Monday 15 August 2022

Starmerism Vs Nationalisation

Has the internet got room for one more take on Keir Starmer's energy bill announcement? In case you've been asleep or nowhere near news media for a couple of days, on Sunday night the papers splashed with the centrepiece of Labour's effort to get energy bills under control: freeze them. The policy, which will cost £29bn and caps bills at £1,971 from October to March. It would cancel the £400 payment Rish! Sunak is giving to everyone, though not the boosted payments going to the poorest households, and there would be no means testing. Rightly the bills will be frozen for everyone. And Starmer reiterates, as per last week's pre-payment announcement, that this is part of a package with insulation, community generation, and renewables in the mix.

If Starmer's price cap sounds familiar, it's because it is. Ed Davey announced a near identical policy last week. And in turn, that's very similar to the SNP position on bills. Interesting that the main opposition parties all share the same policy. But there are problems. Firstly, £1,971 is already unaffordable for millions on low incomes and even the retention of Sunak's targeted help plus Labour's meter tariff pledge would still leave them out of pocket. Second, as was entirely obvious, Starmer sidestepped nationalisation. Pressed on BBC Breakfast, he said freezing bills is a better way of immediately helping people than compensating shareholders for the confiscation of their assets. Starmer certainly isn't dim enough to not know this is exactly what he wants to do. Therefore, nationalisation - raised by Gordon Brown, of all people - is off the table.

For someone at pains to distance himself from anything resembling a new social democratic settlement, Starmer's going to have problems when March comes around and bills remain at unsustainably high levels. £29bn has to be conjured up by Labour's number crunchers again, and then presumably again when that half-year has elapsed. Not the sort of prudent financial management he wants Labour to be known for especially in the lead-up to an election. Why not simply nationalise the energy supply at the market figure of £58bn? The case for is persuasive. The chief advantage would be a permanent government subsidy that could keep bills low without having money getting creamed off to shareholders. It would allow for more efficiencies instead of the hapless, fractured energy market we have presently, and allow for more seamless planning when it comes to renewables, carbon capture and storage, battery construction, and the decentralisation of energy generation. It would also be politically popular; two thirds support the utilities (and Royal Mail) being entirely in the public sector. And as argued previously, punitive nationalisations would be a smart populist move.

Except Starmer does have a point. Nationalisation in and of itself would not reduce wholesale prices. Taking energy into state ownership on market value means shelling out £58bn (though this could be done for nothing by replacing shares with gilts, for instance) and then subsidising bills - a huge sum. Therefore nationalisation isn't a magic bullet, and those who want to see it should not pretend otherwise. The costs of gas, oil, and coal are only going to increase in the short term - but this is precisely why nationalisation is necessary. First to shield people from exorbitant bills in the here and now, and second to use energy generation policy and state control of the network to transition to low cost alternatives as quickly as possible. Something that the current regimen and its primary concern with profiteering does not have an incentive to do. The left have to be clear that this is why nationalisation is necessary, because it's the only way that enables us to do what needs to be done: transitioning away from fossil fuels to their alternatives.

This would be the "tough choice", so naturally Starmer ducks it and goes for the headline pleasing option. But is that all there is to it? In the clever-clever land of Labour policy generation, there are two reasons why, to them, this is preferable to nationalisation. As Starmer said in his interview, it's immediate help that will benefit everyone and is "fully costed". In a political culture where having to explain a policy means you've already lost the argument, nationalisation requires making additional, complex arguments that the Tories and their press would happily pick apart. This is their take home from two crucial 2019 elections: our own, and what happened in Australia. A bill freeze is easy to understand and has maximal cut through. No complicated arguments to think about.

The second is the policy's "wedginess". I.e. Driving a wedge between the Tories and their voter coalition. For the LOTO high foreheads, nationalisation is "typical Labour" and would not positively catch their attention, whereas a freeze would versus what the Tories are currently offering. For them, getting drawn into a debate between Liz Truss's tax cuts versus nationalisation is overly ideological in ways tax cuts versus frozen bills does not. The latter can be judged by who's offering the most - Truss with her couple of hundred quid, or Labour who can make most energy worries disappear overnight. And because the Tories will be forced to act as the strength of extra-parliamentary opposition grows daily, in all likelihood Truss will be forced to offer a variation on the price freeze - allowing Starmer to scoop the props for forcing the government to adopt his policy.

This isn't just about point-scoring politics for Starmer. He and most of the figures in his shadow cabinet, including (especially) the shadow chancellor would only ever countenance nationalisation as a last resort, and even then it's so taboo they can't speak about it. But their reticence is ultimately a position staked in elite politics. As with so many things, Starmerism has never stopped debasing itself before capital and property rights. Even in the direst emergency, one that could lead to a very hot autumn indeed, Starmer and friends have to assure the institutional investors and big capital that they will be, like Tony Blair before them, Labour in name only and make no inroads into private property. They are committed to keeping ownership as an issue outside of permitted politics.

In all Starmer has won the day among the media, which makes it more difficult for him to get outflanked by the Tories. But this is the subordination of the general interest, our class interest, to electoral politicking. We have to keep making the case for nationalisation and a transformative programme because, again, the Labour leadership have demonstrated they're not going to do it for us.

Image Credit


SimonB said...

The omission of schools, hospitals, small businesses etc in the plan is a serious problem. If Starmer wants to look like a safe pair of hands to the business sector he’s missed an opportunity here.

Robert Dyson said...

North sea gas is 'our' gas. Nationalisation would mean it could be supplied at cost and not the highest price on the international markets.

Blissex said...

«North sea gas is 'our' gas»

British housing is also 'our' housing, but I wonder why nobody is proposing to nationalise housing. :-)

«Nationalisation would mean it could be supplied at cost and not the highest price on the international markets»

For that to work it should be nationalisation without compensation, or at a price valuing the gas reserves at cost, instead of their global price (not much different from no compensation), because nationalising valuing the reserves at global prices and then selling them to consumers at cost prices would require a colossal subsidy. The BoE and the Treasury did give a few trillions to the City to subsidise their "buy high, sell low" strategies after 2008, I wonder whether gas customers are as powerful.

Zoltan Jorovic said...

The UK uses about 860,000 Gwh of gas annually. Only 365,000 Gwh of that is produced by us. The rest is imported. So, 'our' gas accounts for 42% of what we use. Nationalisation won't resolve the supply problem, but it would help with strategy and consumer pricing.

Wholesale cost of gas is more than 200% higher than a year ago, but consumer prices are currently about 75% higher. Bridging that gap is why the planned cap rise is to 13p / kwh from the current 7p. Since electricity prices are to a significant amount decided by gas prices, it also explains that rise (28p to 51p /kwh).

There's a lot of angst about the cost of subsidising energy prices, but the reality is that without some sort of intervention, millions simply won't be able to pay for their energy. Doing nothing, or even too little, will lead to serious problems. We are not known for rioting, but it has happened, and this could well be enough to precipitate mass protest. Which means the government has to act soon to avoid being forced to act later. The question isn't should we subsidise, but who, by how much, for how long, and using what mechanism.

A lot of chickens are coming home to roost from 12 years of austerity and using the system to draw wealth upwards. The next year will reveal just how much this has weakened our social infrastructure.

Anonymous said...

Nationalisation often appears to popular with the public for utilities.

But I'm not sure it would be in practice. A lot of policies seem popular, but I'm not sure they remain so when they face the full force of political scrutiny and a barrage of media opposition and cynicism. This includes a sort of credibility issue: which is that Labour is particularly vulnerable to accusations that it will fritter away hard working taxpayer's money on inefficiency and lazy public sector workers (and all those other favoured tropes).

I wonder if Starmer favours an image for Labour of dull responsibility because although more radical policies can generate great enthusiasm, they don't necessarily excite enthusiasm in enough voters. Especially when set against tabloid fearmongering and comments about "credibility" or whatever buzzword more serious media throw at anything that differs from a safe norm.

It's hard work for Labour when society has this fixation that the other party is the natural party of government, even when the other party is patently run by clowns, cranks and charlatans.

Blissex said...

«The question isn't should we subsidise, but who, by how much, for how long, and using what mechanism.»

The question is whether there is sufficient physically supply. Gas and other fuels have gone up in price because there is insufficient supply due to the boycott of imports from a big supplier (and that big supplier is currently using that boycott to prevent customers from building up reserves during summer) and higher prices are meant to reduce consumption, because they cannot realistically induce an increase in supply in the short-medium term.

So if subsidies were to enable everybody in the UK and Europe to consume as much gas and other fuels as last year before the boycott, where is that supply coming from?

That is not a trivial question.

«millions simply won't be able to pay for their energy»

That is precisely what higher prices are meant to do: reduce demand until it matches the reduce supply. Higher subsidies cannot avoid that, across UK and Europe. Other than higher prices, which would cut off the poorer consumers, the only other way to reduce consumption is rationing of some sort, which is more egalitarian, subsidies obviously cannot reduce consumption.

Subsidies could be made high enough that UK gas and fuels prices in the UK will become higher than in other countries so that supplies of gas and other fuels are then diverted from those countries to the UK, allowing subsidised UK families to consume as much as last year, at the same price as last year.

How expensive would that be?

Blissex said...

The more brutal version of the rationing option if the UK cannot raise the price it buys gas and fuels wholesale above the international price to outbid other countries:

«The UK government is planning for several days of organised blackouts this winter for industry and households under its latest “reasonable worst-case scenario”»

David Lindsay said...

The last time that there was double digit inflation, then there was also a Conservative Government. Freezing energy prices at their present rate would still be a 70 per cent increase on last year, which is why 68 per cent of the electorate, more than two thirds and only possible with more than half of Conservative supporters, want renationalisation. The figures for water, rail and mail are comparable.

Only 20 per cent positively support keeping energy private, and again the other figures are in the same area, but somehow our entire Political Class is drawn from the most right-wing fifth of the population, well to the right of the average Conservative voter.

This is partly blind ideology, and it is partly sheer corruption, with the political parties funded by the sole beneficiaries of privatisation, which are almost never companies registered in the United Kingdom for tax purposes, and which are very often foreign states.

The governing party has no apparent policy whatever. And out of the public purse, Labour and the Liberal Democrats want to give those beneficiaries in the energy sector 10 times more money than it would cost to nationalise them.

Never mind the old debate about nationalisation without compensation. This would be compensation without nationalisation, spending 10 times as much on a six month sticking plaster than it would cost to solve the problem permanently. Tell me again who are the moderates, and who are the extremists.

It is no wonder that the Labour Party is haemorrhaging members, and that the financially healthy organisation bequeathed by Jeremy Corbyn is now effectively bankrupt. Labour is barely, if at all, ahead of the Conservatives in the polls, and Keir Starmer is behind Liz Truss, making him objectively a drag on his party, a dead weight, a liability.

People have realised that there is a world elsewhere, with unions winning very favourable pay deals all over the place, and with huge majorities for strike action. On a turnout of more than 72 per cent, the vote to strike in the Royal Mail was 98.7 per cent. The Conservatives are choosing their new Leader by means of online voting, but they have banned the unions from using it. Yet these are the figures. How are the unions winning, if strikes or threatened strikes do not work? How are the unions winning, if there is no money to meet their "demands"?

The Conservative Party will go into the next General Election with a huge psephological advantage, but if it did not win outright, then the next Parliament would be hung, and the balance of power could and should be held by 20 or 30 Left MPs, if even that many were necessary, with absolutely no sense of affinity with the Labour Party in particular. Point this out if you really and rightly wanted to annoy Keir Starmer's dwindling band of increasingly aggressive and abusive supporters.

Blissex said...

«This is partly blind ideology [...] The governing party has no apparent policy whatever. And out of the public purse, Labour and the Liberal Democrats want to give those beneficiaries [...] compensation without nationalisation»

The non-trivial question still remains: if there is a physical shortage of supply in Europe because of the boycott of a major supplier, making gas prices in Europe 5-6 times higher than in the USA, how can nationalization or compensation create more supply, given the huge transport costs of LNG?

My expectation is that the UK and european governments will fade from public awareness that boycott at the last possible moment the onset of winter, and that supplies will resume. The big question is whether the USA will then sanction the UK and european states that are not complying with the boycott.

Ander said...

All that is solid makes an excellent point- that policy should be about enabling better, cheaper technologies.

Why, then, pay £58bn for crappy old technologies that will only decline in value? Surely that's letting the capitalists off the hook for a poor investment.

Better to use the money more directly to support new businesses. Why we should think BP or Shell or whoever else might benefit from £58bn are the natural technological leaders in clean energy is something I don't understand.

Water, well, that's a different matter. Nationalise it tomorrow.

Anonymous said...

[i]"The non-trivial question still remains: if there is a physical shortage of supply in Europe because of the boycott of a major supplier, making gas prices in Europe 5-6 times higher than in the USA, how can nationalization or compensation create more supply, given the huge transport costs of LNG?"[i]

It can't, but actual production costs haven't increased, just market prices. Whatever were domestically produced and owned could be sold at cost to consumers.

Also, credible threat of nationalisation would likely attenuate price-gouging.

Blissex said...

"how can nationalization or compensation create more supply, given the huge transport costs of LNG?"
«It can't, but actual production costs haven't increased, just market prices.»

Indeed, but the problems is that there is an Europe-wide physical shortage, without Europe-wide rationing this can be resolved only by an increase in the Europe-wide price to reduce physical consumption.

The problem is simply by which mechanism reduce Europe-wide physical consumption:

* Across Europe rationing

* Across Europe consumers with more income outbid consumers with less income, so that the richer consumers get more of the their normal consumption and the poorer ones less.

* Some countries outbid other countries and buy their entire physical consumption, and then subsidise internal consumption, and the countries who can't afford to bid high enough have a disproportionate fall in physical consumption.

«Whatever were domestically produced and owned could be sold at cost to consumers.»

Doing that for the 40% of scottish gas extracted would still require nationalisation without compensation, and would not solve in any way the lack of physical supply, because that depends on paying the international price for imports.

Also as expressed as “sold at cost to consumers” that would raise the issue of which consumers get the lottery win of cheap UK gas and which don't (a blend for everybody?).

What could be done is to tax away the increased windfall rent of scottish gas extraction companies and use that to subsidise additional imports of foreign gas. But they would sue of course.

However taxing away the windfall is not exactly politically feasible at this moment. But Starmer is in the fortunate position of not being in government and therefore he can talk the talk about as to demagogic policies knowing they won't be implemented by him (or the Conservatives).

«Also, credible threat of nationalisation would likely attenuate price-gouging.»

But it is not "gouging": the energy companies are not charging more than the international price, or manipulating it, they are just profiting from the windfall of a bigger difference between extraction cost and international price, which was largely created by the USA sanctions against the largest european supplier.

In any case I suspect that the EU/NATO governments and their "home front morale" media are already fading out the Ukraine story in preparation for a massive relaxation of the sanctions at the end of October. The big question is whether the USA will then sanction those EU/NATO countries for not complying, but I guess that the USA are about to give up on the notion that sanctions would cause regime change..

I suspect the relaxation of the boycott is why the BoE and "aligned" Economists expect inflation to be very low at the end of 2024.