are not encouraged by the rules and regulations to invest in risky assets to make themselves seem more profitable than they really are. Honest balance sheets are the cornerstone of a healthy financial system – right now, we don't have the transparency we desperately need to avoid a repeat of 2008.”

Download full report

Renewable energy cannot meet UK energy needs

12 December 2011

• As renewable energy sources produce power intermittently, they cannot replace gas, coal and nuclear generation, even with further development.
• Solar and wind energy have no prospect of becoming economically competitive in an unrigged market. Government intervention will lead to higher energy costs and jeopardize energy security.
• Increased investment in wind turbines will do little to reduce carbon emissions and fossil fuel consumption.

The report ‘Renewable Energy: Vision or Mirage’, released today (MONDAY) by the Adam Smith Institute and Scientific Alliance, reveals that the government’s focus on renewable energy sources is misguided. The UK’s plans for renewables are unrealistic, and these technologies cannot provide the secure energy supply the country needs. Present policies will lead to an energy crisis by the middle of this decade.  The key points from the report are detailed below:

• Wind and solar power do little to reduce carbon emissions, as they need large-scale back up generating capacity to compensate for their intermittency.
• With the decommissioning of many of the UK’s coal-fired stations – and nearly all existing nuclear reactors – over the coming decade, energy security is now a priority for policymakers alongside the drive to reduce carbon dioxide emissions. However, even ignoring cost issues, problems of intermittency mean that renewable technologies are incapable of making a major contribution to energy security.
• The Renewable Energy Roadmap for 2020 is hugely overambitious. Renewable energy generation is currently 28% below its already reduced target. Subsidising renewable energy also comes at a cost to consumers who pay for it through higher electricity prices. Nuclear and gas are the most viable energy sources to avoid a capacity crisis in the near future.

Wind turbines are not the solution

• To achieve current targets for wind turbines for 2020, almost 5 wind turbines must be installed every working day, with the majority of them offshore. This is unrealistic.
• No matter how much wind capacity is added, there is no way of storing the energy long enough to avoid the need for backup generators. It cannot ensure the lights stay on, so there can be little reliance on it.
• Experience in other countries shows that a large investment in wind turbines must be matched by large-scale conventional back up generating capacity, which makes any reductions in CO2 emissions quite modest.
• Wind farms in the UK have a capacity factor of only 25%; investment in these farms would not be a commercial proposition without subsidies, even ignoring the intermittency problem.
• Wind power operators in the UK get a higher subsidy per MWh than in other countries in the EU and yet many approved wind farms never get built due to problems connecting to the Grid. Onshore wind turbines face much opposition from the public and off-shore turbines are more expensive to install.
• The operational life for wind turbines is just 20 years. This is much shorter than for coal, gas or nuclear and is another factor making wind power an expensive option.
• Planned high investment in wind power up to 2020 will preclude the possibility of investment in diversified and efficient generating capacity. Wind power is an inefficient of use of taxpayers’ money, is not as green as commonly perceived, and will not provide for the energy needs of the UK.

Solar power

• This is high cost and inefficient at our high latitude.
• The focus of subsidies has been on small scale, domestic installations which are intrinsically less cost effective.
• As there is no technology for long-term, high capacity storage of electricity, this technology cannot help to meet Britain’s energy needs.
• Large solar farms are difficult to build as they need a large land area. This acts as a financial disincentive – nuclear and coal-fired power stations need much less land.

It is difficult not to conclude that the official enthusiasm for renewables has more to do with the power of the green lobby than economics and energy security. Martin Livermore, joint author of the report, adds:
 
“For too long, we have been told that heavy investment in uneconomic renewable energy was not only necessary but would provide a secure future electricity supply. The facts actually show that current renewables technologies are incapable of making a major contribution to energy security and – despite claims to the contrary – have only limited potential to reduce carbon dioxide emissions.”
 
“Consumers have a right to expect government to place high priority on a secure, affordable energy supply. It seems that ministers have not yet realised the need to invest in more nuclear and gas generating capacity if the electorate is not to be badly let down.”

Eamonn on BBC News 24 on benefits and the unemployed

Old Teaser

7th December 2011

Dr Eamonn Butler explains why he believes a recent survey has shown people have less sympathy with the poor and unemployed in a debate with Owen Jones.

The public overwhelmingly rejects taxpayer funding for political parties

You can read the article in full here.

Old Teaser

Tim Ambler writes on ConservativeHome following the results of our survey into the public's attitude towards increasing taxpayer funding for political parties.

Tom on CNBC ahead of Osborne's Autumn Statement