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Freezing the price cap won’t cut it – we should nationalise the big five

Public ownership of energy firms is the only way to keep costs down and protect the planet.

By Carla Denyer

We can all see the terrifying situation we’re heading into this winter. Energy bills have risen at a rate that is simply unaffordable, meaning up to two-thirds of households are expected to be trapped in fuel poverty by January, according to analysis by the University of York. This is a horrifying prospect, and none of the other major parties are getting to grips with it.

But the writing has been on the wall for some time. Last October, as my co-leader Adrian Ramsay and I stood up to make our maiden leaders’ speech at the Green Party conference, we called for urgent action: a £320 universal winter fuel payment to provide everybody with immediate financial support alongside the roll-out of a mass insulation and renewables scheme to ensure moving beyond this country’s reliance on fossil fuels as soon as possible.

Belatedly, the government offered some financial help to households. However, the support so far has been a drop in the ocean compared to what is required. Energy bills and overall inflation continue to rise. And nothing has been done to prevent this situation from getting worse or happening again in the future; investment in renewables and insulation is still lacklustre.

As we see more and more people facing serious hardship, as more and more businesses are forced to shut and as the very fabric of society is stretched to the point of tearing, the government continues to sit on its hands.

It is clear that the experiment with a privatised energy market has failed. It may have made money for shareholders, but it has not delivered the essential public service of affordable, clean energy for everyone.

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That is why the Greens are calling for a major intervention as soon as possible. That starts with lowering the energy price cap to a level that more people can actually afford – rolling it back to the rate it was in October 2021. This would help households facing the cost-of-living crisis and would also help to calm inflation.

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To achieve this we would bring the big five energy retailers into public ownership as the Trades Union Congress (TUC) has proposed. Why? Let’s look at the Labour and Liberal Democrats‘ proposals for comparison. They propose to freeze the price cap (not reduce it as we suggest) and subsidise the private energy retail companies with billions of pounds of public money to prevent the energy price cap sending them to the wall. This is because the energy retailers still have to buy the wholesale energy at a much higher rate.

But these are the same energy companies that exist first and foremost to make profit to pay their shareholders, while failing to offer good value to their customers with tariffs that meet their needs and allow them to keep their homes warm, comfortable and safe.

[See also: Neglected north: 66 per cent of innovation funding has gone to southern firms]

The alternative, bringing the big five energy suppliers into public ownership, would allow the government to align energy companies with the public imperatives to reach net zero and phase out fossil fuels while reducing our energy costs. Only the government can make an intervention of this scale to ensure that we come out of this crisis more resilient and greener by insulating homes and transitioning towards renewables, which are the cheapest form of electricity.

And this is what people actually want. Recent polling from Survation has found once again that two-thirds of people in Britain think energy should be run in the public sector.

Of course, this will cost money. We estimate that returning the energy price cap to last October’s rate for this winter will cost somewhere in the region of £37bn. This is the same amount as the government spent on its failed Test and Trace system and around 10 per cent of what it spent on its response to the Covid pandemic overall.

Beyond that, the TUC calculates that nationalising the big five energy retailers will cost around £2.8bn. For context, the government has already spent £2.2bn in its bailout of the failed energy company Bulb.

We know that much of the cost to fund our proposal can be found from removing loopholes in the former chancellor Rishi Sunak’s windfall tax, which incentivises more oil and gas production, and clawing back profits made in the first half of the year. What’s more, this policy will help everybody and so we are not afraid to increase taxes on the very wealthy to protect those on lower incomes.

Just as during the Covid crisis we had to support people’s incomes, we now have to do whatever it takes to see people through this winter. The crisis enveloping us requires this level of intervention. The proposals from the other parties do not go far enough, however. Plans put forward by both Labour and the Liberal Democrats would see the price cap kept at its current level. It is not clear how Keir Starmer and Ed Davey can think the current rate people are paying is acceptable.

Not only are these plans unviable for customers, they are also unviable for the energy retailers. These companies operate on a small margin, so making them pay the difference would mean many will be forced to leave the market, causing untold damage in their wake. It appears both Labour and the Liberal Democrats have failed to notice this fundamental point. Under their proposals the government would be forced to prop up the retailers but have nothing to show for it, while also not addressing the fundamental problem that bills are already unaffordable.

Bringing the big five energy retail companies into public ownership, setting the price of energy at an affordable rate and absorbing global price rises means the government could make sure everybody could afford to get through this cost-of-living crisis.

At the same time, it would mean this public service would be run in the public interest, instead of in the interest of making profit. This is how we build the greener, fairer future that so many people crave, a future that is essential for the well-being of people and the planet.

[See also: Can interest rate rises reduce the UK’s “astronomical” inflation?]

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