So we'll be bailing out the big energy companies if they crash: how likely is it anyway?

Keeping the flame alive.

As part of a team building exercise in my previous workplace, I once tried tight rope walking. Just to make the experience more exciting, I decided to do the dead-fall – something I had mastered at theatre workshops while in university – knowing there was a safety net below to catch me.

Had it not been for that safety net, I would have never tight rope walked in the first place – leave alone try the crowd pleasing antic. But my risky decision didn’t harm me or anyone around me.

Under a revised plan drawn up by the Government to avoid “market chaos”, UK consumers may be on the hook for a £4bn safety net if any of the six leading energy suppliers see a downfall.

Energy secretary Ed Davey is looking at a quick intervention with “adequate protection” if any of the ‘Big Six’ go out of business. Fair enough, but is it?

In a capitalist society such as the one we live in today, is it morally correct to ensure a safety net for corporates – such as big energy companies – to take risky decisions that could negatively affect millions in the UK market?

If the government is worried about any of these companies going out of business, the one thing it should not do is make it clear that it would be bailed out in case it does crash – providing the company with almost an incentive not to work towards keeping itself afloat.

The Big Six in the UK energy sector refer to German-owned E.On, Npower with its German parent company (RWE), France’s EDF, British Gas, Scottish and Southern Energy (SSE) and Scottish Power.

Competition is imperative to a company performing well. A safety net only reduces the need or will to compete.

A big energy company crashing would be unlike the crash of the banking sector where the crisis risked consumers losing their lives’ savings and government bail outs were imperative.

If a big energy company does go bust, the way it would affect a regular householder would be to find a new energy supplier. Would it be any more complicated than that? Why not let the private sector undertake the rescue?

Half of the Big Six are foreign owned companies, and it could perhaps make sense to draw up plans for the government to separate UK subsidiaries from foreign parents.

However, what are the chances of a big energy company on the whole going under in the first place? Highly unlikely – as Ed Davey himself accepts. Could this be anything more than a threat of nationalisation?

In January this year, a new survey by uSwitch found significant differences between satisfaction in the UK with smaller energy suppliers and the ‘Big Six’. EDF and Npower ranked at the bottom of the survey while Good Energy, the UK’s only 100 per cent renewable energy company, owned top spot.

Of the "Big Six", only two – E.ON and SSE – came in the top ten, sharing ninth place, whereas British Gas and ScottishPower came joint 11th.

Is it really justified, then, that consumers collectively face higher costs and pay up to almost £4bn to save any of the "Big Six" crashing when the satisfaction levels may not be up to mark?

Some may argue it will be better if the costs of the bail out came out of the profits of the energy firms instead of heightening the prices for householders. But ultimately it would amount to the same thing.

Albert Camus said all that he knew about morality and obligations he owed to football. Taking his cue, one thing we do know about the rules of any game is winning –not losing – should be rewarded. By that respect, the Big Six should fight to keep their heads up in stormy times instead of looking for that parachute they know the government is already making for them. And an expensive one at that.  

Photograph: Getty Images

Meghna Mukerjee is a reporter at Retail Banker International

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Building peace in a dangerous world needs resources, not just goodwill

Conflict resolution is only the first step.

Thursday 21 September is the UN-designated International Day of Peace. At noon on this day, which has been celebrated for the last 25 years, the UN general secretary will ring the Peace Bell on the UN headquarters in New York and people of good will around the world will take part in events to mark the occasion. At the same time, spending on every conceivable type of weaponry will continue at record levels.

The first couple of decades after the end of the Cold War saw a steady reduction in conflict, but lately that trend seems to have been reversed. There are currently around 40 active armed conflicts around the world with violence and suffering at record levels. According to the 2017 Global Peace Index worldwide military spending last year amounted to a staggering $1.7 trillion and a further trillion dollars worth of economic growth was lost as a result. This compares with around 10 billion dollars spent on long term peace building.

To mark World Peace Day, International Alert, a London-based non-government agency which specialises in peace building, is this week publishing Redressing the Balance, a report contrasting the trivial amounts spent on reconciliation and the avoidance of war with the enormous and ever growing global military expenditure.  Using data from the Institute for Economics and Peace, the report’s author, Phil Vernon, argues that money spent on avoiding and mitigating the consequences of conflict is not only morally right, but cost-effective – "every dollar invested in peace building reduces the cost of conflict".

According to Vernon, "the international community has a tendency to focus on peacemaking and peacekeeping at the expense of long term peace building."  There are currently 100,000 soldiers, police and other observers serving 16 UN operations on four continents. He says what’s needed instead of just peace keeping is a much greater sustained investment, involving individuals and agencies at all levels, to address the causes of violence and to give all parties a stake in the future. Above all, although funding and expertise can come from outside, constructing a durable peace will only work if there is local ownership of the process.

The picture is not wholly depressing. Even in the direst conflicts there are examples where the international community has help to fund and train local agencies with the result that local disputes can often be settled without escalating into full blown conflicts. In countries as diverse as East Timor, Sierra Leone, Rwanda and Nepal long term commitment by the international community working with local people has helped build durable institutions in the wake of vicious civil wars. Nearer to home, there has long been recognition that peace in Ireland can only be sustained by addressing long-standing grievances, building resilient institutions and ensuring that all communities have a stake in the outcome.

At a micro level, too, there is evidence that funding and training local agencies can contribute to longer term stability. In the eastern Congo, for example, various non-government organisations have worked with local leaders, men and women from different ethnic groups to settle disputes over land ownership which have helped fuel 40 years of mayhem. In the Central African Republic training and support to local Muslim and Christian leaders has helped reduce tensions. In north east Nigeria several agencies are helping to reintegrate the hundreds of traumatised girls and young women who have escaped the clutches of Boko Haram only to find themselves rejected by their communities.

Peace building, says Vernon, is the poor cousin of other approaches to conflict resolution. In future, he concludes, it must become a core component of future international interventions. "This means a major re-think by donor governments and multilateral organisations of how they measure success… with a greater focus placed on anticipation, prevention and the long term." Or, to quote the young Pakistani winner of the Nobel Peace Prize, Malala Yousufzai: "If you want to avoid war, then instead of sending guns, send books. Instead of tanks, send pens. Instead of soldiers, send teachers."

Redressing the Balance by Phil Vernon is published on September 21.   Chris Mullin is the chairman of International Alert.