The privatisation of the UK energy market has been a failure writes dave kellaway.
Some of us can remember a time when nobody thought much about their gas supplier. There were regional boards that managed an industry under public ownership. Nobody wasted hours switching from one provider to another to secure a cheaper deal for exactly the same product as everyone else was using. Millions of pounds were not wasted on energy companies advertising in the mass media. Salaries for managers of these boards were good but way below what the equivalent companies pay today. No money from the operation was siphoned off to private shareholders in dividend payments. The government of the day could take strategic decisions to buy gas ahead, negotiate deals with producers and create storage in case of a crisis.
Margret Thatcher the then British Prime Minister privatised British Gas in 1986. There was an effective advertising campaign to get people to buy shares – If you see Sid tell him. It was all part of Thatcher’s successful neo-liberal project which was to radically reduce the size of the state productive sector and hand it back to capitalist ownership. Her ideology (monetarist economic theory) was that too big a state sector and too much public spending created inflationary pressures in the long term. Also, she argued that the market would bring greater ‘efficiency’ into a state sector saddled with outdated management and well-organised unions. The market would be expanded to line the pockets of her capitalist friends and each privatisation would weaken the power of the unions to defend workers’ wages and living standards. Her plan worked as big profits were made and she started a process that has led to an 11 million-plus unionised workforce reduced by about half.https://www.youtube.com/embed/n5aOO7Aem4M?feature=oembed
Tony Blair (Labour Prime Minister 1997-2007) refused to take back gas and other utilities back into public ownership. Since then whole sectors of utilities have been bought up by overseas companies and multinationals. Governments have encouraged a switching process so that smaller companies could come into the market to challenge the big providers. The latter generally operate a cartel of prices so the idea that competition had brought cheaper or more efficient energy is a complete myth.
In the current crisis, a lot of smaller and medium-sized companies are going bust because their cheaper deals cannot be sustained with the huge increase in wholesale gas prices. The big providers can protect their prices to some extent through hedging – buying their gas ahead of time. Customers with these bankrupt companies will be transferred to the bigger ones who will be able to claim some government money for this operation. They will have to immediately pay a higher tariff. Even people with larger energy suppliers will be facing large price increases. Ofcom, the government regulator which supposedly looks after customer’s interests, has brought in a price cap for a few years now given the already existing anger about rising prices and the dilemma working people faced of heating or eating. Other small-scale allowances for the poorest exist, like the warm homes allowance. Pensioners receive a winter heating allowance too. None of these measures will prevent a huge hit for all gas consumers. Although Johnson talked of a temporary problem, his minister suggested this could be a long-term problem. Ofgem has already indicated it was considering a higher cap next April.
Listening carefully to Labour opposition spokespersons the main line of attack has been to question the government’s complacency and incompetence. Not a peep about the 2017 and 2019 manifesto policies for taking back utilities into public ownership. Ed Miliband made a series of good points in his tweets about the failure to diversify the energy supply more quickly, to accelerate green renewables, to create national storage measures, or plan for the crisis. However no questioning of the privatised model and the advantages of a system in common ownership.
Activists need to campaign against the energy rip-off
Socialists should be explaining how making public goods into a commodity is not more rational or even more efficient. It creates more costs that fall on everybody and it does not even ensure a reasonably priced energy supply. A real vision from Starmer would be trumpeting the benefits of collective ownership of our utilities, there is not a word in his famous The Road Ahead pamphlet about this policy. A number of surveys have shown such policies to be popular. People understand it in terms of the success of the NHS. It is much easier to get people to support public ownership of goods and services that are essential and constitute ‘natural’ monopolies were increasing the number of private companies makes no difference to the quality of the product.
Activists need to campaign against the energy rip-off along with all the current attacks of working people’s living standards – the ending of furlough, the cut to universal credit, the NIC tax rise and pay awards below inflation. Unions and the Labour party should be mobilising around these issues. Starmer would be better writing some stirring calls to the campaign rather than the woolly guff of his 35,000-word pamphlet. Spending all his energy on expelling socialists from Labour and changing the rules to prevent the possibility of the membership electing a left-wing leader, seems to be his priority instead.