World

UK Prime Minister Liz Truss defended her tax-slashing plans Thursday but vowed to “get borrowing back on track”, after nearly a week of silence when markets tanked and the Bank of England was forced into an emergency intervention.

“We had to take urgent action to get our economy growing, get Britain moving, and also deal with inflation,” she said in an initial round of local BBC radio interviews.

“And of course, that means taking controversial and difficult decisions, but I’m prepared to do that as prime minister,” she added, in her first comments to UK media since the crisis sparked by Friday’s “mini-budget”.

“It’s important the United Kingdom’s on the front foot, that we are pulling all the levers we can to drive economic growth. That is what we are pushing ahead with.” 

In a series of further BBC regional television interviews, Truss — in power for less than a month — said some aspects of her growth plan “will take time” while insisting “we will get borrowing back on track”.

The under-fire leader is facing severe pressure after the markets reacted to her government’s contentious plans for extra borrowing to fund uncosted tax cuts by sending the pound to an all-time low against the dollar.

UK markets remain highly volatile, with the central bank intervening on Wednesday to buy government bonds in order to prevent a “material risk” to stability.

The Bank of England announced a two-week programme to buy long-term UK bonds, capped initially at £65 billion ($71 billion), as UK pension funds scrambled to sell investments in order to remain solvent.

After sterling hit its dollar low early Monday, the bank said it would “not hesitate to change interest rates by as much as needed” to curb high inflation.

But it also signalled that it would wait until its next policy meeting on November 3 before fully assessing the impact of the government’s contentious plans.

Parliament’s Treasury Committee on Thursday called on Chancellor Kwasi Kwarteng directly to publish a fully costed economic forecast by the end of October to help the bank rather than on November 23 as planned.

Opposition leaders have demanded that Truss cancel her Conservative party’s annual conference starting on Sunday and recall parliament over the crisis.

Britain’s main opposition Labour party has a huge 33-point lead over the ruling Conservatives, new polling out on Thursday suggested, as the government struggles with the fall-out from its economic plans.

YouGov said a voting intentions survey of 1,712 adults carried out on Wednesday and Thursday put Labour on 54 percent compared to the Tories’ 21 percent.

Adding to Truss’s political woes, signs of unease among Truss’s own MPs began to emerge.

Former science minister George Freeman called on the Cabinet to meet and agree a “Plan B”.

“The economic package of borrowing & tax cuts announced last week clearly can’t command market or voter confidence,” he said on Twitter.

Another MP, Charles Walker, admitted that his party would likely lose an election if it was called today based on the polling, but ruled out the possibility of a leadership challenge against Truss.

– Truss v IMF –

Markets are concerned that Britain cannot fund its huge spending commitments, having announced a massive fuel subsidy package alongside the tax cuts.

Truss defended her fiscal policy, which includes a cut to the top rate of income tax, arguing the UK currently had its highest tax burden in 70 years. 

“We’ve reduced those taxes across the board. And of course people who are better off tend to pay more taxes,” she said.

The pound rebounded somewhat during Thursday, rising one percent against the dollar and reaching $1.09, reversing losses the previous day following the BoE’s emergency move.

But former BoE chief Mark Carney said the government had “undercut” financial institutions with its actions. 

“Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross-purposes with the bank — has led to quite dramatic moves in financial markets,” he told the BBC. 

But Truss insisted she was working “very closely” with the central bank.

In a highly unusual intervention on Wednesday, the International Monetary Fund said it was “closely monitoring” developments and urged the UK government to change tack.

It noted that Truss and Kwarteng, were trying to deal with the energy shock and boost growth.

“However, given elevated inflation pressures in many countries… we do not recommend large and untargeted fiscal packages at this juncture.” 

The IMF stressed the importance of fiscal policy not working “at cross purposes to monetary policy”.

Many central banks, including the Bank of England, are aggressively hiking interest rates in a bid to cool decades-high inflation. 

Google on Thursday said it is shutting down Stadia, the cloud video game service it launched three years ago to let people access console-quality play as easily as they do email.

“It hasn’t gained the traction with users that we expected so we’ve made the difficult decision to begin winding down our Stadia streaming service,” Google vice president Phil Harrison said in a blog post.

Google said it will refund purchases of Stadia hardware, such as controllers, as well as game content bought through its online store, and that players will have access to the service through January 18 of next year, he added.

“They had a great idea and a bad business model,” Wedbush Securities analyst Michael Pachter said of Stadia.

“They tried to offer the service as a subscription without games.”

Xbox-maker Microsoft, meanwhile, offered a rival Game Pass service “with a ton of games,” making it a more tempting option for players, Pachter said.

Game Pass has some 25 million subscribers, while Stadia has fewer than a million, the analyst noted.

Microsoft is considered the streaming video game heavyweight with its Xbox Game Pass service and large community of players who use its consoles and desktop computers.

The Redmond, Washington-based company also has a stable of video game studios.

And while Microsoft makes Xbox video game consoles, it has been leading a shift to letting people play titles on internet-linked devices of their choosing with titles hosted in the cloud.

Microsoft recently announced that the ability to play Xbox games will be built into Samsung smart televisions in its latest cloud gaming move.

“We’re on a quest to bring the joy and community of gaming to everyone on the planet, and bringing the Xbox app to smart TVs is another step in making our vision a reality,” Microsoft Gaming chief Phil Spencer said in a post.

Microsoft catapulted itself into the big league in one of the world’s most lucrative markets early this year by announcing a $69 billion deal to take over video game maker Activision Blizzard — the biggest acquisition in the sector’s history.

Amazon early this year launched its Luna video game streaming service for the general public in the United States, aiming to expand its multi-pronged empire into the booming gaming industry.

Luna allows players to access games directly online with no need for a console as part of the cloud gaming technology that is seen as a future direction of the industry.

Luna takes on Microsoft and PlayStation-maker Sony as well as Stadia.

Flaring — burning off unwanted natural gas from oil and gas wells — releases five times more of the potent greenhouse gas methane into the atmosphere over the United States than previously assumed, according to a study published Thursday.

The result is a far greater impact on climate change, with the warming potential between the stated and actual effectiveness of flaring across the United States equivalent to putting 2.9 million more cars onto the road each year, the paper in Science said.

A team led by Genevieve Plant at the University of Michigan carried out airborne sampling over the Permian Basin and Eagle Ford Shale in Texas, as well as the Bakken Formation that straddles North Dakota and Montana. These together account for 80 percent of US flaring.

“We employed a small airplane equipped with highly sensitive sensors to measure the concentrations of methane and carbon dioxide directly downwind of flare stacks,” Plant told AFP.

“Over the course of our airborne survey, we sample around 300 distinct flare stacks throughout the highest-flaring regions in the US.”

The fossil fuel industry and US government work on the assumption that flares remain lit and destroy methane, the predominant component of natural gas, with 98 percent efficiency.

But according to the study, a combination of unlit flares and some flares that were burning highly inefficiently meant that on average, flares destroyed just 91.1 percent of methane.

That implies methane emissions from flaring in the United States, which ranks among the top five nations for flaring activity, are five times as high as currently officially reported. 

– Health impacts –

Digging deeper into the numbers, the team found that most flares actually operate at 98 percent efficiency.

But a modest number of malfunctioning flares operate at efficiency as low as 60 percent, and 3-5 percent of flares are unlit — directly venting unburned gas into the atmosphere.

Flaring is an inherently wasteful activity — as the natural gas associated with oil extraction could be used for productive purposes. 

The amount of gas that is currently flared each year – about 144 billion cubic meters – could power the whole of sub-Saharan Africa, according to the World Bank.

Gas is flared for various reasons. Sometimes it is done for safety, since the extraction process deals with high pressures that can cause explosions. 

At other times it can be economic — when, for example, the target is oil and the associated gas isn’t considered worth bringing to market.

“From anecdotal conversations with industry experts, one potential reason flares may be unlit is due to high wind events and then the flares remain unlit until noticed by the operator if re-igniting systems are either not installed or not working,” said Plant.

The team suggested a number of solutions, key among them: reduce the total volume of flaring activity, increasing flare efficiency, and reducing the number of unlit flares.

Technology solutions can also be deployed, such as re-injecting gas back into oil reservoirs, which is common practice in Alaska.

“Other proposed alternatives to flaring include using the gas to power equipment on-site, as well as storing it, either compressed or liquefied form, for later energy use,” said Plant.

In a related commentary, authors Riley Duren and Deborah Gordon said the findings had important health implications for the half million people who live within five kilometers (three miles) of the three basins studied.

“Unlit and partially combusted flares have the potential to expose front-line communities to a cocktail of co-pollutants that present risks of acute and/or chronic health impacts,” they said.

Methane is a potent greenhouse gas, with more than 80 times the warming power of carbon dioxide over the first 20 years it enters the atmosphere — though carbon dioxide has greater staying power. 

Because of this, more than 120 countries have signed a Global Methane Pledge to cut emissions by 30 percent by 2030.

The EU on Friday will seek urgent ways to bring down skyrocketing energy prices as winter looms, with “sabotage” of gas pipelines from Russia this week injecting drama into the effort.

Energy ministers will gather in Brussels to consider an emergency European Commission proposal that includes cutting power use in the bloc, imposing windfall levies on energy companies and discussing a price cap on wholesale gas supplies.

Europe has found itself over a barrel as fossil fuel deliveries from Russia dry up. 

EU sanctions on Moscow for its invasion of Ukraine, which include shunning Russian oil starting in December, have prompted the Kremlin to retaliate by severely reducing supplies of natural gas.

Unexplained leaks on the undersea Nord Stream 1 and 2 gas pipelines from Russia to Germany — seen as “sabotage” by EU leaders, with suspicion falling on Moscow — have aggravated the situation.

– Sky-high bills –

Alarm is rising sharply among Europeans faced with climbing energy bills.

“It’s utterly impossible to pay,” Pascale Dumont, a baker in a Belgian town called Gedinne, told AFP after her business’s monthly electricity bill jumped tenfold, to 11,836 euros ($11,500).

“If you work it out over a year, it’s how much a house costs!” she exclaimed.

Business Europe, an EU lobby, warned that “the current state of high gas and electricity prices bears the imminent risk of production losses and shutdowns of thousands of European companies”.

The EU country on the frontline of the energy crunch is Germany, the bloc’s export powerhouse which had long been dependent on Russian gas.

After recording a jump to 10 percent inflation, its government said it will borrow 200 billion euros to shield German households and businesses from “an energy war”.

That adds to various national initiatives across the European Union totalling many hundreds of billions of euros — a hefty bill added to the one run-up during the worst of the Covid pandemic.

The European Commission is trying to leverage the Covid-era cooperation to forge a common EU approach on energy.

“Europe is facing energy blackmail by Russia, and global demand for gas is higher than supply,” EU energy commissioner Kadri Simson said.

“We need to work along the whole chain to tackle the challenge,” she said, adding that a price cap on the wholesale price of gas entering the EU “is possible” if other measures fail to bring results.

– Price cap mooted –

One core proposal with strong backing is a “cap” on non-gas electricity producers’ profits and a “contribution” from other energy majors. 

The levies — the commission refuses to call them a “windfall tax” — are calculated to raise 140 billion euros which can be spent to cushion consumers.

Another is to encourage reduced energy consumption, for instance by turning off public lighting earlier, lowering thermostats to a maximum of 19 degrees Celsius (66 degrees Fahrenheit) and lower peak-hour power use.

The Bruegel think tank in Brussels, however, said those steps are “not sufficient”.

“A more comprehensive plan needs to ensure that all countries bring forward every available supply-side flexibility, make real efforts to reduce gas and electricity demand, keep their energy markets open and pool demand to get a better deal from external gas suppliers,” it said.

Fifteen EU countries, among them France, Italy and Poland, have written a joint letter calling for a price cap on all gas imports into the bloc — covering pipeline gas from Russia but also liquified natural gas (LNG) shipments from the US and elsewhere.

An EU official briefing journalists on condition of anonymity called that idea “radical”.

The “significant risks” it carried included a sudden shortfall in gas supplies to Europe, especially from LNG suppliers diverting ships to more lucrative buyers elsewhere in the world.

One possible solution would be a centralised EU buying for gas “but the complexity of such a mechanism is such that I think in a short timeframe it is difficult to address,” the official said.

French Finance Minister Bruno Le Maire and his German counterpart Robert Habeck called Thursday in a joint newspaper column on the European Commission “to explore all other options which may lower prices while maintaining a secure energy supply and avoiding excessive consumption of gas.”