“Get your Stanlakes out”

22nd Nov 2021

 

In the dim and distant past, I used to teach ‘A’ level economics, and a good textbook for my students was ‘Introductory Economics’ by GF Stanlake. It became a recommended text, so I would often start a lesson by saying, “get your Stanlakes out”. Unfortunately, not many current BEIS officials attended Worcester College of Technology in the early 1990s. This can be the only explanation I have for the lack of understanding of the most basic economics displayed by the department.

Let me give you an example around heat pumps. The issue now, as far as government is concerned, is the low level of demand for the product. So how is demand stimulated? What you do not do is to suggest that prices will be cheaper in the future. All that does is defer demand to a later date. So what possesses Ministers to declare that prices of heat pumps will fall by 50 per cent by 2025? The other thing you would never do is promise a grant was available, but not until next year. All this does is defer demand, especially from those that were going to buy a product anyway. Stanlake, I’m sure, would blush at the lack of economic rigour displayed.

Scratching the surface, why do Ministers think the cost will come down? They believe that higher UK volumes, going from approx. 50,000 a year now to 300,000 by 2025 will deliver the economies of scale needed to drive down costs. Now this increase in the UK may be significant, but taken in the context of global demand it isn’t. Across Europe last year, around 2 million heat pumps were sold, putting the UK demand into perspective. Looking at the components of a heat pump, the key parts are also used in making air con units. Global demand for air con units is around 50 million products a year, the UK’s extra 250,000 is a mere drop in the ocean and will not deliver UK economies of scale that the global market has not already generated.

It’s a salutary lesson. We are part of a global purchasing system, not an isolated country and global economic rules apply.

PS I also used to teach accountancy and one of the recommended textbooks was Business Accounts written by my colleague David Cox. :)

Best wishes

Mike Foster, CEO

Mike Foster

EUA's Chief Executive

 

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