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27 July 2022

The case for public ownership of energy has never been stronger

Keir Starmer should recognise that renationalisation is best for consumers and the planet.

By Paul Mason

I know that Keir Starmer supports the common ownership of rail, mail, energy and water – not just because it was one of his ten pledges. During his Labour leadership campaign, Starmer told supporters he preferred the words “common ownership” to nationalisation because it allowed for a range of options, beyond the statist aspirations of the old, Bennite left.

I can equally see why he wants to abandon the commitment now. Nationalisation became associated in the minds of potential Tory-Labour switchers with Corbynism, and all the polling and the focus groups tell Starmer that, in order to win, he needs to position himself as far as possible away from that.

But in the autumn of discontent that is coming, state control over the price of energy will be the central battleground. The Tories have entered a bidding war over tax cuts because, with a fully marketised system of household energy, you cannot enact even basic price controls without bankrupting the shareholders.

That’s what both France and Germany have found out this week. The German chancellor Olaf Scholz has had to bail out Uniper, a major supplier of Russian gas, with a €15bn rescue package, and will take a government stake in the business as a quid pro quo. Emmanuel Macron is nationalising the French energy provider EDF at a cost of around €10bn.

If you protect consumers from the rising wholesale cost of energy, private ownership of the utilities simply does not work. And that’s before you’ve even considered the strategic challenge. The “energy trilemma” requires the government to balance three priorities: affordability, climate commitments and security of supply – both to the whole country and to all households.

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Before the Ukraine war, and the deglobalisation of energy markets that was already under way, the main tension was between greening the energy system and what the cost of that would be to households.

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Today all three points of the triangle are at critical risk. If Vladimir Putin shuts down Russian gas to central Europe, that will have a knock-on effect on the UK – despite the diversity of our supply. If average household energy bills hit £3,250 this winter, we’ll be facing a major social crisis – with people dying from the cold and children arriving at school malnourished. And with taxes and levies designed to limit carbon consumption at risk of being cut – as has been promised by Liz Truss, the front-runner in the Conservative leadership race – the country’s net zero target recedes further into the future.

[See also: Why Germany can’t escape Russia’s cultural allure]

As someone who campaigned for Starmer based on his ten pledges, I have no problem with resetting priorities in a new situation. Is the nationalisation of rail a priority? Network Rail is effectively nationalised already, and the train operators are going bust one by one. Starmer himself pointed out that Labour would continue to let that happen. Is it a game-changer to renationalise the Royal Mail? Not really.

But energy is different. As the Trades Union Congress (TUC) points out, it would cost around £2.8bn to buy the big five energy retailers at their current market value – that’s about the same amount the Tory government has spent bailing out just one failed provider, Bulb. By nationalising the Big Five you could solve a lot of problems. To avoid the charge of “ideology” you could issue inalienable shares to all customers and call it “common ownership”.

Competition has proved a fiction in this market: the firms that tried to compete on price went bust. Price control is also fictional – the current price cap simply passes on changes in wholesale prices to the consumer, hiking bills in 50 percentage point steps, and devastating the real spending power of households.

The TUC is calling for a “social tariff” – forcing the big suppliers to pay into a levy that would allow energy bills for low-income households to be capped at 5 per cent of household incomes. But that doesn’t come close to solving the problem of soaring energy bills, collapsing demand, fuel injustice and a decarbonisation plan in tatters.

There’s a school of thought in Labour that says: focus on the cost of living not “ideological” obsessions. It’s the right instinct politically, but to see the issue of ownership as a distraction from the problem is muddle-headed. Almost all parts of the energy system would benefit from centralised ownership and control – as would the consumer, the planet and Britain’s national security. Labour has pledged £6bn to retrofit and decarbonise the housing stock, as part of a £28bn-a-year climate investment pledge.

The only way to make that money work, once in power, is to have national and regional control over the project; the only way to leverage private sector investment on top of that is to create a stable ecosystem of generators, networks and consumer-facing companies, each of which understands their social obligations and their obligations to national security.

Even the government has recognised this, with the part-nationalisation of the National Grid planned for 2024. If the Electricity System Operator – the body that balances supply and demand of electricity – needs to be in public ownership, why shouldn’t the energy companies be? They, after all, have an urgent social obligation to keep the lights and central heating on in people’s homes.

It’s not clear yet if the Don’t Pay UK campaign, which is calling for mass non-payment of energy bills from 1 October, will take off. For a movement modelled on the gilets jaunes, its activists look too concentrated in the big cities. If it does take off, as the anti-poll tax struggle showed in 1990, the British people are quite capable of imposing a financial crunch on the energy companies from below, even if the government will not act.

So there is nothing “ideological” about energy nationalisation. The taxpayer is already absorbing the private sector’s losses to the tune of billions of pounds; meanwhile the Treasury was forced to give away further billions raised by the windfall tax on companies directly to consumers. The state is already deeply involved in the business of energy security. 

Nor is nationalisation bad politics. Truss, if she wins the Tory leadership election, will find her momentum quickly absorbed by energy poverty and discontent.

To keep the lights on, and to maintain social cohesion at a time of deep international insecurity, taking large parts of the energy system into common ownership has nothing to do with “ideology”.

[See also: Why Keir Starmer has borrowed the Tories’ “magic money tree” attack line]

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