We could be seeing a revolution in renewable energy if tax breaks for the rich are used to encourage the growth of solar, wind and water power in communities across the country
When I was 16 I was a fervent member of the South London Communist Party. I had an impressive collection of Soviet badges, a red flag on my bedroom wall and a vague but heartfelt understanding of Das Kapital. I took the day off school to watch Brezhnev’s funeral, thought Stalin was harsh but fair all things considered, and above all else I wanted to change the world to fit in with my half-formed ideas. Then one memorable summer I discovered that girls, mopeds and Martini were much more fun, and all of the above were quickly forgotten.
Now that I am older, I am less fussed about mopeds and Martini and my yearning to change the whole world has diminished into a desire to just change things that are in my immediate community. I don’t care so much now about South American trade union recognition; I do care about yobs drinking in my local park.
And, unlike the 1980s, my thinking now seems to be in line with the government’s. All prime ministers fret over their legacy. Given a four-year or, at best, an eight-year opportunity to change the lives of millions of people for the better, what did they do with the chance? David Cameron clearly thinks the Big Society will be his gift to a grateful nation, reversing decades of social atomisation and providing the glue to reconnect communities to each other. Or to put it more simply, stop people nicking flat-screen TVs and get them involved in sweeping up afterwards.
However, one of the frustrations of power is that at best you can only be a catalyst for good. It’s easy to stop people doing socially unacceptable things like rioting, supporting northern football teams when they live in Surrey, or Morris dancing, but it’s very hard to make them do worthy things instead. You can give them the tools to build better Britain but you cannot make them pick them up.
Unlike the views of my teenage self, I no longer think it is possible to create the perfect society. Irrespective of who we appoint as a manager, England will never win another World Cup, bad guys regularly finish first and, despite Cameron’s best intentions, the millions of people employed by government do not act in joined-up ways.
However, the tools to change things do exist and the key is to get them out of the big box called Legislation and use them. The three tools that I am interested in are: tax breaks for rich people, community companies and subsidies for renewable power. They may seen disparate but, trust me on this, you can use them in ways that will astound you. Unfortunately, however, this is a world of acronyms and the three you will need to know are VCT, CIC and FITs.
VCT stands for Venture Capital Trust and basically it’s a tax break to encourage rich people to invest in things that government thinks are a good idea. And Cameron thinks CICs or Community Interest Companies are the Evo Stik of the Big Society so is super keen that VCTs invest in CICs.
It works like this: your common or garden higher-rate taxpayer defers changing his Porsche and invests £50K in a VCT instead. Because this is seen as a good thing to do, he only has to pay the lower rate of tax on the £100K he earned originally. This gives him a great return on his investment on the way in and makes him more relaxed about subsequent returns. Provided he doesn’t actually lose the £50K, he does not care if it earns single figure interest because he has already saved 25K on his tax bill. This means the VCT can lend more money to the CIC at a lower rate of interest so both parties benefit. Still with me? Good, because this combination is a powerful tool for local communities.
It becomes more so when combined with FITs or Feed in Tariffs. These are subsidies for renewable power such as solar, wind and hydro. So to change the world, you bring the three things together. You start a CIC to provide renewable power for your local community and hence reduce their reliance on fossil fuels and ever increasing energy bills. You then speak to a VCT and get 100% of the capital cost funded by our investor in exchange for half the equity. At this point, Porsche’s lost sale is your community’s gain. You use the cash to build the plant and reap the free energy and half the profits.
You also get a lot of kudos from your wife, kids and the regulars in your local pub, which, believe me, is worth oh so much more. Let’s be frank here, receiving plaudits for doing worthy things is the crack cocaine of the liberal middle class. David Walliams didn’t spend five days in the open sewer we call the Thames because he liked swimming, he did it for the buzz of public adoration. Fast cars, women and drink are all very well, but nothing beats the rush of being able to legitimately use the phrase ‘well, it’s nice to be able to put something back’, followed by a smattering of polite applause and your picture in the local paper.
You will note that I have yet to mention the local council in all of this. This is deliberate. The point of CICs is to get round the bureaucracy of existing institutions, thereby avoiding the strength-sapping quagmire of local politics. It’s very hard to get things done if you worry about four-yearly elections. Carp all you like about Chairman Mao’s Great Leap Forward but, give the guy some credit, he didn’t get distracted by his standing in the polls.
So, in conclusion, you can change the world for the better but only in a series of small steps and sometimes not for the most worthy of motivations. The government has made the tools available, you have to pick them up and work out how to make things happen. However, nobody sells a blueprint for revolutions so you will have to write your own.
I realise now that the proletariat uprising will not be started by people selling the Socialist Worker newspaper outside Brixton tube station It is, however, possible to bring about meaningful change by speaking to a VCT. I accept that tackling fuel poverty is not exactly the storming of the Bastille, but that’s not the point. Doing small stuff matters more than making big gestures.
Implementation matters more than ideas and, in its own way, getting a loan offer for your CIC from a VCT is a much more revolutionary act than buying a Che Guevera poster.
Michael Ware is corporate finance partner at BDO
