Why local councils should become energy suppliers

Freeing local authorities to compete in the energy market would reduce prices, attract green industry and create jobs.

Since Ed Milliband unveiled his plan at the Labour Party conference to freeze energy bills until 2017, the price of energy has rarely been out of the news. The problem with the narrow debate around the size of household bills is that it fails to address the issue of diversifying energy generation. The key to lower prices is, ultimately, a more competitive market. Local government has its roots in energy generation – modern Birmingham was built on the revenue from the local gasworks. It’s time we got councils back into the energy game.

The benefits of a new generation of local authority energy provision will not just be felt in terms of greater competition and lower bills. Councils can sell energy to raise money to pay for public services and, if this is positioned smartly, spur green economic development, creating a new generation of good jobs in the sustainability sector. The low carbon economy already accounts for 8% of GDP. With support from councils, it could grow significantly.

Some councils are already using green energy capture to cut their own fuel bills locally. Birmingham, Islington and Woking are all experimenting with energy generation and redistribution. Islington’s Bunhill Energy Centre, for instance, captures wasted heat to provide cheaper energy to estates in the local area – but these initiative tend to be on the periphery of activity. Scaling this up, generating energy on a much larger scale and linking it to local economic growth strategies could completely transform how we control and use energy at a very local level.

Local authorities have a huge role in economic development. If councils were freed up to compete in the energy market on a local basis, to generate and provide energy, this could attract green industry, create jobs and, crucially, underpin communities with green infrastructure. Local authorities are best placed to shape local markets and skills to align to the green energy agenda.

Generating and recycling energy at a local level would also have a huge benefit to local people in a way that the Big Six just can’t achieve. Local authorities would be able to provide cheaper energy directly to their residents, which should take advantage of local resources in the process. Communities would also become much more directly involved in the energy market by working with local authorities through energy co-operatives for instance, to capture and recycle energy to use themselves and sell back to councils for cheaper redistribution locally. Giving this power directly to communities would both incentivise behaviour change locally whilst helping to reduce the cost of living.

Some will question why councils should return to energy. Why not instead partner with energy suppliers and set up joint ventures to distribute cheaper energy? The problem is that attracting this sort of investment is a real challenge. Local authorities have the financial muscle to invest in this sort of infrastructure development that could accelerate projects quickly, whilst linking it to economic growth strategies.

But the real answer to this question lies with community ownership of resources, which would transform how councils and residents interact with the energy market. Given the current direction of energy bills and how powerless people feel to control it, recycling and generating energy using local resources will become more, not less important, in addressing this problem. Behavioural change will only come alongside ownership of these resources and local authorities, as guardians of localities, are ideally placed to lead this.

Laura Wilkes is Head of Policy and Research at the New Local Government Network

A photo illustration of the filament inside a lightbulb on October 17, 2013 in London. Photograph: Getty Images.

Laura Wilkes is Head of Policy and Research at the New Local Government Network

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What is the EU customs union and will Brexit make us leave?

International trade secretary Liam Fox's job makes more sense if we leave the customs union. 

Brexiteers and Remoaners alike have spent the winter months talking of leaving the "customs union", and how this should be weighed up against the benefits of controlling immigration. But what does it actually mean, and how is it different from the EU single market?

Imagine a medieval town, with a busy marketplace where traders are buying and selling wares. Now imagine that the town is also protected by a city wall, with guards ready to slap charges on any outside traders who want to come in. That's how the customs union works.  

In essence, a customs union is an agreement between countries not to impose tariffs on imports from within the club, and at the same time impose common tariffs on goods coming in from outsiders. In other words, the countries decide to trade collectively with each other, and bargain collectively with everyone else. 

The EU isn't the only customs union, or even the first in Europe. In the 19th century, German-speaking states organised the Zollverein, or German Customs Union, which in turn paved the way for the unification of Germany. Other customs unions today include the Eurasian Economic Union of central Asian states and Russia. The EU also has a customs union with Turkey.

What is special about the EU customs union is the level of co-operation, with member states sharing commercial policies, and the size. So how would leaving it affect the UK post-Brexit?

The EU customs union in practice

The EU, acting on behalf of the UK and other member states, has negotiated trade deals with countries around the world which take years to complete. The EU is still mired in talks to try to pull off the controversial Transatlantic Trade and Investment Partnership (TTIP) with the US, and a similar EU-Japan trade deal. These two deals alone would cover a third of all EU trade.

The point of these deals is to make it easier for the EU's exporters to sell abroad, keep imports relatively cheap and at the same time protect the member states' own businesses and consumers as much as possible. 

The rules of the customs union require member states to let the EU negotiate on their behalf, rather than trying to cut their own deals. In theory, if the UK walks away from the customs union, we walk away from all these trade deals, but we also get a chance to strike our own. 

What are the UK's options?

The UK could perhaps come to an agreement with the EU where it continues to remain inside the customs union. But some analysts believe that door has already shut. 

One of Theresa May’s first acts as Prime Minister was to appoint Liam Fox, the Brexiteer, as the secretary of state for international trade. Why would she appoint him, so the logic goes, if there were no international trade deals to talk about? And Fox can only do this if the UK is outside the customs union. 

(Conversely, former Lib Dem leader Nick Clegg argues May will realise the customs union is too valuable and Fox will be gone within two years).

Fox has himself said the UK should leave the customs union but later seemed to backtrack, saying it is "important to have continuity in trade".

If the UK does leave the customs union, it will have the freedom to negotiate, but will it fare better or worse than the EU bloc?

On the one hand, the UK, as a single voice, can make speedy decisions, whereas the EU has a lengthy consultative process (the Belgian region of Wallonia recently blocked the entire EU-Canada trade deal). Incoming US President Donald Trump has already said he will try to come to a deal quickly

On the other, the UK economy is far smaller, and trade negotiators may discover they have far less leverage acting alone. 

Unintended consequences

There is also the question of the UK’s membership of the World Trade Organisation, which is currently governed by its membership of the customs union. According to the Institute for Government: “Many countries will want to be clear about the UK’s membership of the WTO before they open negotiations.”

And then there is the question of policing trade outside of the customs union. For example, if it was significantly cheaper to import goods from China into Ireland, a customs union member, than Northern Ireland, a smuggling network might emerge.

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.