The energy price freeze is a means - market reform is the end

Long after the price freeze has been lifted, Labour's market reforms will go on delivering a more transparent and more competitive deal for consumers and businesses.

In Parliament today, every MP will have the opportunity to back their constituents and local businesses in voting for Labour’s 20 month energy price freeze. For every hyperbolic statement from those lined up by the Tories to stand in the corner of the large energy companies, and the Edinburgh SNP’s energy spokesman Fergus Ewing ridiculously repeating the comparison to the Enron manipulated experience in California in Holyrood, thousands of individuals in every part of the country want to see their bills frozen and real reform of the broken energy market.

While the price freeze has attracted – and sustained – headlines for several weeks, it is far from being the only element of Labour’s agenda for the retail energy market. The price freeze enables us to take volatility out of bills while we get on with the vital task of reforming the retail energy market.

They may not draw as much attention, but these measures to overhaul the market are needed. They are the Xabi Alonso to the price freeze’s Cristiano Ronaldo. Long after the price freeze has lifted, these will go on delivering a more transparent and more competitive deal for consumers and businesses alike.

Sift through the responses to Labour’s energy policy with a little more care and you’ll find that behind some of the (obvious, predictable, wrong-headed) opposition, there is a recognition that these policies are desperately needed. From arch-Tories, such as John Major or Peter Lilly, through the Telegraph, the FT and the Guardian, to organisations such as Which? and the Committee on Energy and Climate Change, there is a growing chorus that calls for widespread reform of a market that is broken. 

Labour have been quietly setting out such policies for the past two years. We’ll begin by scrapping Ofgem. This is a regulator that has proved time and again that it is simply not up to the job of protecting consumers. Its replacement will be established with a clear commitment to to make sure that wholesale price decreases are registered on the bills of our households and businesses, not just in the profit margins of the Big Six.

We will end the practice of shady over-the-counter deals by requiring that all energy is traded through an open exchange. At present, some estimates suggest that the equivalent of just 6% of electricity consumption volume is traded this way, damaging transparency and liquidity. By ring-fencing generation businesses from supply operations, we will end the practice of vertical integration that can allow big utility companies to sell energy to themselves at an inflated price, passing profit back along their supply chain.

The reason that these proposals have drawn support from right across the political spectrum is because what drives them is fairness and transparency to provide competition and liquidity in the market. These are practical, common sense proposals. But the Conservatives have nothing comparable to offer. They defend the Big Six to the hilt, making the classic mistake of assuming that the less-regulated market is always the more effective market. In truth, the large companies have the energy sector stitched up. It is only by pushing the reset button that that we can repair the failing market.

Increasingly, the public debate is beginning to reflect these deeper concerns. This is a real problem for the Tories. They’ve taken more than a month to start putting together a response to Labour’s price freeze. Even those of us who hold the competence of the Conservatives in fairly low regard have been surprised by their sluggishness.

But just as they're beginning to formulate a policy on retail prices – shifting some costs from consumers’ bills onto their taxes and pretending that those costs have vanished – the public debate is moving ahead. Newspapers and commentators have begun to ask more fundamental questions about the adequacy of the energy market that sets such prices.

Throughout the progress of the Energy Bill through Parliament, Labour warned that it was a serious mistake not to include any measures to reform the clearly defunct retail market. By failing to head those warnings and signalling that they were content with the status quo, the coalition made a grave oversight. What the Tories are discovering is just how cavernous this hole in their policy is, and the lack of public and business support for a broken market which works against the consumer.

The longer this debate goes on, the starker the contrast will become between a Labour Party that will freeze prices, get tough with the Big Six and bring much-needed reform to the market and a Tory Party that is content to defend the status quo. 

Tom Greatex is shadow energy minister and Labour MP for Rutherglen and Hamilton West

British Gas branding adorns the entrance to Leicester's Aylestone Road British Gas Centre. Photograph: Getty Images.

Tom Greatrex is shadow energy minister and Labour MP for Rutherglen and Hamilton West

Getty Images.
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Trade unions must change or face permanent decline

Union membership will fall below one in five employees by 2030 unless current trends are reversed. 

The future should be full of potential for trade unions. Four in five people in Great Britain think that trade unions are “essential” to protect workers’ interests. Public concerns about low pay have soared to record levels over recent years. And, after almost disappearing from view, there is now a resurgent debate about the quality and dignity of work in today’s Britain.

Yet, as things stand, none of these currents are likely to reverse long-term decline. Membership has fallen by almost half since the late 1970s and at the same time the number of people in work has risen by a quarter. Unions are heavily skewed towards the public sector, older workers and middle-to-high earners. Overall, membership is now just under 25 per cent of all employees, however in the private sector it falls to 14 per cent nationally and 10 per cent in London. Less than 1 in 10 of the lowest paid are members. Across large swathes of our economy unions are near invisible.

The reasons are complex and deep-rooted — sweeping industrial change, anti-union legislation, shifts in social attitudes and the rise of precarious work to name a few — but the upshot is plain to see. Looking at the past 15 years, membership has fallen from 30 per cent in 2000 to 25 per cent in 2015. As the TUC have said, we are now into a 2nd generation of “never members”, millions of young people are entering the jobs market without even a passing thought about joining a union. Above all, demographics are taking their toll: baby boomers are retiring; millennials aren’t signing up.

This is a structural problem for the union movement because if fewer young workers join then it’s a rock-solid bet that fewer of their peers will sign-up in later life — setting in train a further wave of decline in membership figures in the decades ahead. As older workers, who came of age in the 1970s when trade unions were at their most dominant, retire and are replaced with fewer newcomers, union membership will fall. The question is: by how much?

The chart below sets out our analysis of trends in membership over the 20 years for which detailed membership data is available (the thick lines) and a fifteen year projection period (the dotted lines). The filled-in dots show where membership is today and the white-filled dots show our projection for 2030. Those born in the 1950s were the last cohort to see similar membership rates to their predecessors.

 

Our projections (the white-filled dots) are based on the assumption that changes in membership in the coming years simply track the path that previous cohorts took at the same age. For example, the cohort born in the late 1980s saw a 50 per cent increase in union membership as they moved from their early to late twenties. We have assumed that the same percentage increase in membership will occur over the coming decade among those born in the late 1990s.

This may turn out to be a highly optimistic assumption. Further fragmentation in the nature of work or prolonged austerity, for example, could curtail the familiar big rise in membership rates as people pass through their twenties. Against this, it could be argued that a greater proportion of young people spending longer in education might simply be delaying the age at which union membership rises, resulting in sharper growth among those in their late twenties in the future. However, to date this simply hasn’t happened. Membership rates for those in their late twenties have fallen steadily: they stand at 19 per cent among today’s 26–30 year olds compared to 23 per cent a decade ago, and 29 per cent two decades ago.

All told our overall projection is that just under 20 per cent of employees will be in a union by 2030. Think of this as a rough indication of where the union movement will be in 15 years’ time if history repeats itself. To be clear, this doesn’t signify union membership suddenly going over a cliff; it just points to steady, continual decline. If accurate, it would mean that by 2030 the share of trade unionists would have fallen by a third since the turn of the century.

Let’s hope that this outlook brings home the urgency of acting to address this generational challenge. It should spark far-reaching debate about what the next chapter of pro-worker organisation should look like. Some of this thinking is starting to happen inside our own union movement. But it needs to come from outside of the union world too: there is likely to be a need for a more diverse set of institutions experimenting with new ways of supporting those in exposed parts of the workforce. There’s no shortage of examples from the US — a country whose union movement faces an even more acute challenge than ours — of how to innovate on behalf of workers.

It’s not written in the stars that these gloomy projections will come to pass. They are there to be acted on. But if the voices of union conservatism prevail — and the offer to millennials is more of the same — no-one should be at all surprised about where this ends up.

This post originally appeared on Gavin Kelly's blog