With UK energy bills now projected to double this winter, reaching £4,200 for the average household, and the government preparing for 1970s-style blackouts, all the political solutions on offer look weak.
Rishi Sunak has refused to guarantee further help beyond a one-time VAT cut on energy bills this winter that would save the average household £160 a year, and the £400 payment he announced as chancellor. Liz Truss is offering a further £153 by promising to suspend the green energy levy, and has pledged to reverse the National Insurance rise. Those sums appear feeble given the scale of the coming crisis.
As for Labour, the front page of its website simply invites you to join the party. Its Twitter feed is putting out “missing person” notices on government ministers, accusing them of being absent during a crisis. But the party itself is absent in policy terms.
“Labour would bring down bills by taxing oil and gas producers, investing in home grown power and insulating 19 million homes,” it says. Not by January 2023 it won’t. By deliberately conflating sensible, medium-term solutions with an acute crisis, Labour seems to be hoping that – as the Tories get hit with a tsunami of blame – nobody notices its own lack of immediate solutions.
And that’s because solutions cost money. The Liberal Democrat leader Ed Davey has called for the government to simply cancel the upcoming £1,600 bill rise by absorbing the £36bn cost of the hike itself.
It sounds bold but all it really does is transfer taxpayers’ money to the energy suppliers through a route other than tax cuts or handouts to consumers. And it freezes bills at just under £2,000 a year – double what households were paying when, in 2019, Theresa May introduced the price cap because she was worried about fuel poverty.
Nor does it address the most urgent problem: in the worst-case scenario, according to official government contingency planning, the lights will go off. Britain has a security of supply problem, a storage problem and an energy industry whose upstream suppliers are coining billions in superprofits while the crisis rages.
How did we get here? By leaving the nuclear building programme to a market that could not finance it, by disincentivising onshore wind, by slashing the programme to insulate housing, by penalising solar electricity producers, and by cutting gas storage capacity. The Tories did all this while spending the best part of a decade pursuing the fantasy solution of fracking, which produced nothing except a few earthquakes in Blackpool and criminal records for the protesters who bravely tried to stop it.
We need to start by accepting there is no market solution to the triple whammy of soaring energy prices, insecure supply and the urgent need to decarbonise.
As a result of deliberate underinvestment, there are 4.4 billion barrels of oil and its gas equivalent sitting under the North Sea as proven reserves, another 1.8 billion in “contingent resources” in oilfields already producing, plus at least 5 billion more that are deemed not yet commercially producible.
Given the aim of reaching net zero by 2050, in an ideal world you would leave these reserves in the ground. But 12 years of Tory underinvestment in green energy means we are in a world in which some elderly people will likely freeze to death this winter.
Forcing the oil and gas majors to invest, at a time when stated government strategy is to reduce dependency on their product, is like pushing a piece of string. As a result, the UK has become highly dependent on foreign energy: in a normal year, 50 per cent of our gas is imported, the bulk of it from Norway, while a similar level of our oil products come from abroad.
That means, in an emergency, that the UK could still exert control over the price and final destination of half its gas and a significant segment of its oil. And that’s what we should do. Nationalising the Big Five energy retailers would cost £2.9bn according to the Trades Union Congress. You could hand the companies over to their customers as cooperatives or mutuals if you wanted to avoid looking statist but the outcome would be the same: run the retail operations at cost, and subsidise prices to reduce household energy bills.
But that only slices away the senseless and obscene profits the retailers make. To really attack the problem of insecurity, inflation and decarbonisation you would need state control of North Sea oil and gas production. Nationalising the North Sea “independents” – the biggest is Harbour Energy with a market value of £3.2bn – would cost a lot less than the Lib Dems’ £36bn proposal. Taking a golden share in the oil giants – mainly BP and Apache – would cost whatever the government felt like paying.
The result would be state control over the wholesale price of the oil and gas produced off Scotland and from other niche production venues in England. Apache, for example, reported 2021 global production revenues of $6.5bn compared with combined operating costs and capital investment of around $2.3bn. There is, by implication, ample scope for wholesale price reductions.
Doing this by diktat and control, rather than through swingeing one-off windfall taxes, simply cuts out the room for tax avoidance and negotiation. So no, I don’t find the Lib Dems’ £36bn one-year bung to the oil giants a radical solution. The radical solution is to take state control and partial ownership of this most strategic industry. Make it temporary if you want but it has to happen.
If that sounds extreme, it’s because the whole of politics is trapped by cognitive dissonance. Russia is not just at war with Ukraine, it is at war with the West. The Vladimir Putin regime aims to destroy our democratic societies by using the last few decades of the fossil fuel era to make our lives unlivable. All the propaganda pumped out by RT and Sputnik, all the practice runs towards Scotland by Russian nuclear bombers pale into insignificance compared with the actual economic power Russia is wielding by choking off gas supplies to Europe.
To keep the lights on and to stop our poorest and most infirm citizens shivering their way through the British winter, it is time to take wartime measures. Freeze the price of household energy. Take control of the supply and wholesale pricing of domestically produced oil and gas. Ban oil and gas exports. Make affordable energy a public good and a human right. And unlock investment in solar, wave and onshore wind power, and start building nuclear power stations: every one of those things will need command planning, not just planning permission.
We’re not fighting “the market” here: we’re fighting a dictator who’s determined to manipulate the market to destroy our way of life and prevent the vital decarbonisation needed to save our planet. Politicians unprepared to face this fact have no role to play.