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    Voices: Labour’s plan on energy bills is welcome – but does it go far enough?


    August 15, 2022 - Sean O'Grady

     

      It’s good to have Sir Keir Starmer back from holiday and, look, he’s got a plan! It’s a flawed plan, and it seems to have been expropriated without compensation from the Liberal Democrats, but it has some merit. Freezing the energy price cap, and in effect freezing the retail price of gas and electricity indefinitely, has the great advantages of being simple and of granting immediate reassurance to people.

      We now know that under a Labour administration, the gas and electric bill would not keep accelerating away into the distance, constantly outpacing our ability to pay it. We would no longer have to guess how the complex mix of price controls, subsidies, “hand outs”, VAT cuts, national insurance reductions and reduced green levies would affect our household budgeting, or to wait for the Institute for Fiscal Studies to produce a chart to help.

      Even now the £400 lump-sum Sunak promised as chancellor is being threatened by Liz Truss. This is no way to build consumer confidence. We want to know where we are, even if it’s not a very warm and comfortable place. Labour would do that, to be fair.

      That said, the Starmer plan is still unsatisfactory – for us as taxpayers. The time has come to end the great experiment with privatising the retail energy market. The private energy market is failing, albeit under unusual conditions. When the provision of vital commodities, i.e. essential to civilised life, simply becomes uneconomic, then other means must be found.

      One way is via the various packages of measures proposed by Rishi Sunak. Another is to do rather little, as advocated by Liz Truss. Another is to subsidise the energy companies at the same time as taxing them, which is the idea Ed Davey had and which Starmer has adopted. But much of this still means subsidising and taxing energy companies in a complicated merry-go-round that leaves the taxpayers of today and tomorrow with nothing much in the way of assets to show for their “investment”.

      This is why the more radical approach, by Gordon Brown, of equity stakes in retail gas and electricity suppliers makes much more sense. It is very much like the brilliant plan he had as prime minister to save the big banks in the financial crisis – and it meant that eventually the public had the chance of getting something back (as well avoiding a deep global slump). There’s no great sense in the hard pressed British taxpayers of today or tomorrow subsidising the shareholders of energy companies, which is what Starmer’s plan does. (And If he wants to limit dividends as well as energy prices then he may as well nationalise them).

      As long as the geopolitical crisis in Ukraine lasts, and until we move further away from fossil fuels and towards domestic renewables and a nuclear baseline, it offers the best way to protect the interests of the British people – as consumers, workers and taxpayers.

      I ought to admit that I yearn for the good old days, pre-privatisation, when British Gas just set a national tariff for everyone’s gas, including with a modest standing charge, and then sent you a bill for how much you’d actually used every quarter and then waited for you to pay it. There was no need to navigate price comparison websites, to remember to switch every few months when the teaser offers ended, no penalty for the infirm for whom spreadsheet research was beyond them. No one lived in fear of the gas or electric bill, even when there was a power crisis. No one was left on expensive “legacy” tariffs, because there were none.

      There was a political aspect to energy pricing, true, but that was framed by it being an essential to life, as opposed to buying a new Honda, say. The old set-up usually worked much in favour of consumers. I suppose there was a sense in which people in the big houses were being cross-subsidised by the poorer taxpayers in the terraces and flats, but under a more progressive system of income tax that all washed out.

      To keep up to speed with all the latest opinions and comment, sign up to our free weekly Voices Dispatches newsletter by clicking here

      Investment in gas and electricity infrastructure was more erratic under public ownership, but no system is perfect. The fact is that today the provision of gas and electricity to British households on an equitable basis is no longer an economic activity attractive to the private sector without a vast open-ended taxpayer subsidy. The alternative seems obvious.

      The most painful irony for Labour is that this overwhelming case for a controlling public equity stake in the retail energy sector -not nationalising the whole of global Shell of BP – comes only weeks after Starmer ditched his original leadership promise to bring the energy utilities (as well as Royal Mail, water and the railways) “in public hands, not making profits for shareholders” and to support “common ownership”. Looks like Starmer was right the first time, after all, and now he finds himself in opposition to Brown and Jeremy Corbyn. Strange days indeed.

      No matter, though. The public won’t care about any number of U-turns if they can enter a simpler, more humane world where they’re no longer terrified to open the gas bill and where there is absolutely no need to have annoying puppet Russian Meerkats telling us to “compare the market” all the sodding time because that entire lark has been abolished for good. There’s votes in that, I’d say.

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