Belfast Telegraph

Monday 15 September 2014

Move to divert gas supplies is no reason for any alarm

A return to 1970s-style fuel rationing, or just a straightforward contractual arrangement? You could spin the story of National Grid diverting gas supplies from factories with interruptible contracts either way.

This isn't a question of supply, but distribution. What National Grid did yesterday was put in place plans it has for when its network is operating at full capacity and can no longer keep up with demand, reducing supplies to some customers in order to prioritise the domestic market.

Most of those organisations that have been paying lower charges in return for accepting interruptible contracts will have switched to alternative fuels and always knew, when they signed up for the deals, that this was a possibility.

Still, many of these customers will have thought of it as a theoretical possibility only — the contracts have not been enforced for six or seven years — so yesterday may well have come as a nasty surprise.

Moreover, that Britain has a gas distribution network that cannot cope when demand reaches peak levels — albeit that the current severe weather represents an extreme situation — is hardly something to feel proud about.

Businesses, already coping with weather-related stresses of their own, need to be able to feel confident that their energy supplies are secure.

There is an element here of the debate over why Britain's transport system can't cope with snow. Do we want to invest huge sums in upgrading infrastructure so that it is fit for a purpose that is only required once in a blue moon? But given the concern about Britain's energy gap — that our ageing power production plants are not being replaced quickly enough — that there is additional anxiety about transmission is disturbing.

Remember, though, that rationing in the 1970s followed gas shortages. British Gas's insistence that there is plenty of gas available is comforting, particularly in the context of the second gas balancing alert issued yesterday.

That followed a technical problem with supplies from Norway — unfortunate timing, but no more than that — but there seems to have been no problem making up the short

fall from alternative sources.

It's very easy to get hysterical about gas supplies when it's snowing outside, but let's be careful not to conflate two separate issues.

The first is that the UK’s gas transmission network genuinely is creaking right now, but as of this moment, there is no threat to the domestic market and the cutbacks on supplies to industrial customers are within the agreed parameters of their contracts. Secondly, there really does seem to be no problem with gas supplies. Sure, we could do with better storage facilities, but Britain is not running out of gas.

You win some, you lose some. The decimalisation of betting odds, unveiled this week, was seen as good news for bookies, enabling them to make a few pennies by offering meaner starting prices. Yesterday, however, the Department for Culture, Media and Sport announced less welcome news: a move to tighter regulation of online gambling offered to Britons by offshore operators.

It was only a question of time. Online bookmakers based in jurisdictions such as Gibraltar are not currently required to pay various British taxes, despite hawking their services to punters in this country. That's why William Hill and Ladbrokes moved their online sports betting operations to Gibraltar last year.

The current white-list scheme, which sees certain jurisdictions cleared as approved areas for online operators to be based, will continue. But those companies based in these white-list regions will soon be expected to pay many of the same taxes and levies as their onshore counterparts.

The rules will take time to work out — the DCMS is keen to ensure it does not drive smaller operators into non-regulated territories — but look certain to

be implemented whichever party wins the election. The bookies don't win all the time.

Now we have full-year figures for car sales in 2009, the outlook for 2010 is pretty bleak. The Society of Motor Manufactures and Traders' data shows that the scrappage incentive scheme has, since its introduction last April, been accounting for around a fifth of all car sales.

In other words, it has been a hugely valuable boost to the car industry — it is also one that will shortly be no longer available.

What will happen when scrappage ends? Sales will slip back badly. It's not just that demand has been stimulated by scrappage, but also that many purchases have been brought forward — 2009 has cannibalised the sales of 2010 and 2011. There's also the worry that compared to last year — when there were no tax rises to speak of and historically low interest rates — British consumers are likely to have less spare cash to spend on anything this year, let alone a big-ticket item such as a car.

There are some reasons to be a little more optimistic. There was hardly any purchasing done by corporate customers during 2009, and with company car fleets now ageing, demand from business customers should increase. The availability of credit has eased somewhat and should continue to do so, which ought to help too.

All the same, this year may finally be the moment when Europe's car industry has to begin making the painful decisions it has previously been able to put off thanks to the state aid it has received in the form of all these scrappage programmes. It remains a remarkable fact that not a single car production plant has yet been closed during this downturn. Sad though it may be, the car industry still suffers from chronic over-capacity — sooner or later it will have to deal with that.

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