Britain’s energy situation is unacceptable and unsustainable
By Ian Hodson, National President, BFAWU
It turns out that the great Thatcher-Reagan promise about privatisation, free trade and the unrestrained market of a great share-owning democracy, has been a costly experiment that has failed the many. Here in the UK, Thatcher promised a revolution where privatised utilities would mean lower bills, driven by competition. The lie she rolled out was that as the industry wouldn't need to be subsidised, it would mean lower taxes. This privatisation would lead to a prosperous country and a wealthy society for all. We would all get richer and better still, we would get to keep more of our hard-earned cash. Of course the reality was quite different. Private companies have a legal obligation to their shareholders, not consumers, so profit becomes the priority. Normally, this means cutting corners, cutting jobs and under-investing, whilst boosting the pay of the CEO.
While tax has fallen sharply for the richest, the tax take on the rest of us has largely stayed the same and privatised companies are pretty much unaccountable. Statistics show that since privatisation, gas prices have increased by 130%. The ten years before privatisation saw prices increasing by just over 20%. The promise of lower bills couldn't have been further from the truth. If you look at the traditional five evils – want, squalor, idleness, ignorance and disease, in 21st century Britain you would now have to consider adding fuel poverty to those evils. Large swathes of people living in the UK now spend in excess of 10% of their income on keeping themselves warm. Statistics show that one in four households are defined as being in fuel poverty. Indeed, many people are faced with the daily dilemma of having to choose between keeping warm and eating, with the elderly being particularly at risk. It’s a clear and damning indictment that deregulation and privatisation has failed those who live in these Isles.
As for having more money in your pocket, the big six energy companies increased their prices by 37% between October 2010 and 2013. This rise is three times the rate of inflation for the same period, which was been around 10.2%. During that time, average earnings rose by 4.4%, so you don’t really have to be a mathematician in order to realise just how much people have been let down by Thatcher’s privatisation of energy.
The problem is quite simple; the dynamics of today's electricity and gas markets do not create companies or business strategies in which public interest, objectives and social obligations are sufficiently prioritised. Instead, every dysfunction is passed on to consumers through their bills, which have now become the most regressive element in disposable household incomes. Today, people are starting to regard energy costs much like Thatcher's poll tax. It comes as no surprise that recent polls suggest 68% of Brits would like to see the renationalisation of energy.
In terms of the promise of lower taxes due to no longer subsidising the industry, it now requires long-term price guarantees for investment in renewables and nuclear without any comparable quid pro quo in lowering its target cost of capital. The National Grid, similarly privately owned, balances its profit maximising aims with a need to ensure security of supply. This means that the cost of every ambitious commitment to decarbonise British energy supply by 2030, is passed on to the consumer.
As part of its renewable strategy, the government has signed a long-term contract for nuclear power to be supplied at twice the current price of electricity. If there’s one thing that David Cameron’s government have excelled at, it’s been the ability to sniff out a bad deal. His lack of real concern and incompetence have led to the UK being locked into this deal for the next 35 years. We deserve better than this.
New research by Corporate Watch in collaboration with We Own It has found:
Households across the UK could save £250 each on their electricity, gas and water bills and train fares if the services were publicly financed.
Private electricity, gas, water and rail companies pay out £12bn a year to investors and shareholders in interest and dividends. In total, cheaper government borrowing rates could save the UK public £6.5bn: £4.2bn on energy, £2bn on water and £352m on rail.
Years of inflation-busting price hikes by energy companies have increased the average profit per household more than ten-fold, leaving large numbers of people struggling and in millions of cases, failing to heat their homes adequately. Returning the energy sector to state ownership would provide some comfort for those people, not to mention a sense of empowerment as the tables could be turned on this culture of corporate greed that has only served to cheapen life in this country.
Britain needs a new and better deal, so the question is should we renationalise the big 6 or explore other ways?
What about the case for nationalisation?
According to Dr Robert Gross, Director of the Centre of Energy and Technology at Imperial College, London, the government could prevent any excess profits, while borrowing money to invest in the system could become cheaper. The government would be able to borrow money more cheaply than the big six, because it has a much stronger credit rating and because its monopoly status would make it more financially secure, therefore more likely to repay its debts. It would also not have to pay a large portion of its profits out to shareholders in the form of dividends.
“The newly created energy company could plan the system more effectively and potentially take strategic decisions for the good of the country,” Dr Gross says – a point that couldn’t be made for the four members of the big six that are foreign-owned. A focus on what was good for the country, rather than the big six’s profits and shareholders would make it easier to drive through policy goals such as ‘greening’ Britain’s electricity supply, and could bring bills down, added Dr Gross, who nonetheless describes himself as being agnostic about energy nationalisation overall, despite its potential benefits.
There is a strong argument that taking energy back into public ownership and control is vital to ensure businesses can be supplied affordable energy and thousands of customers do not die from the effects of fuel poverty. However, questions would be asked about the cost of renationalising the big 6. Maybe we need to consider that new power stations be publicly owned, whilst we encourage individuals or communities to set up smaller privately-owned generators, a process that would see energy generation largely returned to state ownership gradually over a period of two decades or so, as the main existing power stations reached the end of their lives.
I’m driven to the opinion that our main thrust should be to develop de-centralised energy that is community owned – so that effectively we make the big six redundant by building up a new ecology of community, locally and regionally owned energy, funded by strategic public investment. This is a slightly more radical version of the German model, which has seen a huge transfer from big corporate energy to local and community generation and ownership. Germans can switch power providers. In fact, they are not only free as power consumers, but also free to become “prosumers” – simultaneously producers and consumers. They can even sell the power they make at a profit. Germany’s Renewable Energy Act stipulates that the little guy’s power has priority over corporations. German feed-in tariffs have helped produce all of this community ownership, thereby simultaneously reducing ‘NIMBYism’ and increasing acceptance levels for renewables.
In most countries, the energy sector has long been in the hands of large corporations because electricity came from large central power stations. Renewables offer an opportunity, however, to switch to a large number of smaller generators, and this distributed approach offers an opportunity for citizens and communities to get involved. Germany has an unusually high level of citizen involvement in the ‘Energiewende’.
Either way, the current situation is unacceptable, not to mention unsustainable. We are an often windy island, surrounded by wave power. We even sometimes get a bit of sun. There is also the potential for countless jobs in renewable energy. We cannot continue to allow the cartel of energy companies to run roughshod over consumers and businesses and the archaic obsession with fossil fuels and digging into the earth is based on nothing other than the greed of a select few. There is a need to change the narrative and literally take back power. Now is the time to start.