Tuesday, 9 August 2022

On Don't Pay UK

Another day, another estimate of the energy price cap getting revised upwards. Standing at £3,582 this coming October, by January we'll be at £4,266/year. This is more than a year's worth of Universal Credit payments, incidentally. And for millions of people it's a recipe for destitution. Meanwhile, the Conservative leadership contenders are acting as if their universal £400 payment is cushion enough for the hammering that's coming, and the inestimable Liz Truss has made it clear there are not going to be any handouts. Her programme of tax cuts and cancellation of the National Insurance rise will magically grant the public bulging pockets, enough to easily absorb the bills. Characteristically, with a crisis dominating the news Keir Starmer is nowhere to be seen (he's on holiday, just like the Prime Minister and the Chancellor) and what's on offer is small beer - though rumour has it Starmer and Rachel Reeves are working on something that meets the moment. Will it match or exceed the Liberal Democrat plan of using VAT receipts and extending the windfall tax to shield people from the price rises? I doubt it.

Sitting tight and hoping for the government and opposition to come up with a workable solution will turn out to be another Waiting for Godot situation. When official politics is paralysed, it falls to others outside of the Westminster circus to take matters into their hands. Monday saw the launch of the Enough is Enough campaign, itself an expression of the growing confidence of the newly insurgent trade union movement. Within hours the website was knocked offline by heavy traffic, and in a day the campaign video knocked up almost four million views. That suggests more than a couple of thousand lefties watching Mick Lynch and friends on endless loops. It has what the self-identified insiders like to call "cut through".

This could cause the Tories significant problems in the long run, especially when it comes to shifting public opinion. But more immediately the establishment are affecting a lot of concern about Don't Pay UK, the campaign that has seemingly sprung from nowhere and is looking to get a million people to cancel their energy direct debits on 1st October if the price hike isn't cancelled. This is not some leftist initiative either - I first came across tell of the campaign three or four weeks ago on Conservative Home, where it got a sympathetic hearing from some Tory supporters. Presently, 95,000 have signed the pledge and 30,000 are registered as activists. It's also obvious DPUK is pulling in masses of people from all over the place, as per this Graun piece. And, more importantly, is making the establishment start to sweat. They know it could really take off and repeat the Poll Tax moment.

The boss of Ofgem is pleading with bill payers not to boycott payments. Pretending to be worried about the vulnerable, CEO Jonathan Brearley said non-payment would put up the prices for everyone and get people into more trouble. The debt charity Stepchange said money owed will simply stack up and the bailiffs could be sent round. There are risks to credit ratings and access to finance. Putting a Tory spin on the case against non-payment, CapX rides to the rescue to defend poor energy companies from a beastly monstering. These naive fools, laughs the author, don't they know these firms have tiny profit margins and it's state interference in energy markets that are to blame?

These objections all assume DPUK is "preying" on people who don't know their own minds. What they cannot grasp is credit ratings and future mortgages are irrelevant to millions of people having to choose between food and warmth, and that keeping kids fed comes before realising shareholder value for the Big Six. Nor do they have much sense that a million non-payers can't be dragged through the courts, have the debt collectors sent round, and other strong arm tactics applied. We are many and they are few, to coin a phrase. The idea a boycott would drive up prices is risible scare mongering trying to drive a wedge between the won't-pays-because-can't-pay and those who do cough up the readies. In all likelihood further increases to costs would only succeed in creating more non-payers, and widen the gulf between the government and the public. Because let there be no doubt, neither a Truss or Sunak administration are going to do anything but stand four square with the energy companies. A gas and/or electricity contract is, formally, a private arrangement between a service provider and a customer with the latter paying for goods received, but this isn't a Netflix subscription: it's a necessity. The energy market we have now came about through political decisions. The Tories decided to privatise the utilities, the Blairites were evangelists for global energy markets, and the Tories again are pivoting more toward dependence on fossil fuels, downgrading renewables and, famously, exposing the country to price fluctuations by gutting gas storage capacity. Energy bills are a public matter, and are ripe for direct action.

It's obvious the Tories won't have an answer to energy bills apart from "pay them", and if past performance is any indicator neither will Starmer's "opposition". That leaves us with a very hot Autumn of trade union action and a mass non-payment campaign to look forward to. Something's going to have to give and, with millions of people inching toward political activity of some description, my money's not on the Tories being able to weather this crisis without conceding a great deal.

Image Credit


Graham said...

At least Enough is Enough's five demands form a coherent and easily understood response to the economic disaster facing most of the population.

The Labour Party should, but wont, be offering similar clear and radical policies. It is failing to do this on all of today's problems not just the cost of living. For instance in the face of the drought and the enviromental damage caused by the water companies dumping sewage into our rivers what happend to the policy to nationalise them ?

Starmer might as well stay on holiday - he is as much "missing in action" as Johnson, Sunak and Tuss.

Paul C said...

I'm afraid this doesn't really deal with the issue that it's not the Big Six (or Five) that are raking it in (at least directly), but the big fossil fuel extractors (though clearly there are ownership links bertween the producers and suppliers) because of the way the wholesale market works/is rigged to be tied to the most expensive purchase (currently gas by a long way). So the piece doesn't respond to the quite reasonable criticism that a boycott of supplier payments which drove them to the wall would end up in public ownership of the supply, but which pays the gouging profits of the fuel extractors on the same basis from the public purse.

That said, I'm not against the Don't Pay campaign, as the suppliers are the easieest but of the system to attack, and you've got to start somewhere, but I'm nor sure that this - the idea that we're going to just make the whole syatem crashs - is explicit enough from the campaign organizers (I know messages need to be straightforward but.....). To me, the campaign feels unethical as it stands, because it's not altogether honest about what can be achieved.

Graham said...

Given that the only alternatives to the Tory's non-response to the cost of living crisis are the Don't Pay and Enough is Enough campaigns it is not just Starmer that is "missing in action" - its the entire Labour Party.

Remind me what its reason for existance is ?

Dr Zoltan Jorovic said...

@paul C, Why should anyone care if the so-called suppliers go under? They don't actually do anything vital. The electricity is generated and delivered by separate organisations, ditto gas. All the 'suppliers' do is administer the bills and collect the money. We didn't create the ridiculous system whereby a bunch of middlemen were inserted between us and the real producers/suppliers.

Having this unnecessary layer means 'market signals' (i.e. willingness / ability to meet the price demanded) are intercepted and so never reach the producers. The producers simply raise the price, knowing that the middlemen have to deal with the consequences. Remove this layer, and the stark choice becomes apparent to all. Either drop the price, or find new customers. Of course they would try to opt for the second which would force the government to intervene because heat and power are essentials, and otherwise there would be very serious "unrest".

If all the suppliers went bust, that would be sad for their employees, but it might force real change to resolve the underlying contradiction between an essential (and naturally mono/oligoch-polystic) service and a 'competitive market'.

Blissex said...

There are two interesting and related questions here:

* Is there a difference between booming house prices and rents and higher energy bill?

* Is there a difference between populism and demagoguery?

As to the first difference:

* Booming house prices and rents benefit rentier voters, higher energy bills screw both rentiers and workers, but the increase in energy bills is smaller than that in house prices and rents.

* Booming house prices and rents are due to an artificial scarcity of housing near jobs, created by restricting job creation to already congested areas, for the purpose of benefiting rentier voters in those congested areas, who are the core constituencies of Conservatives, New Labour and LibDems.

* Increases in energy bills are due to an actual scarcity of fuel, created by the boycotting suppliers from the Russian Federation. There may be simply not enough fuel to heat (or generate electricity for) everybody at normal levels across Europe and the UK (there is no such issue in the USA), so higher prices decide who will stay warm (or who will have electricity) and who will not. The increases are really due mostly to fuel scarcity, not to price gouging by the UK energy companies.

* A payment strike in the UK against energy bills will simply mean a lower supply of fuel to the UK and a better supply with lower prices elsewhere in Europe, as energy suppliers will stop supplying many UK customers. It will do nothing to improve the supply of fuel. It is like when there is a water drought, the only feasible option is to reduce physical consumption.

* Electricity or city gas in particular is not something people can hoard. There are many people who are trying to buy as many wood pellets or heating oil or bottles of LNG as they can buy (same as toilet paper 2 years ago) to make sure that they stay warm over the next winter, but most people's electricity and city gas supply can be cut off easily.

* A rent strike instead cannot reduce in the short term the supply of housing, even if it certainly will not improve its supply or make jobs move from congested areas to "pushed behind" areas. It is also more difficult to evict existing tenants than cut off their

The difference between populism and demagoguery is simple:

* Populism means providing sustainable solutions that benefit whoever happens to be currently in the lower-middle and lower classes.

* Demagoguery means making fabulous promises that are unsustainable or benefit whoever happens to be currently in the upper-middle and upper classes.

Now how to solve both supply issues?

* It is demagoguery to think that rent strikes or energy bill strikes will achieve good results: yes, rent strikes for a while will save money to incumbent tenants, but will freeze out people looking for a place to rent, and energy bill strikes will simply reduce even more the total supply of fuels to the UK, as customers in other countries will buy more.

* The populist solution to massive rent increases would be to move jobs out of congested areas like the Oxford-London-Cambridge area, and into areas where housing is plentiful and cheap.

* The populist solution to scarcity of fuel and perhaps of electricity can only be rationing (like for water in drought), however unpleasant that is, because otherwise richer households will just buy the whole supply of available fuel and the poorer ones will simply go without.

A demagogic solution would be to subsidize rents with more easily available and higher housing benefit (which will not increase the supply of jobs on areas with cheap and abundant housing), but at least will not create a freeze of the rental market as rent strikes would, and to subsidize energy bills so as a whole the UK can continue to consume as much imported energy as before, and some other countries will have to cut their consumption, but that would be phenomenally expensive, and neither is remotely plausible with our current political parties.

Blissex said...

It is like when there is a water drought, the only feasible option is to reduce physical consumption.

«‘This is the future’: the Oxfordshire village living without running water
Residents of Northend, forced to rely on bottled water and a tanker, find their lives upended in the heatwave [...] “This is the future, isn’t it?” said Evans, who has learned to be more economical with her water usage now she is in her 70s.»

Zoltan Jorovic said...

@Blissex Energy prices rose well before the Russian invasion and although they might be higher as a result of it, the underlying causes are varied and fall into short, medium and long term. Short term includes the supply disruption caused by Covid, and now the attempted sanctions on Russia (to add to existing ones on Iran and Venezuela). Medium-term is the decline in US fracking derived oil and gas, and many conventional oil&gas fields, including the North Sea. Long term is the steady increase in the Energy cost of Energy ECoE). What this means is that prices may fluctuate, but the trend will be inexorably upwards.

The only long term solution is to set about building non-fossil fuel energy production facilities - be that solar, wind, tidal or nuclear (probably all four) and move all domestic heating to heat pumps. Medium term is to insulate every house in the country, and put solar panels on as many roofs as possible. Short term would be to subsidise energy costs for consumers on a sliding scale based on income, and if required, nationalise. Oh, and a scrappage scheme for old der petrol & diesel cars and vans, to move to EVs. These are mobile batteries that could help with the renewable intermittency problem by allowing controlled charging and discharging to and from the grid. 10 million ~60Kwh batteries gives a lot of storage (~600gwh)

Higher energy costs are out of national government control (or anyone's in the long term). We need to move away from fossil fuels anyway, so might as well use this moment to start making the big changes necessary.

Anonymous said...

Christ Blissex can you literally not comment without mentioning house prices *crying laughter emoji*

Blissex said...

«can you literally not comment without mentioning house prices *crying laughter emoji*»

Look, I know, but it is not *my* obsession, it is the obsession of the 20-40% of UK voters who determine electoral majorities, and of the the vast majority of MPs and local party officials. And they are right in being obsessed: the big deal is that it does not involve the odd few hundred pounds per year, which some people would still be quite obsessed with, but it redistributes upwards from the lower classes dozens of thousands of pounds per year to average property owners, often doubling their effective after tax spending power. That is really very huge, as I keep hearing when I talk with my upper-middle class propertied acquaintances who are so immensely pleased.

So property is the central fact of UK economy and finance and politics, and everything revolves around property, for or against, but very few people seem to be willing to acknowledge that, because most media and pundits are hugely profiting from it, so I try to fill the gap :-).

I wish it was different: if the UK central obsession were with social insurance, or with capital infrastructure, and very few people were willing to acknowledge that, I would be talking about those instead.
I wish!

Blissex said...

«when I talk with my upper-middle class propertied acquaintances who are so immensely pleased»

«housing-market heroin: the special high the Brits get when property prices are really taking off and Sarah Beeny is on the telly explaining how we can all cash in. Thatcher was the first PM to really push housing-market heroin with her right-to-buy programme and her Lawson boom but, with their love of aspiration and Home Ownership Task Force, Blair and Brown knew its potency, too.»

«I spoke to Phil Salter, a 79-year-old retired carpenter in Cornwall, who bought his council house in Devon in the early 80s for £17,000. When it was valued at £80,000 in 1989, he sold up and used the equity to put towards a £135,000 fisherman’s cottage in St Mawes. Now it’s valued at £1.1m. “I was very grateful to Margaret Thatcher,” he said.»