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Thursday, September 26, 2013

Price Freezes, energy blackouts and Tory hypocrisy

After Ed Miliband unveiled his policy of freezing energy prices for 20 months should he win the 2015 general election there was a predictable tide of vehement opposition from the Tory party and the right-wing press.

The two most commonly heard complaints from the Tories and their mouthpieces in the right-wing press have been squeals of "price fixing" and "government interference in the market". I'm going to demonstrate how utterly hypocritical these claims are.

In June 2013 the Coalition government announced that they were going to bribe the French electricity company EDF with £10 billion worth of "financial guarantees". Essentially, they will lend EDF money at a much cheaper rate than is available to them on the commercial market to fund their infrastructure spending. If that isn't "government interference" in the energy market, I don't know what is!

The coalition government is also set to agree minimum energy prices, called Contracts for Difference (CfDs) with EDF, to ensure that if energy prices fall below a certain level, the government will use taxpayers' money to top up the prices paid to EDF in order to safeguard their profits. Energy market CfDs (government guarantees to top up corporate profits) are already commonplace in the UK energy market. Here's an official government policy document which explains how CfDs are used to fix prices in the energy market, which includes a commitment to extend the practice to the nuclear industry.

EDF are arguing for extremely high CfDs before they agree to start work on building two new nuclear reactors at Hinkley Point, and the government looks set to give into their demands, the only point of negotiation being the level at which these taxpayer funded price fixing subsidies will kick in.

For members of the government to attack Labour for "government interference" and "price fixing" looks very hypocritical indeed when official government energy policy involves massive "government interferences" like the £10 billion worth of "financial guarantees" being handed to EDF to help them avoid having to borrow at a higher rate of interest from the commercial market, and the increasingly common use of energy market CfD "price fixing" agreements to ensure that the taxpayer will pay for any corporate shortfalls, should energy prices (and corporate profits) fall below predetermined levels.

Personally I don't think that Ed Miliband's energy price freeze goes far enough. The UK energy market has operated like a price-fixing cartel for decades, virtually since privatisation began. Everyone has seen the way that the big energy companies have repeatedly hiked their prices in unison. Everybody has seen the way they use rises in wholesale prices to raise the prices they charge, yet when wholesale prices fall back again, the high energy prices stay the same.

These largely foreign owned companies have become a parasitic drain on the UK economy. Their vast profits are generated by soaking away what should be the disposable income of millions of families, and the profits of small and large businesses all over the UK. This kind of blatant rentierism damages the UK economy by reducing aggregate demand and harming British industry.

In my view, fixing prices for 20 months isn't even a half measure because the only real solution would be large scale renationalisation of British energy infrastructure. I mean, Ed's energy price freeze has already got the Tories hypocritically foaming at the mouth, so why not go the whole hog an announce the strategic renationalisation of UK energy infrastructure?

I mean, all the Tories could possibly offer in opposition to renationalisation is a load more hypocritical hot air. Recall the £10 billion bribe they're handing to EDF. Well EDF is 85% owned and operated by the French government! The Tory stance is this (and I'm not joking): The British are such a cretinous bunch that they are utterly incapable of running their own energy infrastructure, and that is why they need to bribe the French  government to the tune of billions of pounds in order to run it for them!

EDF is not the only example of foreign governments running supposedly "privatised" British infrastructure. Other national governments own stakes in our "energy market", our public transport network, our water companies and various other bits of formerly state owned infrastructure.

What is it that makes the Tories believe that the British state sector so desperately uncompetitive that we should just let the French state run our major infrastructure projects for us instead?

The fact that so much British infrastructure has been flogged off to foreign interests by the Tories utterly destroys their "wrap themselves in the flag" claims of patriotism. Especially the fact that many of these foreign owners are actually foreign governments and foreign government controlled sovereign wealth funds. They clearly believe that it isn't important who owns British infrastructure as long as it's not the British public.

In my view, if we're going to have state run companies administering our major infrastructure projects, they might as well be run by the British state, because at least there is a veneer of democratic legitimacy and accountability about it if it is done that way.

Before I conclude I'd just like to cover one more element of the right-wing reaction to Ed Miliband's energy price freeze policy: The disgusting fearmongering. The Daily Mail claim that freezing energy prices would take us back to the "bad old days of the 1970s". The energy companies themselves are overtly threatening to inflict energy blackouts on the country if they are not allowed to continue their profiteering. And most shockingly of all, instead of condemning these efforts to blackmail the country into allowing them to continue brazenly profiteering, the Liberal Democrat Energy Secretary Ed Davey actually joined in the fearmongering campaign by invoking the energy blackouts in California as a probable consequence (completely failing to take account of the corrupt practices at energy companies like Enron that played such a major role in the California blackouts).

That Ed Davey would actually join in with the fearmongering campaigns orchestrated by largely foreign owned corporations to blackmail the British public, is an absolutely clear demonstration that this government has a commitment to serve corporate interests. Surely it is the job of the energy secretary to oppose energy companies that threaten to impose energy blackouts if they don't get their own way, not to repeat their threats in order to score political points against an opposition party.

Lets have a little think back to the 1980s when the coal miners went on strike. They knew that Tory plans for their industry would mean an end to their jobs and the destruction of their communities. They were fighting for their livelihoods. They were fighting for the survival of their communities. Remember how the Tories and the baying right-wing press labeled these men "the enemy within" and accused them of "holding the country to ransom"?

Now look at these largely foreign owned power companies blackmailing the UK with threats of energy blackouts if their blatant profiteering is curtailed. Are the Tories calling them "the enemy within" and accusing them of "holding the country to ransom"? Of course they're bloody not.

In conclusion, the power companies threatening to impose energy blackouts as retaliation, illustrate that Ed's energy price freeze doesn't go far enough. These largely foreign owned companies are utterly unscrupulous, and totally disinterested in what is best for the UK economy. They'll only build new infrastructure if they get massive multi-billion pound bribes and agreements that prices will be fixed in their favour (with the taxpayer underwriting their profits if energy prices fall). But if the boot is on the other foot, and the government fix energy prices for the good of the British economy, they threaten to impose energy blackouts as retaliation (even though some of them were actually offering to freeze their own energy prices until 2017 before Ed Miliband even announced his scheme!).

These largely foreign owned energy companies are clearly "the enemy within" and Ed's plans have revealed that they will quite gladly hold the UK economy to ransom if anyone dares try to curtail their obscene profiteering. At least the miners were fighting for their jobs and the very survival of their communities when they went on strike. These corporate parasites are planning to hold us to ransom just to protect their obscene profits, which are made at the direct expense of the wider UK economy.

That the Tories and their cheerleaders in the right-wing press are siding with these largely foreign companies, when they dealt so ruthlessly with the native British miners is an absolutely clear demonstration of their ideological commitment to "Profits over People". So much so that the protection of foreign profits is vastly more important to them that the protection of British people, British jobs, British communities and the British economy.

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